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Issues:
1. Profit element on materials supplied by the Government in contract work. 2. Disallowance of depreciation on a car used for personal work. Issue 1: The case involved determining the profit element on materials supplied by the Government in contract work. The Assessing Officer recalculated the net profit and included an additional amount as "profit on materials supplied by the Government." The Tribunal upheld this decision, reducing the amount. The assessee argued that there was no profit element in the materials supplied. The Tribunal distinguished a previous case, stating that the property in the materials had vested in the contractor, but this did not change the legal principle. The High Court agreed with the assessee, stating that the Assessing Officer had already calculated the net profit from the business, making the additional income assumption unjustified. The cost of materials, whether from the Government or elsewhere, would impact the profit or loss of the business. Therefore, the court ruled in favor of the assessee, denying the additional income assumption. Issue 2: The second issue concerned the disallowance of 25% depreciation on a car used for personal work by partners and their families. The court referred to Section 38(2) of the Income-tax Act, which allows deductions based on the proportionate business use of assets. Since the car was found to be used for personal work, the court upheld the disallowance of 25% depreciation. Consequently, the court ruled in favor of the Commissioner on this issue. The judgment concluded by stating that each party would bear its own costs. In conclusion, the High Court ruled in favor of the assessee regarding the profit element on materials supplied by the Government but sided with the Commissioner on the disallowance of depreciation for personal use of a car.
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