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2014 (5) TMI 842 - AT - Income TaxGross receipts to be estimated @5% instead of 3% - Rejection of books of accounts – allowance of depreciation and partners salary from estimated income applying the provisions of Section 44AD - Held that:- On examination of the books of account with reference to the voucher produced, the Assessing Officer found that the voucher does not tally with the cashbook - When the voucher does not tally with cashbook, the book results will not reflect the correct profit of the assessee - The Assessing Officer has rightly rejected the books of account - When the books of account were rejected the only method available to the Assessing Officer is to estimate the profit - The profit ratio cannot be a constant factor for each and every year - Tribunal has been uniformly estimating the profit from main contract at 8% to 12.5% depending upon the factual situation and 5% to 7% on the sub contract depending upon the factual situation. Claim of seigniorage charges – Held that:- The material supplied by the Government/contractor will not have any element of profit - it shall be reduced from the contract receipts - the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit – thus, the AO is directed that while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. Estimation of income @5% - Grant of depreciation - Held that:- Following Indwell Constructions Versus Commissioner Of Income-Tax [1998 (3) TMI 121 - ANDHRA PRADESH High Court] - the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed - Depreciation is allowable u/s. 32 of the Income-tax Act - as provided in section 44AD no further/separate deduction shall be allowed - the claim of depreciation on the estimated income is not justified. Payment of interest and salary to the partner – Held that:- The provision of section 44AD as it is applicable for the assessment year under consideration and the amendment made with effect from1.4.2011 it is obvious that the Legislature intended to allow the interest and salary separately from the estimated income – the AO is directed to allow the salary and interest paid to the partner subject to the limitation provided in section 40(b) of the Act – Decided against Revenue.
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