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TMI Blog1996 (8) TMI 153X X X X Extracts X X X X X X X X Extracts X X X X ..... e AO has not allowed 100% depreciation on hutments as claimed by the assessee in the asst. yr. 1991-92. The learned CIT(A) observed that the AO had applied the net profit rate of 10.5% and has observed that the same takes care of the depreciation claimed by the assessee. He, therefore, agreed with the AO in principle. However, keeping in view the rise in the price index of various inputs, the learned CIT(A) allowed a lumpsum relief of Rs. 50,000 to the assessee. 3. The learned counsel for the assessee Shri Suresh Ojha invited our attention to the written submissions filed before the learned CIT(A), wherein attention of the learned CIT(A) was invited to the decisions by the Tribunal in the case of M/s Tolaram Phusaram, Bikaner, and Shri Poo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esentative Shri A.K. Singh strongly refuted the submissions made by the learned counsel and submitted that the main reason given by the AO related to maintenance of the books in improper manner and that it was a clear case of application of the provisions of s. 145 of the Act. He submitted that the low withdrawals by the partners was only one aspect for making the additions. The learned Departmental Representative further submitted that the assessee could not produce any vouchers with reference to the expenses claimed and that even the purchase of coal, etc. were unvouched. He further submitted that the cases mentioned by the learned counsel were distinguishable on facts. He, therefore, submitted that there should be no interference with th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dt. 9th Aug., 1979, in the case of Hiranand Ramchand vs. ITO (ITA No. 346/Jab/1978-79), wherein it was held that additions on account of low withdrawals by partners unmatching their household expenses were misconceived and that the firm was not liable to explain how the partners met their household expenses. In view of the foregoing decisions and taking into account the overall facts and circumstances of the case, we feel that the addition of Rs. 2,594 as sustained by the learned CIT(A) is uncalled for, as the learned counsel has specifically mentioned in response to a query made by the Bench that the G.P. rate of 8.31% has been declared by the assessee without taking into account the claim of depreciation and interest paid to third partie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 10%. In the process the AO also made a reference to the provisions of s. 44AD of the IT Act whereby net rate of 8% became applicable from asst. yr. 1994-95 in case of contractors having gross receipts upto Rs. 40 lacs. The AO also referred to the decision of the Tribunal, Jaipur Bench, in the case of M/s Sriram & Co. and M/s Gopalaram Pemaram wherein net profit rate of 9% was upheld without allowing depreciation and interest paid to third parties. 9. On first appeal, the counsel of the assessee contended that the AO has not allowed depreciation on truck and machinery used for construction work. The learned CIT(A), however, referred to the assessment order wherein the AO had applied the lower net rate of 10% after taking into considerat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... In the said cases a G.P. rate of 7 to 8% was found reasonable. He also invited our attention to the decision of the Tribunal dt. 31st March, 1995, in the case of Mohangarh Construction Co. vs. Asstt. CIT in ITA No. 1732/Jp/1994, wherein the Tribunal relying on the case of Chopra Bros. (India) Pvt. Ltd. vs. ITO (1993) 46 TTJ (Chd)(TM) 523 : (1993) 202 ITR 40 (A.T.), wherein the CBDT Circular No. 29-D, dt. 30th Aug., 1965, and various cases of the High Courts were considered, held that after rejection of accounts and estimation of net profits, depreciation should be worked out separately. The learned counsel has also filed copies of the decision of the Tribunal, Chandigarh Bench, in the case of Chopra Bros. (India) Pvt. Ltd. vs. ITO. The lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorities and various decisions referred to by the learned counsel. It is observed that in majority of the decisions the Tribunal has held the view that even after applying the net profit rate, depreciation and interest paid to third parties are allowable separately. In the case of Chopra Bros. (India) Pvt. Ltd. and Mohangarh Construction Co., the Tribunal has carefully considered the question of allowability of depreciation in circumstances similar to the case before us. Respectfully following the aforesaid decisions of the Tribunal and having regard to the decision reported in (1995) 210 ITR 118 (All), we feel that the claim of the assessee for depreciation and interest paid to third parties has to be allowed. The AO is accordingly direc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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