9911796707
TMI Blog2014 (5) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... mstances of the case, the learned Commissioner of Income Tax (Appeals)- VI, Hyderabad erred by directing that the total income of the appellant be estimated @ 3% of the gross receipts, net of all the expenses as against the income returned/admitted of Rs. 4,92,760/- (after claiming depreciation of Rs. 86,23,448/- and interest/ finance charges of Rs. 33,51,172/-). (4) On the facts and in the circumstances elf the case, the learned Commissioner of Income Tax (Appeals)- VI, Hyderabad further erred by not allowing depreciation allowance from the income/profit estimated though the CBDT has clarified vide circular no: 29-0 dated 31-8- 1965 that where it is proposed to estimate the profit and where particulars of depreciation have been furnished, depreciation should be separately deducted from the estimated profit. (5) On the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals)- VI, Hyderabad ought to have accepted the fact that the lorries/trucks were plied for commercial purpose and, therefore, they are eligible for depreciation of Rs. 86,23,448/- as claimed in the return of income filed for the assessment year 2010-11 from the income estimated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Asst. Order. 4. Brief facts of the issue are that the assessee is an individual and engaged in supply of vehicles for goods transportation, filed the return of income for A.Y. 2010-11 admitting total income of Rs. 4,98,060/-. In the course of the assessment proceedings, it has been observed by the assessing officer that the assessee could not produce the vouchers for freight charges paid to lorries, in full. Further, the vouchers produced were not capable of verification as they did not contain date, signature of the recipient, vehicle number etc. It was also observed that the details of trip sheets were not furnished for verification. The AR submitted before the Assessing Officer that given the voluminous number of vouchers and the constraints in this line of business, it was not possible to maintain the vouchers in the perfect manner. The Assessing Officer held that since the assessee had been unable to produce all the vouchers and in view of the deficiencies noted by him, he estimated the income at 5% of the turnover clear of all expenditure, by rejecting the books of account. 5. On appeal the CIT(A) directed the AO to estimate income of the assessee at 3% of the gross rece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of justice if the income is estimated applying a rate of 3%. In deciding the issue as above, we considered the fact that the assessee does not own trucks used in the business and is incurring huge incidental expenditure. From such income estimated applying rate of 3%, deduction towards interest and remuneration to partners in terms of S. 40(b) of the Act may be allowed. We are supported in this behalf by the decision of the coordinate Bench of this Tribunal in ITA No. 668/Hyd/2009 and thee others in the case of M/s. C. Eswara Reddy & Co., Hyderabad, relied upon by the learned counsel for the assessee, wherein the Tribunal, vide para 14 of its order dated 31.1.2011, even in a case covered by the provisions of S. 44AD, has directed the assessing officer to allow deduction towards salary and interest and salary paid to partners, from out of the income estimated in terms of S. 44AD of the Act. Accordingly, impugned order of the CIT(A) is set aside, and the assessing officer is directed to recompute the income of the assessee. Accordingly, assessee's ground No. 2 is partly allowed and ground No 3 is allowed." 9. As the CIT(A) followed the earlier order of the Tribunal which is based o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... M. Bhaskar Reddy (supra). No doubt this Tribunal estimated the profit from 12.5% to 8% depending upon the factual situation. The learned DR made an attempt to distinguish the order of this Tribunal in M. Bhaskar Reddy (supra) on the ground that the turnover is only Rs.54,40,420. It 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 receip ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eipts for the purpose of estimating the profit. Accordingly we direct the Assessing Officer while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. 12. Now coming to the depreciation. 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 restric ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 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. Therefore, the judgement of the jurisdictional High Court in the case of Indwell Constructions (supra) may not be of any assistance to the Revenue in this case. Accordingly we direct the Assessing Officer to allow the salary and interest paid to the partner subject to the limitation provided in section 40(b) of the Act. 10. Being so, either of the parties cannot have any grievance in estimating the income of the assessee at 3% and denying the allowability of depreciation. Accordingly, we are inclined to confirm the order of the CIT(A) in toto. Further, all the judgements relied on by both the counsels are not at all relevant at this point as the CIT(A) properly followed the order of the Tribunal which is on the same issue. 11. In the result, all appeals of both the Revenue and the assessees are dismissed. 8. Being so, taking a consistent view, we are inclined to confirm the order of the CIT(A) in estimating the income of the assessee at 3% net of all expenses and the assessee is not entitled for any depreciation. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
