2001 (9) TMI 28 - HC - Income Tax

Summary

Issues Involved:
The judgment involves the assessment of income for the year 1991-92 for a contractor, focusing on the net profit rate applied, deductions allowed for depreciation and interest, and the interpretation of a circular dated August 31, 1965.

Assessment of Income and Deductions:
The contractor declared an income of Rs.9,29,800 for the year 1991-92, with the Assessing Officer applying a net profit rate of 12.5% on the total contract receipts of Rs.2,97,04,200, resulting in a taxable income of Rs.33,94,810. The Commissioner of Income-tax (Appeals) confirmed the net profit rate but allowed deductions of Rs.8,13,344 for depreciation and Rs.5,15,334 for interest. Both the assessee and the Revenue filed separate appeals, which were decided by the Tribunal. The Tribunal determined that a net profit rate of 10% was reasonable compared to the previous rate of 5.6%, taking into account the claim of depreciation, leading to the appeal under section 260A by the assessee.

Interpretation of Circular and Legal Justification:
The assessee raised questions regarding the interpretation of the circular dated August 31, 1965, specifically related to the disallowance of depreciation and interest. The Tribunal's decision on disallowing depreciation and interest was challenged by the appellants based on the circular. The High Court referred to a previous case and found that the claim for depreciation was well-founded and should be considered by the authorities in compliance with the circular. However, regarding the claim for interest, the Court noted that no substantial question of law arose in the circumstances of the case, and the claim was not supported by evidence, ultimately ruling against the assessee.

Conclusion:
The High Court held that authorities must consider and decide the claim for depreciation in accordance with the circular dated August 31, 1965, if the necessary particulars are provided. However, the claim for deduction on account of interest was not supported by substantial evidence and was therefore not allowed. Consequently, the appeals were disposed of with no order as to costs.