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2015 (11) TMI 1637 - ITAT VISAKHAPATNAMAssessment order u/s 144 - estimation of net profit @ 12.5% on gross contract receipts - Held that:- In the present case on hand, the assessee is a sub contractor executing works contract for main contractor. It is a admitted fact that element of profit is less in sub contract works when compared to main contract works. The CIT(A) after considering the facts and circumstances of the case rightly estimated 8% net profit in respect of sub contracts works executed directly by the assessee and 4% net profit in respect of sub contracts works executed by the assessee through third parties. Therefore, we are of the opinion that the CIT(A) has rightly estimated the net profit and his order does not require any interference. Hence, we are inclined to upheld the order of the CIT(A) on this issue. Additions made towards income from other sources - as per CIT(A) income from other sources being interest received, royalty and discount received is nothing to do with business activity of the assessee, therefore, even after estimation of net profit, these items should be brought to tax separately - Held that:- We find force in the arguments of the Ld. D.R. that income from other sources being interest received, royalty and discount received are not connected with the business activity of the assessee. Therefore, while estimating the net profit from the contract receipts, these items cannot be included. There is no nexus between interest and Royalty receipts to works contract receipts. If these receipts are originated from work contracts, then definitely these items forms part of contract receipts. But, in this case, it is not so. The A.O. as well as CIT(A) rightly held that these items are separately taxable even in case of estimation of net profit from the contract receipts. Therefore, we upheld the order of the CIT(A) and reject the ground raised by the assessee on this issue. Claim of deduction of depreciation denied - Held that:- We are of the opinion that depreciation is a allowable deduction, even after estimation of net profit on gross receipts. Accordingly, we direct the A.O. to allow the admissible depreciation against the income estimated from the contract receipts.
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