2001 (9) TMI 14 - HC - Income Tax

Whether on the facts and in the circumstances of the case the Tribunal was right in treating the claim of depreciation as covered in the rate of net profit applied by it? In CIT v. Jain Construction Co. this court has taken a view that the Central Board of Direct Taxes has a power to issue circulars and they are binding on the income-tax authorities. In the instant case the Tribunal has not taken into consideration the circulars of the Central Board of Direct Taxes and simply ordered that the net profit rate of 7 per cent. will cover the allowance of depreciation and interest In our opinion the Tribunal was wrong in treating the claim of depreciation as covered in the rate of net profit of 7 per cent. - The reference is accordingly answered and returned to the Income-tax Appellate Tribunal Jaipur Bench to decide the appeal afresh after giving an opportunity of hearing to the assessee as well as the Revenue Department in the light of the law laid down in Jain Construction Co. s case

Summary

The High Court of Rajasthan addressed a case involving the treatment of depreciation in a construction business's net profit rate. The Tribunal's decision to include depreciation in the net profit rate of 7% was deemed incorrect. The case was referred back to the Tribunal for a fresh decision in accordance with relevant legal principles.