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TMI Blog2000 (12) TMI 216X X X X Extracts X X X X X X X X Extracts X X X X ..... rved that the assessee received gross payments at Rs. 22,82,261 and declared net profit at Rs. 1,84,337 which was 8 per cent. The AO considered it as low and observed that in such type of contractor's cases the net profit rate of 10 per cent was being applied and upheld in appeals. The contention of the assessee was that even if proviso to s. 145(1) was applicable in that case, the depreciation was still allowable. This explanation of the assessee was not accepted by the AO who applied net profit rate of 10 per cent without allowing any further deduction in its own. He relied on the following case laws: (i) Brij Bhushan Lal Pardaman Kumar vs. CIT 1978 CTR (SC) 134 : (1978) 115 ITR 524 (SC); (ii) CIT vs. Kartar Singh Gill (1979) 117 IT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0 per cent. Regarding claim of depreciation, the learned CIT(A) observed that the facts were the same as were in the asst. yr. 1989-90 and claim of depreciation was to be allowed in view of his appellate order dt. 9th Dec., 1992, for the asst. yr. 1989-90. He directed the AO to allow the depreciation, to verify the details of credits and allow the interest on borrowings which were genuine and were utilised for purpose of assessee's business keeping in view the decision of the Tribunal in the case of Chopra Brothers (India) Ltd. vs. ITO (1993) 46 TTJ (Chd) (TM) 523 : (1993) 202 ITR 40 (AT). 5. Being aggrieved, the Department is in appeal. At the time of hearing of the case, the learned Departmental Representative relied on the order of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e appellant are neither prone to verification nor reliable. He can use his own method but his method should be rationale and reasonable. In the case of the assessee he had used rationale and reasonable method. The application of net rate is directly dependent on the net rate shown by the other cases in the line of the business. Other cases of contractors are being applied net rate of profit without giving them advantage of loss or trading account expenditure and claimed 100 per cent of depreciation. This method creates an abnormal situation in the net profit. The AO had, therefore, taken a proper course by ignoring the depreciation and the interest and applied net rate of 10 per cent. The second positive feature in the assessment of the ITO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was estimated by applying a net profit rate. In the facts and circumstances of the case, therefore, the Tribunal accepted the return and allowed deduction on account of interest paid to the bank as well as depreciation on the truck. On an application to direct reference. Held, dismissing the application, that no question of law arose from the order of the Tribunal." 7.2 It is observed that in the case of Pooja Construction Co., the Tribunal Amritsar Bench referred the case of Saraya Engineering Works vs. CIT which was distinguished by the Hon'ble Allahabad High Court in the case of CIT vs. Bishambhar Dayal Co. wherein it was held that : "the Tribunal had relied upon a Circular of the CBDT No. 29D(xix) of 1965 F.No. 45/239/65-ITC, d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of 10 per cent estimated by him was after depreciation. The need to issue a circular such as the one issued in the present case arose because determination of income by estimating the net profit without mentioning anything about the allowance of depreciation led to serious legal difficulties in assessing the profits arising on the sale of assets by applying the provisions of s. 10(2)(vii) of the 1922 Act. Moreover, beneficial circulars and benevolent circulars should receive the highest respect and consideration in the hands of the AO particularly at the level of the CIT(A) because that was the policy of CBDT which means the Government. They are not supposed to go against the intention of the Government in implementing laws. They must a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce S. Ranganathan were following: "It is clear that the observations of the High Court, seemingly vehement, and apparently unpalatable to the Revenue, are only intended to curb a tendency in revenue matters which, if allowed to become widespread, could result in considerable harassment to the assessee-public without any benefit to the Revenue. We would like to say that the Department should take these observations in the proper spirit. The observations of High Court should be kept in mind in future and the utmost regard should be paid by the adjudicated authorities and the appellate authorities to the requirements of judicial discipline and the need for giving effect to the orders of the higher appellate authorities which are binding on ..... X X X X Extracts X X X X X X X X Extracts X X X X
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