2016 (2) TMI 1400

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....ss appeals are decided issue-wise as under: 3. Issue No. 1: On ground No. 1, the assessee challenged the order of the ld. CIT(A) in applying the net profit rate of 6% on the contract receipts without further allowing depreciation, salary and interest to the partners. The Revenue on ground No. 1 challenged the order of the ld. CIT(A) in applying the net profit rate of 6% instead of 10% applied by the AO. 4. The assessee is engaged in the business of civil construction on contract basis. The AO while completing the assessment rejected the book results u/s. 145(3) and estimated the net profit of the assessee from contractual activities @ 10%. The AO noted that the assessee has produced only ledger account, cash book, salary register and only....

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....expenses on the material and labour have increased. Therefore, the addition is not justified. He has also relied upon the order of ITAT, Agra Bench in the case of Jagdish Prasad Bansal in ITA No. 300/Agra/2012, in which it was held that net profit rate of 6% is fair and reasonable subject to further allowance of interest and salary to the partners and depreciation. The ld. CIT(A) confirmed the rejection of books of account u/s. 145(3) of the Act. However, the NP rate applied at 10% was reduced to 6% and income of the assessee from contractual receipts was estimated at Rs. 34,00,136/-. No further deduction in respect of salary or interest to the partners or depreciation was allowed. 6. After considering the rival submissions, we are of the ....

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....eparately. We accept the contention of the assessee because these are allowable deductions and depreciation is statutory deduction and shall have to be allowed to the assessee even if the books are rejected by the authorities below. Considering the history of the assessee and that the assessee has declared higher profit rate as compared to earlier assessment years, we set aside and modify the orders of the authorities below and direct the AO to apply the profit rate of 5.5% as against 6% applied by the ld. CIT(A) and the AO shall grant depreciation and salary and interest paid to the partners separately. In the result, ground No. 1 of appeal of the assessee is partly allowed and ground No. 1 of the departmental appeal is dismissed. 7. Issu....

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....tender. Therefore, no addition could be made. The ld. CIT(A) found that the assessee is following mercantile system of accounting and therefore, interest accrued on FDR and security deposits is liable to be taxed. 10. After considering the rival submissions, we do not find any merit in this ground of appeal of the assessee. The assessee is maintaining mercantile system of accounting, therefore, the interest accrued on FDR and security deposits, may be with the other department for getting the contract, is liable to be taxed in the hands of the assessee. No infirmity has been pointed out in the order of the ld. CIT(A). We, therefore, confirm this addition and dismiss ground No. 3 of the appeal of the assessee. 11. Issue No. 4: The Revenue ....