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TMI Blog2014 (9) TMI 205X X X X Extracts X X X X X X X X Extracts X X X X ..... deductable in the ordinary course of assessment, remain the same legal character, even where the profit of assessee is determined on percentage basis - relying upon Circular dated 31.08.1965 issued by the Central Board of Direct Taxes –The order of the Tribunal is upheld – Decided against Revenue. - ITA. No. 48 of 2002 - - - Dated:- 30-7-2014 - L. Narasimha Reddy And Challa Kodanda Ram,JJ. For the Appellant : Sri J. V. Prasad For the Respondent : A .V. Krishna Kaundinya ORDER (Per the Honble Sri Justice L. Narasimha Reddy) This appeal under Section 260-A of the Income Tax Act, 1961 (for short the Act) is preferred by the Revenue feeling aggrieved by the order dated 10.08.1999 passed by the Hyderabad Bench A of the Income Tax Appellate Tribunal (for short Tribunal) in I.T.A.No.1336/H/1997, by raising the following questions of law: 1. Whether on the facts and in the circumstances of the case the Tribunal is correct in law in directing the Assessing Officer to allow depreciation and interest payments from the estimate of profit made at 12%? 2. Whether on the facts and in the circumstances of the case the Tribunal is correct in law in directing the Asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e net profits at a fixed percentage and that would be inclusive of the allowance of depreciation and interest. He submits that the exercise being comprehensive in nature, the two components cannot be dealt with, separately. Sri A.V. Krishna Koundinya, learned Senior Counsel for the respondent, on the other hand, submits that the determination of the taxable income by taking recourse to Section 144 of the Act, namely, best judgment assessment has nothing to do with the allowance of depreciation under Section 32 of the Act. He contends that these two operate on totally different planes and there is hardly any meeting point between them, particularly, at the time when the assessment in question was made. The respondent himself was not sure as to the exact loss sustained by him in the Assessment Year 1994-95. Initially, he declared the loss of ₹ 15,24,198/- and he came forward with a revised return indicating the loss of ₹ 93,11,879/-. That itself was sufficient for the Assessing Officer to disbelieve the books of account and he has chosen to adopt the procedure prescribed under Section 144 of the Act, namely, the best judgment assessment. In matters of this nature, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee engaged in an eligible business, a sum equal to eight per cent of the total turnover or gross receipts of the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum claimed to have been earned by the eligible assessee, shall be deemed to be the profits and gains of such business chargeable to tax under the head Profits and gains of business or profession. (2) Any deduction allowable under the provisions of sections 30 to 38 shall, for the purposes of sub- section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed: Provided that where the eligible assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub- section (1) subject to the conditions and limits specified in clause (b) of section 40. (3) The written down value of any asset of an eligible business shall be deemed to have been calculated as if the eligible assessee had claimed and had been actually allowed the deduction in respect of the depreciation for each of the relevant assessment years. (4) The provisions of Chap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of now, it is ₹ 1 Crore. In the instant case, Section 44AD of the Act does not apply because the turnover was above the stipulated amount. Therefore, the feasibility of deduction of turnover and interest cannot be said to have been taken away. The learned counsel for the appellant is not able to point out any provision of law in the Act or Rules made thereunder, which restricts the allowance of the depreciation and interest. On the other hand, the facility created under the Act is so firm and strong that if for any reason it becomes impermissible or unnecessary for an assessee to seek the allowance of depreciation for a particular Assessment Year, he is entitled to carry it forward, for the subsequent years. In such an event, it assumes the character of unabsorbed depreciation. In this very case, the Assessing Officer permitted the allowance of unabsorbed depreciation to the respondent. However, he denied the benefit of the allowance of current depreciation and interest. No reference is made to any provision of law to make such distinction. His understanding of the matter is that Section 44AD of the Act, that provides for a comprehensive formula of determining net profit ..... X X X X Extracts X X X X X X X X Extracts X X X X
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