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M/s Arjit Construction Versus Asstt. Commissioner of Income-Tax 1 (1) , Jabalpur

2015 (8) TMI 81 - ITAT JABALPUR

Rejection of books result - estimation of NP @5% of gross contractual receipts - in A.Ys. '07-08, '08-09 and '09-10 that the A.O. estimated the N.P at 5% by rejecting the book result without allowing depreciation, interest and salary paid to partners - Held that:- In the instant case, we find that the assessee has submitted the audited financial statements in which assessee has basically claimed depreciation and also details of fixed assets mentioning in the balance sheet. The details of depreci .....

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firm is entitled for separate deduction of depreciation, interest and salary payment to partners. The A.O. is directed to allow the same and then estimate the net profit/income of the assessee after deducting the separate depreciation, partners' salary and interest as shown by the assessee. - Decided in favour of assessee. - IT (SS) Nos. 01 to 03/Jab/2013 - Dated:- 29-5-2015 - D T Garasia, JM And B. C. Meena, AM,JJ. For the Appellant : Shri Anil Gupta, ld.AR For the Respondent : Shri V B Sargar .....

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,'08-09 and '09-10 respectively:- 1. That the ld.CIT(Appeals) is not justified in sustaining the assessed income estimated at 5% of gross contractual receipts without giving separate further deduction of depreciation claimed vide circular no.29-D(XIX-14) f No.45/239/65-ITJ) dated 31.08.1965, and interest and salary paid to the partners u/s.40(b) of the I.Tax Act, 1961, without adjudicating that the same does not amount to double taxation. 2. That the ld.CIT(Appeals) erred in law on facts .....

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rs-such as ITO Vs. B.R Constructions, Indore (2005) 3 ITJ 302(Indore ITAT), Shri Ram Jhanwarmal Vs. ITO(2005) 98 TTJ(JD) 639 etc. which held estimating 5.03 to 8% of gross contract receipt as reasonable subject to further deduction of third party interest, depreciation and interest and salary to partners. 3. Common facts of the case are that a search & seizure operation in the premises of Shri Ashwini Kumar Shrivastava certain documents and diaries were seized which had direct links with the .....

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, labour expenses of ₹ 12,29,31,417/-, deduction and royalty of PWD [Rs.98,52,917.73, ₹ 81,66,236], diesel and oil expenses of ₹ 2,19,21,737.79. Vide query no.7 of the notice issued u/s. 142(1) dated 23-11-10 the assessee was asked to explain as to why N.P@5% should not be adopted for arriving at the net income from business and accordingly addition of ₹ 1,15,80,676/- should not be made in the total income declared. The assessee replied vide para 5 of the assessment order .....

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₹ 1,46,00,262 for the a.y 07-08, ₹ 1,14,50,883/- for the a.y '08-09 and ₹ 52,33,578/- for the a.y '09-10 respectively. The A.O. further held that income of the assessee should be determined at 5% of the gross contractual receipts without giving further deduction of depreciation, interest and remuneration paid to the partners as shown in the P & L account. 4. Matter carried to ld. CIT(A). The ld. CIT(A) after considering the submissions of the assessee has dismissed .....

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for the A.Ys 2004-05, '05-06, '06-07 were originally processed u/s. 143(3) of the Act. The A.O. has accepted the original returns filed u/s. 153C of the Act for the A.ys '04-05, '05- 06 and '06-07, '07-08, '08-09 & '09-10. Against the A.Ys. 2007-08 to '09-10 the assessee is in appeal before the tribunal. The A.O. has rejected the books result and estimated N.P @5% for the A.Ys under consideration. The assessee has accepted the N.P rate of 5%. The ld.AR sub .....

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the net profit/ income of the assessee. The ld.AR also submitted that the assessee has submitted the audited financial statement in which the assessee has specifically claimed depreciation and also shown details of fixed assets in the balance sheets. Details of depreciation, interest and remuneration paid to partners were also accounted for in the books of account and the also claimed the same in the respective I.T returns. The A.O. has rejected the books result and estimated the NP @5% of gross .....

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ion in the premise of one partner, Sh. Ashiwini Kumar Shrivastava. Therefore, the assessments for the A.Ys 2004-05, '05-06 & '06-07 and returns filed in response to section 153C of the Act were accepted, which are available at pages 156-181 of the APB[assessee's paper book]. In all these assessment years the A.O. has applied and estimated the N.P at 5% of the gross contractual receipts by rejecting the books result. The only dispute before us that in A.Ys. '07-08, '08-09 .....

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p deed is allowable as deduction to the extent of limit provided under s.40(b). In this group of cases, the Tribunal after examining the partnership deed in all individual cases found that the claim of assessee for interest on capital contribution by partners and salary to working partners was allowable deductions to the extent of limit provided under s.40(b). The Tribunal was justified in doing so.The finding of fact does not give rise to question of law. It is clearly provided that the amendme .....

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refer the Circular dt. 31st Aug, 1965, issued by the Central Board of Revenue, which provides that if a claim for depreciation is made by the assessee in the return and the ITO proposes to estimate the profits, the depreciation alone should be separately worked out. The Board clealy pointed out this aspect of the matter in para 2 of the circular, where it particularly directs that in all such cases, the gross profit shall be estimated and the deduction and allowance including the depreciation al .....

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ng effect to the order o the Tribunal will tantamount to same deductions twice. The premises of the contention appears to be the presumption that depreciation must have been considered to have been allowed in arriving at the net profit. It is not permissible to draw such presumption. An A.O. is expected to be conscious of the claim of the assessee for allowance of depreciation and that he has to deal with it in computing the income, by applying net profit. Thus, the assessee is entitled to depre .....

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per cent has been provided. Proviso to sub-s (2) permits salary and interest paid to the partners deducted from the fixed net profit of 8 per cent subject to the conditions and limits specified in cl(b) of s.40. Thus, there is further simplication and certainly in computation of income. Instructions contained in para 2 of the circular of the year 1965 have been brought in the statute, thereby the doubts, if any, with respect to subject circular have been settled. The Tribunal while allowing the .....

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