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TMI Blog2016 (7) TMI 936X X X X Extracts X X X X X X X X Extracts X X X X ..... of the learned counsel for the appellant to apply Net Profit Rate of 8% as provided under Section 44AD (1) of the Act is also required to be rejected as in view of the proviso to Section 44AD (1) of the Act, since the gross receipts paid or payable in the case of the assessee are over ₹ 40 lacs, the provisions of Section 44AD (1) of the Act, as reproduced above, would not be attracted in the case of the respondent-assessee. - I. T. A. No. 30 of 2016 (O&M) - - - Dated:- 14-7-2016 - J. VAZIFDAR, ACTING CHIEF JUSTICE AND MR. DEEPAK SIBAL, JJ. For The Appellant : Mr. Zora Singh Klar, Senior Standing Counsel DEEPAK SIBAL, J. : C. M. No. 1817-C-II of 2016 : Through this application, condonation of delay of 183 days ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case, the ITAT was right in law in allowing the depreciation claimed whereas the Hon'ble Punjab and Haryana High Court, Chandigarh has held in the case of Surinder Pal Nayyar vs. CIT, Ludhiana reported in 177 Taxmann 207 that the profit having been arrived at on the basis of gross receipts by taking into consideration all allowable expenses, no deduction on account of depreciation can be separately allowed. ? The factual matrix of the matter, which, in brevity needs to be noticed is that the respondent-assessee is a Civil Contractor. After he had filed his return for the assessment year in question, his case was selected for scrutiny and in the proceedings which ensued, since according to the Assessing Officer, proper boo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uld be 10%, as assessed by the Assessing Officer and in any case, at least 8%, as per Section 44AD (1) of the Act, as it existed at the relevant time. On the issue of the assessee having been allowed to claim depreciation, relying upon the provisions of Section 44AD (2) of the Act (as it existed at the relevant time), it was submitted by the learned counsel for the appellant that there was a complete bar to the same. Our attention was drawn to Section 44AD (2) of the Act, wherein it was provided that any deduction allowable under the provisions of Sections 30 to 38, which include the grant of depreciation under Section 32 of the Act, would be deemed to have been given full effect to while applying the Net Profit Rate in accordance with S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further deduction under those sections shall be allowed : Provided that where the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under subsection (1) subject to the conditions and limits specified in clause (b) of section 40. Circular No. 737 dated 23.02.1996, issued by the Central Board of Direct Taxes, which culled out the objects behind insertion of Section 44AD, is also extracted as under :- The Estimated Income Method of assessment for certain categories of businesses is prevalent in several countries. The Tax Reforms Committee has also recommended gradual introduction of the Estimated Income Method in certain areas to facilitate better tax complian ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Resultantly, the challenge to the claim of depreciation having been allowed by the Tribunal must fail. So far as the challenge by the Revenue to the application of Net Profit Rate @ 7% is concerned, the same has been ordered to be applied by the Tribunal after considering the entire facts and circumstances of the case before it, which we do not find as arbitrary or perverse and resultantly, choose not to interfere with the same. The argument of the learned counsel for the appellant to apply Net Profit Rate of 8% as provided under Section 44AD (1) of the Act is also required to be rejected as in view of the proviso to Section 44AD (1) of the Act, since the gross receipts paid or payable in the case of the assessee are over ₹ 40 lac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s applicable to all assessees whose gross receipts from the above mentioned business do not exceed ₹ 40 lakhs. Gross receipts are the amount received from the clients for the contract and will not include the value of material supplied by the client. The income from the above mentioned business will be estimated at 8 per cent of the gross receipts paid or payable to an assessee. A taxpayer can voluntarily declare a higher income in his return. 7. The circular having clarified that it applies to an assessee whose gross receipts do not exceed ₹ 40 lacs,we have no hesitation in holding that the ITAT has rightly allowed depreciation to the assessee. 8. As regards the first question namely reduction of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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