2001 (9) TMI 265 - AT - Income Tax

Summary

Issues:
1. Deduction of work-in-progress and material cost for determining profits under section 44A
2. Assessment of profits from truck-plying business under section 44AE for a specific period

Analysis:

1. Issue 1 - Deduction of work-in-progress and material cost under section 44A:
The Revenue appealed against the CIT(A)'s order directing the reduction of the value of opening work-in-progress and material cost from net receipts for determining profits under section 44A. The Revenue argued that section 44AD prescribes income estimation at 8% of gross receipts without provision for deduction of work-in-progress. The Departmental Representative supported the AO's order, citing the decision in State Bank of Travancore vs. CIT. However, the ITAT referred to UCO Bank vs. CIT, where it was clarified that circulars issued under section 119 of the IT Act for fair enforcement are binding on authorities. The ITAT dismissed the Revenue's appeal based on the revenue effect falling below the specified limit and being in contravention of CBDT's Instructions.

2. Issue 2 - Assessment of profits under section 44AE for a specific period:
The second ground raised by the Revenue related to the assessment of profits from the truck-plying business under section 44AE for a reduced period compared to the AO's assessment. The ITAT considered the guidelines in CBDT's Instructions, emphasizing adherence to monetary limits and exceptions. Referring to a case precedent, the ITAT concluded that the Revenue's appeal, filed against the Instructions, was not tenable and dismissed it at the threshold. This decision was supported by the precedent set by the Hon'ble Delhi High Court in a similar case.

In conclusion, the ITAT ruled in favor of the assessee, dismissing the Revenue's appeal on both issues due to non-compliance with CBDT's Instructions, which are binding on Revenue authorities. The judgment highlighted the significance of following established guidelines and policies in tax matters to ensure fair enforcement and public interest.