Court dismisses appeal on depreciation deduction issue, deeming it a debatable question of law and fact.

The Court dismissed the appeal, finding that the issue of deduction on depreciation from gross income estimated at 12.5% on main contractual receipts was a debatable question of law and fact. The Court concluded that the matter involved interpretation of legal principles and was not a clear mistake on record. Therefore, the invocation of jurisdiction under Section 154 was deemed unjustified, leading to the dismissal of the appeal.

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Issues:
1. Whether the order of the Tribunal is perverse and liable to be set asideRs.
2. Whether the Tribunal was correct in directing the assessing officer to estimate income tax at 12.5% of gross receipts and grant depreciationRs.

Analysis:
Issue 1:
The Assessing Officer estimated the income of the assessee for the accounting year 2008-09 at 12.5% on contractual receipts based on the ratio in 'KNR Constructions Vs. DCIT.' Subsequently, the Assessing Officer added depreciation to the income of the assessee under Section 154 of the Income Tax Act. The CIT (Appeals) allowed the appeal, stating that the rectification by the Assessing Officer exceeded the powers under Section 154. The ITAT upheld the CIT's decision. The Department contended that the Assessing Officer incorrectly applied the ratio in 'KNR Constructions' and allowed depreciation after estimating gross income. The Department argued that a mistake was apparent on the face of the record, citing 'Indwell Constructions vs. Commissioner of Income Tax.'

Issue 2:
The debate centered around whether deduction on account of depreciation is permissible on estimated income. The Department argued that depreciation cannot be allowed on gross income if the books of accounts are rejected, relying on 'Indwell Constructions.' On the contrary, the assessee cited 'CIT Vs. Y.Ramachandra Reddy' to support the argument that depreciation is permissible even on estimated income. The Court emphasized that a debatable question of law cannot be considered a mistake apparent on the face of the record. Referring to 'T.S.Balaram v. M/s. Volkart Brothers,' the Court reiterated that only a glaring and palpable mistake justifies rectification under Section 154.

Conclusion:
The Court found that the issue of deduction on depreciation from gross income estimated at 12.5% on main contractual receipts was a debatable question of law and fact. Citing 'Y.Ramachandra Reddy,' the Court concluded that the matter involved interpretation of legal principles and was not a clear mistake on record. Therefore, the invocation of jurisdiction under Section 154 was deemed unjustified, leading to the dismissal of the appeal.

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