Tribunal includes interest paid to third parties in income calculation under Income-tax Act

The Tribunal allowed the appeal partially, modifying its previous order to include interest paid to third parties in income calculation under section 145(3) of the Income-tax Act, 1961. This decision aligned with the consistent view of the Tribunal and was based on the precedent set in a previous case. The appeal outcome remained unchanged, with the order pronounced on 15th July 2014.

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Issues:
- Application of net profit rate and deductions in income calculation under section 145(3) of the Income-tax Act, 1961.

Analysis:
The appeal in this case was directed against the order of the ld. CIT(A), Bikaner, where the main ground raised was regarding the application of the net profit rate before allowing deductions for depreciation, interest, remuneration to partners, and interest paid to third parties. The Tribunal confirmed the application of section 145(3) of the Act, which allows for the rejection of books of account and the application of a net profit rate. However, the assessee claimed that interest paid to third parties should be considered while estimating profits under this section. The Tribunal referred to a previous decision in the case of M/s Ganesh Garhia Construction Co. and held that interest paid to third parties is allowable after invoking the provisions of section 145(3) of the Act.

The Tribunal recalled and modified its previous order to include the allowance of interest paid to third parties in the income calculation. The decision was based on the consistent view of the Tribunal on this issue. Consequently, the appeal was partly allowed, with the result of the appeal remaining the same. The order was pronounced on 15th July 2014.

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