TaxTMI 
TaxTMI 
2016 (1) TMI 1413
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....ernment departments. During the assessment year under appeal, the assessee filed its return of income declaring taxable income of Rs. 18,63,450/-. The accounts of the assessee were duly subjected to tax audit u/s 44AB of the Act. The net profit reported by the assessee was 2.03% of net contract receipts. During the course of assessment proceedings, the assessee did produce the books of accounts and filed details called for by the Learned AO. However, the Learned AO resorted to estimate the net profit from contract business @ 8% of total contract receipts and accordingly added a sum of Rs. 55,72,100/-. On first appeal, it was pleaded by the assessee that deduction towards bank interest , bank charges and depreciation should be allowed to be deducted from the estimated business profit of 8% u/s 44AD of the Act. The Learned CIT(A) found that if the same are reduced, then the resultant profit would be 2.1% and accordingly, the Learned CIT(A), to meet the ends of justice, resorted to estimate the net profit @ 2.5% of contract receipts. Aggrieved, the revenue is in appeal before us on the following grounds:- 1. That on the facts and in law, the Ld CIT(A) has erred in deducting b....
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....Learned CIT(A). 5.1. We find that the assessee had taken secured loans of Rs. 326.89 lakhs on which bank interest of Rs. 35,08,977/- and bank charges of Rs. 6,57,561/- was incurred by the assessee. Similarly fixed assets to the tune of Rs. 80,27,539/- was used for civil construction business and depreciation thereon of Rs. 12,87,911/- was claimed as allowance u/s 32 of the Act by the assessee. The Learned CIT(A) found that these figures of bank interest, bank charges and depreciation , if reduced from the estimated profit of 8% of net contract receipts, the resultant profit figure was 2.1%. We find that the assessee had explained before the Learned AO that the assessee was formed with an objective of taking over business of an existing partnership firm and in order to build credentials of the new company in Government records, the assessee accepted contracts at substantially lower rates. As a result, the profit margin during the year was low. This fact was not disproved by the Learned AO and no evidence was brought on record by the Learned AO to show that the tenders were won by the assessee at higher prices. We find that the Learned CIT(A) had sought to restrict the estimation ....
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....he purpose of the business and was used for the same. If so, then the interest thereon has to be allowed as a deduction. If, however, the assessee has sufficient capital and in spite of that borrowed money which was not utilised for the purpose of the business it is for the Assessing Officer to disallow the claim as the borrowed money was not for the purpose of the business. In the present case, there is no dispute regarding the capital borrowed which was utilised for the purpose of the business. Admittedly, it is allowable deduction. " 11. Considering the totality of the facts and circumstances of the case as are available before me I therefore hold that in estimating appellant's income; deduction for depreciation and interest was requited to be allowed separately. This was not done by the AO. I find that even if net profit rate of 8% as adopted by the AO is applied in assessee's case then the gross operating profit works, out, to Rs. 73,39,740 being 8% of Rs. 9,17,46,745. From this; if bank interest of Rs. 3508977, bank charges of Rs. 657561 and depreciation of Rs. 12,87,911 is reduced then the net. income from business of civil contract execution works, out to R....
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....uestions: "1. Whether on the facts and in the circumstances of the case the Tribunal is correct in law in directing the Assessing Officer to allow depreciation and interest payments from the estimate of profit at 12%? 2. Whether on the facts and in the circumstances of the case the Tribunal is correct in law in directing the Assessing Officer to grant reliefs on those items which are not claimed by the assessee? 3. Whether on the facts and in the circumstances of the case the Tribunal is correct in granting depreciation though it was already granted by the Assessing Officer? Held: 13. The learned counsel for the appellant is not able to point out any provision of law in the Act or Rules made thereunder, which restricts the allowance of the depreciation and interest. On the other hand, the facility created under the Act is so firm and strong that if for any reason it becomes impermissible or unnecessary for an assessee to seek the allowance of depreciation for a particular Assessment Year, he is entitled to carry it forward, for the subsequent years. In such an event, it assumes the character of unabsorbed depreciation. In this very case,....