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TMI Blog2016 (4) TMI 696X X X X Extracts X X X X X X X X Extracts X X X X ..... sider the fact that whether the said expenditure has been claimed as revenue in nature and debited to profit & loss account or capital in nature and added to the cost of the asset to claim depreciation. If the amount incurred towards repair of the vehicle is forming part of cost of the asset, then the assessee should have deducted the insurance claim from the block of asset. In this case, on verification of the depreciation schedule filed along with the return of income, we noticed that the assessee has not credited any amount in the depreciation schedule. At the same time, from the records, it cannot be ascertained that whether the expenditure is debited as a revenue expenditure or capital expenditure. Primafacia, from the entries in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2. The brief facts of the case are that the assessee is an individual engaged in the business of execution of works contract, sales of petrol, diesel and also excavation of quarry. The assessee has filed his return of income for the assessment year 2009-10 on 30.9.2009 declaring a total income of ₹ 41,83,920/-, besides agricultural income of ₹ 2,90,862/-. The return was processed u/s 143(1) of the Income Tax Act, 1961 (hereinafter called as 'the Act') on 24.4.2010. Subsequently, the case has been selected for scrutiny under CASS and accordingly, notices u/s 143(2) 142(1) of the Act were issued. In response to notice, the authorized representative of the assessee appeared from time to time and furnished the books of ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Further, in addition to estimation of net profit from contract receipts, the A.O. made separate additions towards income from other sources being insurance claim, interest received on FDR and other receipts as disclosed by the assessee in the profit loss account. 3. Aggrieved by the assessment order, the assessee preferred an appeal before the CIT(A). Before the CIT(A), the assessee reiterated the submissions made before the A.O. The assessee further submitted that out of the gross contract receipts of ₹ 5,51,90,495/-, a sum of ₹ 4,32,00,311/- was from sub contract works. During the year under consideration, he has executed sub contract works therefore, the profit margin in his business is very low when compared to main con ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on account of damage of Excavator and profit on sale of Dozer. The A.R. further submitted that the assessee has received insurance claim towards loss incurred on account of damage of Excavator due to fire. During the financial year under consideration, a machine called EX-70 was met with fire accident The assessee has claimed insurance and the insurer has reimbursed an amount of ₹ 8 lakhs towards loss of Excavator. The insurance claim received towards loss of excavator should be forming part of block of assets and accordingly considered for claiming depreciation. When A.O. has chosen to estimate the net profit from the business, separate additions towards insurance claim and profit on sale of Dozer is not correct. On the other hand, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Written down Value as per section 50 of the Act. We further noticed that the assessee claims to have incurred a sum of ₹ 17,40,198/- towards repair of the damaged excavator. Though assessee claims that it has incurred substantial amount for repair of the damaged excavator, the A.O. as well as the CIT(A) have failed to consider the fact that whether the said expenditure has been claimed as revenue in nature and debited to profit loss account or capital in nature and added to the cost of the asset to claim depreciation. If the amount incurred towards repair of the vehicle is forming part of cost of the asset, then the assessee should have deducted the insurance claim from the block of asset. In this case, on verification of the depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
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