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2016 (4) TMI 696 - ITAT VISAKHAPATNAM

2016 (4) TMI 696 - ITAT VISAKHAPATNAM - TMI - Additions towards income from other sources - estimation of net profit - claim of depreciation - Held that:- Once assessee himself has credited the income under the head “Income from other sources”, there is no merit in the assessee arguments that these items should be considered under block concept for claiming depreciation and to arrive at Written down Value as per section 50 of the Act. We further noticed that the assessee claims to have incurred .....

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, then the assessee should have deducted the insurance claim from the block of asset. In this case, on verification of the depreciation schedule filed along with the return of income, we noticed that the assessee has not credited any amount in the depreciation schedule. At the same time, from the records, it cannot be ascertained that whether the expenditure is debited as a revenue expenditure or capital expenditure. Primafacia, from the entries in the financial statements, it appears that asses .....

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to verify the issue in the light of above discussion and pass fresh order after affording an opportunity of hearing to the assessee. - I.T.A.No.637/Vizag/2013, I.T.A.No.659/Vizag/2013, C.O. No.18/Vizag/2014 - Dated:- 25-2-2016 - SHRI V. DURGA RAO, JUDICIAL MEMBER AND SHRI G. MANJUNATHA, ACCOUNTANT MEMBER For The Appellant : Shri M.K. Sethi, DR For The Respondent : Shri G.V.N. Hari, AR ORDER PER G. MANJUNATHA, Accountant Member: These cross appeals filed by the assessee as well as Revenue are di .....

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the business of execution of works contract, sales of petrol, diesel and also excavation of quarry. The assessee has filed his return of income for the assessment year 2009-10 on 30.9.2009 declaring a total income of ₹ 41,83,920/-, besides agricultural income of ₹ 2,90,862/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') on 24.4.2010. Subsequently, the case has been selected for scrutiny under CASS and accordingly, notices .....

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supported by self made vouchers. The A.O. further noticed that the net profit from the contract business was reduced to 2.95% when compared to 3.48% for the preceding financial year. Therefore, issued a show cause notice and asked to explain why the books of accounts should not be rejected and estimate net profit from the business. In response to show cause notice, the assessee submitted that he has maintained books of accounts and relevant vouchers in support of all expenditures. The assessee f .....

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wever, taking into consideration of the fact that the assessee has accepted sub contract works, the income from works contract is estimated @ 6% on gross contract receipts. Further, in addition to estimation of net profit from contract receipts, the A.O. made separate additions towards income from other sources being insurance claim, interest received on FDR and other receipts as disclosed by the assessee in the profit & loss account. 3. Aggrieved by the assessment order, the assessee prefer .....

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of ITAT, Visakhapatnam Bench in the case of K. Venkata Raju Vs. ACIT and submitted that the Hon ble ITAT considered the net profit rate of 4.5% in cases of sub contract receipts. Similarly, the assessee further submitted that the A.O. was erred in making separate additions towards income from other sources being insurance claim on account of damage of excavator and profit on sale of Dozer, as these two items necessarily should have been considered for calculation of depreciation and to arrive at .....

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on sale of Dozer, the CIT(A) held that these are not revenue generated from his main contract business. Therefore, the A.O. has rightly added the income under the head Income from other sources . Aggrieved by the CIT(A) s order, the assessee is in appeal before us. 4. The Ld. A.R. submitted that the CIT(A) was erred in confirming the additions made by the A.O. towards income from other sources being insurance claim on account of damage of Excavator and profit on sale of Dozer. The A.R. further .....

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A.O. has chosen to estimate the net profit from the business, separate additions towards insurance claim and profit on sale of Dozer is not correct. On the other hand, the Ld. D.R. strongly supported the order of the CIT(A). 5. We have heard both the parties, perused the materials available on record and gone through the orders of the authorities below. The A.O. made additions towards income from other sources being insurance claim, interest on FDRs and profit on sale of assets. The A.O. was of .....

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. 6. We have gone through the records. On perusal of the financial statement filed by the assessee, we noticed that the assessee himself has admitted these receipts under the head Income from other sources. Though assessee rightly claimed that these items are forming part of block of assets, the assessee himself has chosen not to adopt method of account prescribed for calculation of depreciation as per block of assets concept. Once assessee himself has credited the income under the head Income f .....

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the fact that whether the said expenditure has been claimed as revenue in nature and debited to profit & loss account or capital in nature and added to the cost of the asset to claim depreciation. If the amount incurred towards repair of the vehicle is forming part of cost of the asset, then the assessee should have deducted the insurance claim from the block of asset. In this case, on verification of the depreciation schedule filed along with the return of income, we noticed that the assess .....

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