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2020 (1) TMI 224 - HC - Income TaxBest judgment assessment - net profit rate in making assessment of the income - adjustment of the profits arrived at by applying net profit rate by way of allowance of depreciation of the assets used in business is permissible - HELD THAT - The present issue that has been raised by the appellant in the present appeal is that once the Appellate Tribunal had determined profit on the basis of net profit basis @ 8% of the contract value it was no longer open for the Income Tax Appellate Tribunal to re-do computation on the 12.5% of net profit. On perusal of impugned order it appears that though the Tribunal has taken note of the directions of this Court however it had failed to apply the judgment rendered by this Court in the case of M/s. Shri Ram Jhanwar Lal 2008 (7) TMI 505 - RAJASTHAN HIGH COURT nor the judgment rendered in the case of Jain Construction 1999 (9) TMI 26 - RAJASTHAN HIGH COURT The present appeal is allowed to the extent of modifying the order of the Tribunal for determining the profit rate @ 8% instead of 12.5% on gross contract receipt as earlier determined by the Tribunal subject to allowing depreciation interest and remuneration to partners. Accordingly the appeal is allowed and the matter stands remitted back to the Income Tax Authorities concerned for recomputing the amount of tax.
Issues:
1. Challenge to the judgment and order of the Income Tax Appellate Tribunal. 2. Application of net profit rate and deduction of depreciation. 3. Interpretation of previous judgments regarding net profit rate and depreciation. 4. Determination of profit rate and computation of tax. Analysis: 1. The appellant filed an Income Tax Appeal challenging the judgment of the Income Tax Appellate Tribunal, seeking to revisit the decision dated 03.8.2009 passed in Appeal No.365/JU/2005 for the Assessment Year 2001-02. The appellant contended that a previous appeal had been allowed by the High Court, directing the Tribunal to reconsider the matter based on specific observations and directions provided in the earlier judgment. 2. The core issue revolved around the application of the net profit rate and the allowance of depreciation. The Tribunal had initially determined the net profit rate at 8% without allowing any separate deduction for depreciation. The appellant contested this decision, emphasizing the importance of considering depreciation in the computation of profits. 3. The High Court referred to a previous judgment in a similar case where the question of allowing depreciation on top of the net profit rate was addressed. The Court relied on the judgment of the Division Bench in CIT Vs. Jain Construction Co. and directed the Tribunal to reexamine the matter in light of the principles established in the previous rulings. 4. Upon reviewing the impugned order, the High Court observed that the Tribunal had deviated from the directions provided in the earlier judgment and had determined the profit rate at 12.5% instead of the previously decided 8%. The Court held that the Tribunal should have adhered to the earlier decision and recalculated the profit rate at 8%, while also allowing for depreciation, interest, and remuneration to partners. 5. The High Court allowed the appeal, modifying the Tribunal's order to set the profit rate at 8% instead of 12.5% based on the gross contract receipts. The matter was remitted back to the Income Tax Authorities for the recomputation of the tax amount. The Court rejected the Revenue's justification for the Tribunal's decision, emphasizing the importance of following previous judgments and directions provided by the Court in similar cases. In conclusion, the High Court upheld the appeal, emphasizing the significance of consistent application of legal principles and directions provided in previous judgments while determining profit rates and allowing for necessary deductions in income tax assessments.
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