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TMI Blog2011 (1) TMI 1238X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the assessee the assessee is maintaining the books of account properly and no mistake/error was pointed out, therefore, the Assessing Officer is not justified in rejecting the books of account. Referring to the estimation of profit, the learned counsel for the assessee submitted that when the assessee was maintaining the books of account there is no question of estimation of profit would arise for consideration. Therefore, according to the learned counsel for the assessee the Assessing Officer ought to have accepted the book results for the purpose of computing the total income. 3. The learned counsel for the assessee further submitted that alternatively the estimation at 12.5% by the Assessing Officer is on the higher side. Though the CIT(A) restricted the estimation of profit at 8%, he has not considered the salary and interest paid to the partner, seiniorage charges and depreciation. According to the learned counsel for the assessee, estimation of profit at 8% is also on the higher side in this line of business. Referring to the judgement of the Apex Court in Brij Bhushanlal Kumar (1978) 115 ITR 524, the learned counsel for the assessee submitted that seiniorage charge ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itted that this Tribunal estimated the profit at 12.5%. Referring to the order of this Tribunal in M. Bhaskar Reddy vs. ITO, in IT No.168/Hyd/06 dated 19.10.2007, the learned DR submitted that the total contract receipts in this case was Rs.51,40,420. Therefore, this Tribunal estimated the profit at 8%. However, in the case before us, the total contract receipt was Rs.20,29,32,425. Therefore, the profit ratio adopted by this Tribunal in the case of M. Bhaskar Reddy (supra) may not be applicable for this assessee. The learned DR further submitted that the CIT(A) estimated the profit at 8% in respect of main contract and 5% in respect of sub-contract which are very low. Therefore, the profit ratio estimated by the Assessing Officer may be restored. 5. Referring to the judgement of the jurisdictional High Court in Indwell Construction vs. CIT (1998) 232 ITR 776, the learned DR submitted that once the books of account were rejected and the profit was estimated, all expenditures are deemed to have been allowed. Therefore, there is no need for allowing depreciation, interest and salary to partner. 6. We have considered the rival submissions on either side and perused the materials avai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is a well known fact that whenever the turnover increases the profit ratio would go down. Merely because the turnover increases the profit may not go up. Therefore, we do not find any justification in the distinction made by the learned DR to show that this Tribunal estimated the profit at 8% in the case of M. Bhaskar Reddy (supra) only because the turnover was Rs.51,40,420. A bare reading of the order of this Tribunal in M. Bhaskar Reddy (supra) clearly shows that this Tribunal after considering the judgement of the Apex Court in C. Velukutty, 60 ITR 239 and the decision of the Special Bench of this Tribunal in Arihant Builders Pvt. Ltd. vs. ACIT, 291 ITR 41 (SB) and by taking a clue from section 44AD of I.T. Act the profit was estimated at 8%. Admittedly section 44AD would be applicable in respect of a case where the gross contract receipt does not exceed Rs.40 lakhs. Wherever the gross contract receipts exceed Rs.40 lakhs the provisions of section 44AD are not applicable. Therefore, the profit can be estimated either at lower than 8% or above 8% depending upon the factual situation. As discussed earlier, for the purpose of estimating the profit various factors such as the profit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . We have carefully gone through the judgement of the jurisdictional High Court in the case of Indwell Construction (supra). In the case before the jurisdictional High Court an addition was made towards interest and remuneration paid to the partner when the profit was estimated. The jurisdictional High Court after considering the provisions of section 29 and 40 found that no separate addition shall be made. The contention of the learned counsel for the assessee is that depreciation shall be on the WDV from the profit computed/estimated. Therefore, depreciation shall be allowed on the profit computed. 13. We have carefully gone through the provisions of section 44AD of the Act. Now doubt this provision is applicable for those cases where the turnover/total contract receipt does not exceed Rs.40 lakhs. However, by Finance (No.2) Act of 2009 with effect from 1.4.2011 the Legislature removed the restriction of the total contract receipts of Rs.40 lakhs. By taking a clue from the provision of section 44AD as is applicable for the assessment year under consideration and the provisions which are applicable with effect from 1.4.2011, we find that the deduction available u/ss. 30 to 38 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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