TMI Blog2007 (7) TMI 430X X X X Extracts X X X X X X X X Extracts X X X X ..... epreciation as well as interest should be separately deducted as has been held in various decisions. As against this, the Assessing Officer had relied on CBDT Circular No. 29-D, dated 31-8-1965 and allowed only depreciation . The CIT (Appeals) has rejected the appellant s contention of allowing both i.e. depreciation and interest without giving any cogent reason for the same. 3. Without prejudice as regards disallowance under section 43B Rs. 1,02,10,450 being interest to financial institutions, the ld. CIT (Appeals) has wrongly confirmed the Assessing Officer s action of above disallowance without appreciating the fact that when book result is rejected and N.P. rate is applied without deducting interest there is no scope for making the disallowance for said interest under section 43B. 4. The CIT (Appeals) has wrongly confirmed the Assessing Officer s action of making disallowance under section 43B for unpaid bonus Rs. 8,21,264 even after applying N.P. rate. 5. The CIT (Appeals) has wrongly confirmed the Assessing Officer s action of making disallowance under section 43B for unpaid PF/EPF Rs. 46,219 even after applying N.P. Rate. 6. The CIT (Appeals) has wrongly conf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o last year and also that the case of the assessee has been admitted by the BIFR where the proceedings are taking place and considering other submissions made by the assessee for reduction in profit margins, the average profit are before depreciation is adopted at a round figure of 3 per cent. The assessee has shown sales and other income of Rs. 3,747.50 lakhs. However, it has been represented and shown by the assessee that this sales consists of captives sales being internal branch-wise transfer of Rs. 961.51 lakhs. This sales is deducted from the above sales and other income and the average rate of 3 per cent is applied on sales and other income of Rs. 2,785.99 lakhs. Therefore, the average net profit before depreciation amounts to Rs. 83,57,970." The Assessing Officer also rejected the contention of the assessee that profit should have been arrived at after taking into consideration interest also because quantification of the interest was not possible in the facts of the case and also as per the Circular issued by the CBDT, income was to be estimated subject to allowance of depreciation only. Aggrieved by this, the assessee carried the matter into appeal before the learned CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the interest paid by the assessee should have been further allowed after computing the net profit on estimated basis. However, as per the concise ground, the assessee appears to be aggrieved on both counts i.e. non-consideration of depreciation as well as interest. In our opinion, this is factually incorrect as the Assessing Officer himself has allowed depreciation out of the estimated net profits, hence, we shall only consider the issue of further allowance of interest from the estimated profits. The learned CIT(A) has not accepted the claim of the assessee in this regard for the reason that interest in the case of the assessee was not separately ascertainable, hence, the case of the assessee was distinguishable on this facts from the facts of the case relied on by the assessee. 9. The learned counsel, appearing on behalf of the assessee, narrated the factual matrix of the case and placed reliance on the following decisions: ( i ) CIT v. Jain Construction Co. [2000] 245 ITR 527 (Raj.). ( ii ) CIT v. Vinod Kumar Bhatia [1995] 211 ITR 253 (Punj. Har.) ( iii ) ITO v. Amar Singh Krishan Chander [2001] 71 TTJ (Jodh.) 182 (iv ) ITO v. Khosla Construct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... count of Bonus, PF, EPF and interest to financial institutions and also made disallowance under section 40A(3) of the Act in respect of cash payment made in excess of Rs. 10,000 from the net profit before depreciation. Aggrieved by this, the assessee carried the matter into appeal before the learned CIT(A). The learned CIT(A) held that the Assessing Officer had made disallowance under section 40A(43) of the Act based upon the decision of the Tribunal in the case of ITO v. D.D. Hazare [1994] 48 ITD 595 (Bom.) wherein it was held that in such circumstances disallowance under section 40A(3) of the Act could be made. The learned CIT(A) also analysed the nature of other disallowances and confirmed the action of Assessing Officer. Still aggrieved, the assessee is in appeal before us. 13. The learned counsel, appearing on behalf of the assessee, narrated the factual matrix of the case and placed strong reliance on the decision of the Hon ble A.P. High Court in the case of Indwell Constructions v. CIT [1998] 232 ITR 776 wherein it was held that when the books of account had been rejected and income was estimated then, all deductions under section 29 of the Act were deemed to ha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h estimation. Accordingly, disallowances under this section have to be made after estimation of profits without first deducting such amounts from estimated profits. In view of the foregoing, we hold that disallowance made by the Assessing Officer under section 43B are liable to be confirmed and amount equal to disallowance made under section 40A(3) is required to be reduced from the estimated profits so as to avoid double disallowance. Accordingly, Ground Nos. 3, 4 and 5 stands dismissed and Ground No. 6 stand allowed. 16. In Ground No. 7, the assessee is aggrieved by the denial of deduction under section 80-I of the Act to the assessee in respect of company s industrial undertaking at Mandideep Distt. Raison (M.P.). 17. The facts, in brief, are that the assessee claimed deduction under sections 80-I and 80-IA of the Act vide its letters dated 27-1-1998 and 23-10-1997 and a note was also attached with the computation of income wherein it was mentioned that in the absence of taxable income, depreciation under section 32 and deduction under section 80HHC was not claimed. However, no mention was made therein with regard to deduction under section 80-I or 80-IA of the Act. On ..... X X X X Extracts X X X X X X X X Extracts X X X X
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