TMI Blog2014 (5) TMI 842X X X X Extracts X X X X X X X X Extracts X X X X ..... be reduced from the contract receipts - the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit – thus, the AO is directed that while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. Estimation of income @5% - Grant of depreciation - Held that:- Following Indwell Constructions Versus Commissioner Of Income-Tax [1998 (3) TMI 121 - ANDHRA PRADESH High Court] - the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed - Depreciation is allowable u/s. 32 of the Income-tax Act - as provided in section 44AD no further/separate deduction shall be allowed - the claim of depreciation on the estimated income is not justified. Payment of interest and salary to the partner – Held that:- The provision of section 44AD as it is applicable for the assessment year under consideration 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 estima ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owed depreciation and deductions u/s. 40(b) of the Act. The income from sub-contract works was estimated at 8% net of all expenditure. 4. On appeal, the CIT(A) held as follows: 5. I have seen the submissions made by the appellant, gone through the manner in which the assessment has been made besides perusing all other material available on record including the case laws relied upon. It may be noted here that subsequent to the case of M/s KNR Constructions Ltd vs. DCIT, Circle-2(2), Hyderabad, many cases have been decided and the appellant has relied on some of such cases, which are more nearer to the facts of the present case. In any case, one has to remember here that any estimation is net of all expenses including that of depreciation. Since the appellant happens to be a firm, it is eligible for deductions of remuneration to working partners and interest on partner's capital. It may further be noted here that since the appellant is having contract works and he took sub contract works also from others, as per the precedents of the jurisdictional tribunal. the AO is directed to estimate income at 8% and 5% on contract works and sub contract works respectively. 5. We ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of Krishnamohan Constructions (supra), K.C. Reddy Associates (supra), Sri Srinivasa Constructions (supra) and 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 applicabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tract receipts. In view of the judgement of the Apex Court the seigniorage charges shall be reduced from the total contract receipts 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 receip ..... X X X X Extracts X X X X X X X X Extracts X X X X
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