2013 (6) TMI 780 - HC - Income Tax

Summary

Issues involved: Appeal regarding assessment year 2005-06; deletion of income addition on estimate basis; grant of depreciation allowance without maintained books of accounts; justification of depreciation claim based on material on record.

Deletion of income addition on estimate basis: The appellant contended that the income should not have been estimated at 4% instead of 5% due to the absence of maintained books of accounts. The Tribunal held that the agreement for estimation of profit at 5% for a previous year did not bind the assessee for the current assessment year. It was established that in the absence of books of accounts, the assessing officer can estimate income based on available material. The Tribunal found it permissible to accept profit estimation at 4% when agreed upon by both parties, and dismissed the appeal filed by the revenue, stating no interference was necessary.

Grant of depreciation allowance without maintained books of accounts: The Tribunal relied on a circular by CBDT stating that depreciation allowance should be separately calculated when profit is estimated and prescribed particulars are provided by the assessee. Referring to a judgment by the Rajasthan High Court, it was established that depreciation and interest payments must be allowed separately when estimating profit. Based on this, the Tribunal concluded that depreciation should be allowed separately. The High Court, in agreement with the Tribunal's findings, held that there was no need for interference and dismissed the appeal.

Conclusion: The High Court dismissed the appeal, upholding the Tribunal's decision regarding the estimation of income and the grant of depreciation allowance.