TMI Blog2012 (8) TMI 420X X X X Extracts X X X X X X X X Extracts X X X X ..... quired to be estimated, it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted therefrom - authorities should not apply the principles emanating section 44AD of the Act but should be guided by the binding circular of the Board - matter is remitted back to the Assessing Officer for passing a fresh order of assessment - - - - - Dated:- 7-5-2012 - SHIVA KIRTI SINGH, VIKASH JAIN, JJ. JUDGMENT Shiva Kirti Singh J.-Heard the parties. 2. The assessee has preferred this appeal against the order passed by the Income-tax Appellate Tribunal, Patna Bench, Patna (hereinafter referred to as "the Tribunal") dated January 31, 2008, whereby I. T. A. No. 58 (Pat) of 2007, relating ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed out of the net profit subject to the conditions and limits specified in section 40(b) of the Act. The learned Commissioner of Income-tax (Appeals) has further held with regard to the income from interest of Rs. 3,11,956 that the said receipt has to be assessed as "Income from other sources" as in his view, it was not an integral part of the contract. 4. Before the Tribunal the appellant-assessee objected to the inclusion of interest income being assessed as "Income from other sources" on the ground that the income was from money deposited in FDRs and NSC which was required to be furnished by way of security for securing the contract work and, therefore, it should have been treated as income from business and not from other sources. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was in error in holding that interest accrued on security deposits in the nature of National Savings Certificates and FDRs is assessable as "Income from other sources" ? 7. Learned counsel for the appellant has placed reliance upon a judgment of the Calcutta High Court reported in CIT v. Tirupati Woollen Mills Ltd. [1992] 193 ITR 252 (Karn) and upon a judgment of the Karnataka High Court reported in CIT v. Chinna Nachimuthu Constructions [2008] 297 ITR 70 (Karn) to support his submission in respect of question No. 2 noticed above. The judgment in the case of CIT v. Chinna Nachimuthu Construc- tions was rendered in a case of similar nature where the assessee being a contractor, in order to secure a contract work was required to offer a b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on security deposits to the extent used for the purpose of securing the contract work would also be assessable as income from other sources. This question is thus answered in favour of the appellant. 9. So far as the first question of law is concerned, reliance has been placed on behalf of the appellant on the judgment of the Rajasthan High Court reported in Shri Ram Jhanwar Lal v. ITO [2010] 321 ITR 400 (Raj). In that case, the Tribunal held that since the gross receipts were in excess of Rs. 40 lakhs, the case was not covered under section 44AD of the Income-tax Act but permitted guidance from those provisions of the Act and applied 8 per cent. net profit rate subject to interest and remuneration to partners as provided under section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ular, the gross profit should be estimated and the deductions and allowance including the depreciation allowance should be separately deducted from the gross profit. If the net profit is required to be estimated, it should be estimated subject to the allowance for depreciation and the depreciation allowance should be deducted therefrom. 11. Since it is the case of the appellant that the authorities should not apply the principles emanating section 44AD of the Act but should be guided by the binding circular of the Board, we find it necessary not only to set aside the order of the Tribunal but also the orders of the Assessing Officer and the learned Commissioner of Income-tax (Appeals) as those orders also suffer from error of law on both ..... X X X X Extracts X X X X X X X X Extracts X X X X
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