2005 (12) TMI 77 - HC - Income Tax

Depreciation - Whether Tribunal was right in law in separately allowing depreciation to the assessee when the net profit rate at 8 per cent. was adopted thereby deeming that the deductions under sections 30 to 38 have already been given full effect? only issue before the Tribunal was that when a net profit rate is applied because of non-maintenance of proper books of account the assessee is still entitled to claim other business expenses like salary interest and depreciation etc. since it has been specifically noted that the audit accounts along with the audit report balance-sheet profit and loss account fixed assets and depreciation chart as prescribed had been filed with the Department no question of law much less a substantial question of law survives for our consideration. revenue s appeal dismissed

Summary

Issues involved:
- Interpretation of the Income-tax Act, 1961 regarding allowing depreciation to the assessee for the assessment year 1994-95.
- Whether the net profit rate at 8 per cent should be adopted to deem that deductions under sections 30 to 38 have already been given full effect.
- Entitlement of the assessee to claim other business expenses like salary, interest, and depreciation when a net profit rate is applied due to non-maintenance of proper books of account.

Analysis:
The High Court judgment pertained to an appeal by the Revenue under section 260A of the Income-tax Act, 1961, challenging the order of the Income-tax Appellate Tribunal for the assessment year 1994-95. The key issue was whether the Tribunal was correct in separately allowing depreciation to the assessee when a net profit rate of 8 per cent was adopted, deeming that deductions under sections 30 to 38 had already been fully accounted for. The court referred to a previous case, CIT v. Chopra Bros. India P. Ltd., where it was established that an assessee could claim depreciation separately if the necessary particulars were provided. The court noted that the audit accounts, along with other essential documents, were filed by the assessee, as confirmed by the Commissioner of Income-tax (Appeals). The Revenue's argument that necessary particulars were not furnished was dismissed by the court after examining the documents on record.

The court emphasized that the Revenue's contention lacked substance, as all required documents had been submitted by the assessee. Citing the precedent set in the case of Chopra Bros. India Ltd., the court concluded that no substantial question of law remained for consideration. The court held that the assessee was entitled to claim depreciation and other business expenses, such as salary and interest, even when a net profit rate was applied due to the absence of proper accounting records. Consequently, the court declined to entertain the appeal and dismissed it.

In summary, the judgment clarified the interpretation of the Income-tax Act regarding the allowance of depreciation to the assessee for the assessment year 1994-95. It established that the assessee could claim depreciation and other business expenses separately, provided the necessary particulars were furnished, even when a net profit rate was applied due to inadequate bookkeeping. The court's decision was based on precedents and the submission of essential documents by the assessee, leading to the dismissal of the Revenue's appeal.