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TMI Blog2014 (5) TMI 285X X X X Extracts X X X X X X X X Extracts X X X X ..... infirmity in the order in rejecting the books of account and estimating the profit – Decided against Assessee. Claim of seigniorage charges – Held that:- The material supplied by the Government/contractor will not have any element of profit - it shall be reduced from the contract receipts - the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit – thus, the AO is directed that while computing the total contract receipts the seigniorage charges shall be reduced from the total contract receipts for the purpose of estimating the profit. Estimation of income @5% - Grant of depreciation - Held that:- Following Indwell Constructions Versus Commissioner Of Income-Tax [1998 (3) TMI 121 - ANDHRA PRADESH High Court] - the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed - Depreciation is allowable u/s. 32 of the Income-tax Act - as provided in section 44AD no further/separate deduction shall be allowed - the claim of depreciation on the estimated income is not justified. Payment of interest and salary to the partner – He ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssioner of Income Tax (Appeals)- VI, Hyderabad ought to have accepted the fact that the lorries/trucks were plied for commercial purpose and, therefore, they are eligible for depreciation of Rs. 86,23,448/- as claimed in the return of income filed for the assessment year 2010-11 from the income estimated in view of the CBDT circular no: 29-D dated 31-8-1965. (6) On the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals)-VI, Hyderabad ought to have also allowed the interest paid of Rs. 33,51,172/- from the estimated income. (7) On the facts and in the circumstances of the case, the learned Commissioner of Income Tax (Appeals)- VI, Hyderabad erred by not following the ratio laid down by the jurisdictional ITAT, Hyderabad in ITA 353/Hyd/2009 in the case of Sree Venkateswara Swamy Lorry Service, Kodad on identical facts and the judgement of the Hon'ble Rajasthan High Court in the case of CIT v. Jain Construction Co. Others (2000) 245 ITR 527 wherein it has been held that depreciation and interest allowance should be separately allowed as a deduction from the estimated income; while completing the assessment of the appellant. (8) O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eld that since the assessee had been unable to produce all the vouchers and in view of the deficiencies noted by him, he estimated the income at 5% of the turnover clear of all expenditure, by rejecting the books of account. 5. On appeal the CIT(A) directed the AO to estimate income of the assessee at 3% of the gross receipts net of all expenses. Against this both the parties are in appeal before us. 6. The crux of the grounds of the assessee is that after estimating income of the assessee at 5% of gross receipts, depreciation is to be granted. The crux of the Revenue grounds is that the assessee income should be estimated at 5% of gross receipts as against 3% estimated by the CIT(A). 7. We have heard both the parties and perused the material on record. Identical issue came before this Tribunal in the case of Sri Gundapaneni Nageswara Rao vs. ITO in ITA No. 1799/Hyd/2013 and 28/Hyd/2014 and the Tribunal vide order dated 29.4.2014 held as follows: 8. We have heard both the parties and perused the material available on record. Both the parties want to agitate a settled issue. The plea of both the parties against the well accepted policy of law is that there must be a poi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mated in terms of S. 44AD of the Act. Accordingly, impugned order of the CIT(A) is set aside, and the assessing officer is directed to recompute the income of the assessee. Accordingly, assessee s ground No. 2 is partly allowed and ground No 3 is allowed. 9. As the CIT(A) followed the earlier order of the Tribunal which is based on the conclusion reached by this Tribunal in the case of C. Eswara Reddy Co. vs. ACIT in ITA No. 668/Hyd/2009 Others. The Tribunal vide order dated 31st January, 2011, held as follows: 6. We have considered the rival submissions on either side and perused the materials available on record. Admittedly the assessee produced the books of account and vouchers. On examination of the books of account with reference to the voucher produced, the Assessing Officer found that the voucher does not tally with the cashbook. When the voucher does not tally with cashbook, in our opinion, the assessee has not maintained the books of account properly. Therefore, the book result will not reflect the correct profit of the assessee. In these circumstances, in our opinion, the Assessing Officer has rightly rejected the books of account. Therefore, we do not find any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Special Bench of this Tribunal in Arihant Builders Pvt. Ltd. vs. ACIT, 291 ITR 41 (SB) and by taking a clue from section 44AD of I.T. Act the profit was estimated at 8%. Admittedly section 44AD would be applicable in respect of a case where the gross contract receipt does not exceed Rs.40 lakhs. Wherever the gross contract receipts exceed Rs.40 lakhs the provisions of section 44AD are not applicable. Therefore, the profit can be estimated either at lower than 8% or above 8% depending upon the factual situation. As discussed earlier, for the purpose of estimating the profit various factors such as the profit ratio of the assessee in the earlier year, profit ratio of the similarly placed traders in the same locality, demand for the product, availability of labourers, raw materials, etc., and the time gap available for executing the contract work, etc., have to be taken into consideration. Therefore, in our opinion, reference to earlier order of this Tribunal alone for the purpose of estimating the profit at 12.5% may not be justified at all. 9. In fact, in the case of Krishnamohan Constructions in ITA Nos. 116 and 117/Hyd/2007 for A.Ys. 1993-94 and 1994-95 the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion shall be allowed on the profit computed. 13. We have carefully gone through the provisions of section 44AD of the Act. Now doubt this provision is applicable for those cases where the turnover/total contract receipt does not exceed Rs.40 lakhs. However, by Finance (No.2) Act of 2009 with effect from 1.4.2011 the Legislature removed the restriction of the total contract receipts of Rs.40 lakhs. By taking a clue from the provision of section 44AD as is applicable for the assessment year under consideration and the provisions which are applicable with effect from 1.4.2011, we find that the deduction available u/ss. 30 to 38 shall be deemed to have been already given full effect and no further deduction under those sections shall be allowed. Depreciation is allowable u/s. 32 of the Income-tax Act. Therefore, as provided in section 44AD no further/separate deduction shall be allowed. In view of the above, in our opinion, the claim of depreciation on the estimated income is not justified. Therefore, the lower authorities have rightly rejected the same. 14. Now coming to the payment of interest and salary to the partner. Proviso to section 44AD(2) clearly says that salary and in ..... 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