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2016 (2) TMI 1237 - ITAT AMRITSARRectification u/s 154 - netting of interest income against interest payment - assessment was completed u/s 143(3) and books of account were rejected by the AO and a flat rate of 8% of total receipts as net profit was applied - HELD THAT:- We find that the assessment in this case was completed by applying net profit rate of 8% of the gross receipts and the books of account were rejected during the assessment proceedings and, therefore, the same books of account cannot be relied upon for carrying out mistake u/s 154 of the Act. Once the books of account has been rejected, the AO cannot fall back upon the same books for making addition on the interest accrued on the FDRs reflected in the books of account. Once the books of account were rejected, no separate addition on account of interest earned on FDRs, which was made for business purposes was maintainable, therefore, we are in agreement with arguments of the ld. AR. Moreover, we find that for invoking the provisions of section 154 the mistake has to be apparent from the record and rectification is not possible if the question is debatable. This has been held by the Hon’ble Supreme Court, in the case of CIT vs. Hero Cycles Pvt. Limited, [1997 (8) TMI 6 - SUPREME COURT]. Also further held that for invoking the provisions of section 154, the point should have been examined on facts and in law. The Hon’ble Kerala High Court in the case of Satish Chandra vs. CIT [1998 (7) TMI 73 - KARNATAKA HIGH COURT] has held that where the point is debatable, rectification was not valid. Depreciation and interest as allowable deduction from deductions from the net profits - total income is calculated by applying net profit rate - HELD THAT:- The matter is no longer res integra. The Division Benches of this Court in Commissioner of Income Tax vs. Chopra Bros. India (P) Limited [2001 (9) TMI 90 - PUNJAB AND HARYANA HIGH COURT] and Girdhari Lal vs. Commissioner of Income Tax [2001 (9) TMI 28 - PUNJAB AND HARYANA HIGH COURT] while considering the aforesaid issue, in view of the circular issued by the Board, had held in a case where the assessee makes a specific claim for depreciation and gives the information as required under section 32 of the Act, the assessing officer is bound to take the claim of the assessee into consideration. Following the aforesaid judgments, it is held that the assessee is entitled to deduction on account of depreciation from receipts while applying net profit rate on the gross receipts Allowability of salary and interest to the partners - Allow payment of salary and interest out of the estimated income subject to the condition that the income thus, arrived at should not fall below the returned income.
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