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Issues involved: Interpretation of deductions u/s 256(2) of the Income-tax Act, 1961.
Summary: The respondent, a building contractor, filed an income-tax return for the assessment year 1984-85, showing income based on a profit rate of ten percent of payments received. The Income-tax Officer accepted the income but rejected deductions for interest paid and truck depreciation. The Commissioner of Income-tax (Appeals) upheld this decision, but the Income-tax Appellate Tribunal partially allowed the appeal, permitting the deductions. The Department challenged this decision, leading to the present petition u/s 256(2) of the Act. The High Court clarified that it was not reviewing the Tribunal's decision but determining if a legal question necessitated the Court's opinion. The Court found no such question, emphasizing the flexibility in assessing net income and the Tribunal's authority to accept deductions. As the Tribunal had allowed the claimed depreciation and deductions from the ten percent profit, the Court concluded that no legal issue warranted referral to the High Court. Therefore, the petition was dismissed. This judgment highlights the discretion of the assessing authority in accepting deductions and the absence of a rigid formula for computing net income, ultimately affirming the Tribunal's decision to allow the deductions claimed by the assessee.
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