Tax Tribunal: Depreciation Claim Upheld, Net Profit Rate Set at 7%

The Tribunal partly allowed the departmental appeal by confirming the rejection of books of account and applying a net profit rate of 7%. The issue of allowing depreciation separately claimed by the assessee was addressed, with the Tribunal deciding in favor of the assessee based on a previous decision affirmed by the Punjab & Haryana High Court. The Tribunal maintained the earlier decision partially allowing the departmental appeal and dismissed the revenue's argument against allowing depreciation separately. The departmental Miscellaneous Application was disposed of accordingly.

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Issues:
1. Rejection of books of account and application of net profit rate.
2. Allowing depreciation separately claimed by the assessee.

Analysis:
1. The Tribunal partly allowed the departmental appeal concerning the rejection of books of account and application of the net profit rate. The Tribunal confirmed the rejection of the books of account under section 145(3) of the Act. The Assessing Officer increased the net profit rate claimed by the assessee from 5.29% to 12%, which was later reduced to 6.5% by the ld. CIT(Appeals). The Tribunal then applied a net profit rate of 7% and partly allowed the appeal of the revenue.

2. The issue of allowing depreciation separately claimed by the assessee was raised by the revenue in a subsequent application. The Tribunal noted that the earlier order did not address this issue. The revenue contended that depreciation should not be allowed separately, citing certain court decisions. However, the assessee's counsel referred to a decision in the case of M/s Harbhajan Singh & Co., which was confirmed by the Hon'ble Punjab & Haryana High Court. The Tribunal decided to address this issue in the present application due to its significance.

3. The revenue argued against allowing depreciation separately, stating that the ld. CIT(Appeals) erred in following the case of M/s Harbhajan Singh & Co. The Hon'ble Punjab & Haryana High Court's decision in the case of CIT Vs Harbhajan Singh & Co. affirmed the order of the Tribunal in allowing depreciation to the assessee. Consequently, the Tribunal dismissed the second ground/issue in the departmental appeal, deciding it against the revenue.

4. The Tribunal emphasized that the decision on the second issue in the departmental appeal would be part of the earlier order dated 15.07.2014, where the departmental appeal was partly allowed. The result of the departmental appeal in ITA 188/2014 would remain the same, with the departmental appeal deemed to be partly allowed as per the previous order. The departmental Miscellaneous Application was disposed of accordingly.

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