R. K. Katadi, Kakinada V. The DCIT, Circle-1, Kakinada

CO 48/VIZ/2013

• Counselvise Citation: [2015] 123 COUNSELVISE.COM (IT) 1557 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 2 year(s) 7 month(s) 26 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 29-10-2015
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2005-2006
• Appeal Filed On: 04-03-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M K SETHI
• Keywords: Depreciation; Income from undisclosed sources; Unabsorbed depreciation; Capital expenditure
• Section: 44AD; 143(3); 37

Judgement Text

ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 1 , , IN THE INCOME TAX APPELLATE TRIBUNAL, VISAKHAPATNAM BENCH, VISAKHAPATNAM . . . . , ,, , . . . . , , , , % % % % BEFORE SHRI V. DURGA RAO, JUDICIAL MEMBER & SHRI G. MANJUNATHA, ACCOUNTANT MEMBER . .. ./ // / I.T.A.NO.58/VIZAG/2013 ( / ASSESSMENT YEAR : 2005-06 ) DCIT CIRCLE - 1 KAKINADA VS. R.K. KATADI KAKINADA [ PAN: AAFFR 1746R] (, , , , / APPELLANT) (-., -., -., -., / RESPONDENT ) C.O. NO.48/VIZAG/2013 (ARISING OUT OF I.T.A.NO.58/VIZAG/2013) ( / ASSESSMENT YEAR : 2005-06 ) R.K. KATADI KAKINADA VS. DCIT CIRCLE - 1 KAKINADA (, , , , / APPELLANT) (-. -. -. -., ,, , / RESPONDENT ) , / / APPELLANT BY : SHRI G.V.N. HARI, AR -., / / RESPONDENT BY : SHRI M.K. SETHI, DR / 3 / DATE OF HEARING : 27.10.2015 / 3 / DATE OF PRONOUNCEMENT : 29.10.20 15 ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 2 / O R D E R PER V. DURGA RAO, JUDICIAL MEMBER: THIS APPEAL IS FILED BY THE REVENUE AND CROSS APPE AL BY THE ASSESSEE AGAINST THE ORDER OF THE CIT(A), VISAKHAPA TNAM DATED 21.11.2012 FOR THE ASSESSMENT YEAR 2005-06. 2. FACTS ARE IN BRIEF THAT THE ASSESSEE IS A FIRM I N THE BUSINESS OF CONSTRUCTION AND HIRING OF BOATS. THE ASSESSEE HAD FILED RETURN OF INCOME FOR THE YEAR UNDER CONSIDERATION BY DECLARIN G TOTAL INCOME OF RS.2,11,230/-. THE RETURN FILED BY THE ASSESSEE WA S PROCESSED INITIALLY U/S 143(1) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER CALLED ACT) AND SUBSEQUENTLY A SURVEY WAS CONDUCTED AND ASSESSMENT WAS CONDUCTED U/S 143(3) OF THE ACT R.W.S. 147 OF THE ACT. SUBSE QUENTLY, ASSESSMENT WAS REOPENED. DURING THE COURSE OF ASSESSMENT PROC EEDINGS, THE AO HAS NOTICED THAT THE ASSESSEE DID NOT ACCOUNT FOR A LL THE RECEIPTS IN THE P&L ACCOUNT FILED IN HIS RETURN OF INCOME TO THE EX TENT OF RS.16,11,265/-. WHEN THE AO HAS ASKED THE ASSESSEE TO EXPLAIN THE ASSESSEE HAS FILED A LETTER DATED 27.12.2010 REQUES TED THE AO TO ESTIMATE PROFIT AT 12.5% ON THE NET RECONCILED AMOU NT OF RS.16,11,265/-. HOWEVER, THE AO HAS TREATED THE EN TIRE RECEIPTS OF RS.16,11,265/- AS UNACCOUNTED INCOME AND SAME WAS A DDED TO THE TOTAL ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 3 INCOME OF THE ASSESSEE. ON APPEAL, THE LD. CIT(A) DELETED THE ADDITION MADE BY THE AO BY OBSERVING THAT THE AO HIMSELF MAD E AN ESTIMATION OF PROFIT ON THE ADMITTED RECEIPTS AT 13.5%. THEREFOR E, THE ENTIRE SUPPRESSED RECEIPTS OF RS.16,11,265/- CANNOT BE TRE ATED AS AN INCOME. ACCORDINGLY, THE AO WAS DIRECTED TO ESTIMATE THE PR OFIT AT 13.5% ON THE SUPPRESSED CONTRACT RECEIPTS OF RS.16,11,265/-. RE VENUE IS IN APPEAL BEFORE THE TRIBUNAL. 3. THE LD. D.R. HAS STRONGLY SUPPORTED THE ORDER PA SSED BY THE AO. ON THE OTHER HAND, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ENTIRE RECEIPTS CANNOT BE TREATED AS INCOME OF THE ASSESSEE. ONLY ESTIMATION COULD BE MADE ON TOTAL CONTRACT RECEIPTS RECEIVED BY THE ASSESSEE. HE ALSO RELIED ON THE DECISION OF HONBL E GUJARAT HIGH COURT IN THE CASE OF DCIT VS. PANNA CORPORATION (2012) 74 DTR 89. HE ALSO RELIED ON THE JUDGEMENT OF THE HONBLE M.P. HIGH CO URT IN THE CASE OF CIT VS. BALCHAND AJIT KUMAR 263 ITR 610 AND SUPPORT ED THE ORDER PASSED BY THE CIT(A). 4. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORDS , GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. THE ASSESSEE DID NOT ACCOUNT FOR ALL THE RECEIPTS IN HIS P&L ACCOUNT AND HE WAS ALSO UNA BLE TO RECONCILE THE EXCESS INTEREST TO THE EXTENT OF RS.16,11,265/- AS APPEARING IN HIS BANK ACCOUNT. THE ASSESSEE HAS SUBMITTED BEFORE THE AO THAT THE ESTIMATE ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 4 OF PROFIT AT 12.5% ON THE UN-RECONCILED ACCOUNTS OF RS.16,11,265/- MAY BE MADE. HOWEVER, AO HAS NOT ACCEPTED THE REQUEST OF THE ASSESSEE. HE SIMPLY ADDED ENTIRE AMOUNT OF RS.16,11,265/- AS INCOME OF THE ASSESSEE. ON APPEAL THE CIT(A) DIRECTED THE AO TO ESTIMATE PROFIT AT 13.5% ON SUPPRESSED CONTRACT RECEIPTS OF RS.16,11,2 65/-. WE FIND THAT THE LD. CIT(A) RIGHTLY DIRECTED THE AO TO ESTIMATE THE PROFIT ON SUPPRESSED CONTRACT RECEIPTS. AO IS NOT CORRECT IN ESTIMATING ENTIRE RECEIPTS AS AN INCOME OF THE ASSESSEE. WE FIND NO I NFIRMITY IN THE ORDER PASSED BY THE LD. COMMISSIONER. IN THIS CONTEXT, T HE HONBLE GUJARAT HIGH COURT HAS OBSERVED THAT IN THE CASE OF PANNA C ORPORATION (SUPRA) EVEN UPON DETECTION OF ON MONEY OR UNACCOUNTED CASH RECEIPTS WHAT CAN BE BROUGHT TO TAX IS THAT TAX IS THE PROFIT EMB EDDED IN SUCH RECEIPTS AND NOT THE ENTIRE RECEIPTS THEMSELVES. IF THAT BE THE LEGAL POSITION, WHAT SHOULD BE ESTIMATED AS A REASONABLE PROFIT OUT OF SUCH RECEIPTS MUST BEAR AN ELEMENT OF ESTIMATION. THE HONBLE M. P. HIGH COURT IN THE CASE OF BALCHAND AJIT KUMAR (SUPRA) HAS OBSERVED TH AT NET RECORDED SALES CANNOT BE RECORDED AS A PROFIT OF ASSESSEE AN D NET PROFIT RATE HAS TO BE ADOPTED, ONCE A NET PROFIT RATE IS ADOPTED FO R MAKING THE ADDITION. 5. KEEPING IN VIEW OF THE FACTS AND CIRCUMSTANCES O F THE CASE AND ALSO BY FOLLOWING THE JUDICIAL PRECEDENTS, WE FIND THAT NO INFIRMITY IN THE ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 5 ORDER PASSED BY THE LD. CIT(A). THUS, THIS GROUND OF APPEAL RAISED BY THE REVENUE IS DISMISSED. 6. IN SO FAR AS CROSS OBJECTIONS FILED BY THE ASSES SEE IS CONCERNED, THE ONLY ISSUE IS ALLOWABILITY OF DEPRECIATION. IN THE ASSESSMENT ORDER, THE ASSESSING OFFICER HAS OBSERVED THAT ONCE PROFIT IS ESTIMATED ASSESSEE IS NOT ENTITLED TO CLAIM THE DEPRECIATION. THE VIEW OF THE ASSESSING OFFICER WAS CONFIRMED BY THE CIT(A). ON APPEAL, THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT DEPRECI ATION ALLOWANCE IS A STATUTORY DEDUCTION PROVIDED UNDER THE ACT AND IT S HOULD BE CONSIDERED SEPARATELY AND IT SHOULD BE ALLOWED. THE LD. A.R. A LSO RELIED ON THE DECISIONS OF THE COORDINATE BENCH OF THE TRIBUNAL I N THE CASE OF DCIT VS. SRIVALLI SHIPPING TRANSPORT IN ITA NOS.79 TO 85/VIZ AG/2013 & 89 TO 95/VIZAG/2013 DATED 15.9.2015. HE ALSO RELIED ON T HE JUDGEMENT OF THE ORDER OF THE TRIBUNAL IN ITA NOS.244&245/VIZAG/2014 IN THE CASE OF RAMESH METALS, VIJAYAWADA DATED 15.4.2015. 7. ON THE OTHER HAND, LD. D.R. HAS SUBMITTED THAT O NCE THERE IS AN ESTIMATION OF PROFIT DEPRECIATION CANNOT BE ALLOWED . 8. WE HAVE HEARD BOTH THE SIDES, PERUSED THE RECORDS , GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW. IN THE INSTAN T CASE, THE ASSESSEE CLAIMED DEPRECIATION AND BOTH THE AUTHORITIES BELOW REJECTED THE CLAIM OF THE ASSESSEE ON THE GROUND THAT ONCE ESTIMATION OF PROFIT IS MADE NO ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 6 DEPRECIATION COULD BE ALLOWED. THE LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE DEPRECIATION ALLOWANCE IS A STAT UTORY PROVISION AND IT HAS TO BE CONSIDERED SEPARATELY AND INDEPENDENTLY A ND IT HAS TO BE ALLOWED. WE FIND THERE IS A FORCE IN THE ARGUMENT OF LD. COUNSEL FOR THE ASSESSEE IT WAS ALSO SUPPORTED BY THE COORDINATE BE NCHES OF THE TRIBUNAL IN THE CASE OF DCIT VS. SRIVALLI SHIPPING TRANSPORT (SUPRA), WHEREIN THE TRIBUNAL HAS CONSIDERED THE ALLOWABILIT Y OF THE DEPRECIATION AND HELD AS UNDER: 23. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES T O THE CLAIM FOR DEDUCTION OF DEPRECIATION. BOTH THE TAX AUTHORITIES HAVE REJ ECTED THE SAME. THE CONTENTION OF THE ASSESSEE IS THAT THE DEPRECIATION ALLOWANCE IS A STATUTORY DEDUCTION PROVIDED UNDER THE ACT AND AS P ER THE CBDT CIRCULAR ALSO, IT SHOULD BE ALLOWED SEPARATELY. TH E LD. D.R., HOWEVER, CONTENDED THAT THE ESTIMATE OF NET PROFIT MADE SHOU LD BE CONSIDERED AS HAVING BEEN MADE NET OF ALL DEDUCTIONS INCLUDING DEPRECIATION AND HENCE THERE IS NO REQUIREMENT OF ALLOWING DEPRECIAT ION SEPARATELY. 24. ON CONSIDERATION OF RIVAL CONTENTIONS, WE FIN D MERIT IN THE SUBMISSIONS MADE BY THE ASSESSEE. THE CAPITAL EXPENDITURE INCU RRED IS NOT ALLOWED AS DEDUCTION, BUT THE DETERIORATION IN THEIR VALUE IS ALLOWED AS DEDUCTION WITH THE NAME DEPRECIATION. HENCE, IT IS CALLED NON-CASH EXPENDITURE AND ALSO CALLED STATUTORY DEDUCTION. W HILE ESTIMATING THE INCOME, THE TRADING RESULTS ONLY ARE ESTIMATED ON T HE BASIS OF SALES/GROSS RECEIPTS, MEANING THEREBY, WHAT IS ESTI MATED IS ONLY THE NET PROFIT BEFORE ALLOWING ANY NON-CASH EXPENDITURE /STATUTORY DEDUCTIONS. FURTHER, THE QUANTUM OF DEPRECIATION W OULD ALSO DEPEND UPON THE VALUE OF ASSETS. FOR EXAMPLE, A BUSINESS MAN HAVING LOWER VERSION OF CAR ON AIR CONDITIONER WOULD BE ENTITLED TO CLAIM LOWER AMOUNT OF DEPRECIATION, SINCE THE COST OF THE LOWER VERSION OF CAR AND AIR CONDITIONER WILL BE LESS. WHEREAS ANOTHER BUSI NESS MAN HAVING HIGHER VERSION OF CAR AND AIR CONDITIONER WOULD GET HIGHER AMOUNT OF DEPRECIATION, SINCE THE COST OF THOSE ASSETS SHALL BE HIGHER. HENCE, EVEN IF THE LEVEL OF OPERATIONS AND OTHER THINGS AR E EQUAL BETWEEN THE TWO, THE DEPRECIATION AMOUNT WILL BE DIFFERENT DUE TO THE DIFFERENCE IN THE VALUE OF ASSETS. HENCE THE TOTAL INCOME SHALL ALSO RESULT IN DIFFERENT FIGURES BETWEEN THE TWO BUSINESS MEN. TH E ABOVE SAID ILLUSTRATION WOULD SUPPORT THE CONTENTIONS OF THE A SSESSEE THAT THE ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 7 DEPRECIATION SHOULD BE ALLOWED SEPARATELY. ACCORDI NGLY, WE DIRECT THE AO TO ALLOW THE DEPRECIATION ADMISSIBLE TO THE ASSE SSEE AGAINST THE INCOME ESTIMATED BY US IN THE PRECEDING PARAGRAPHS. 9. IN THE CASE OF RAMESH METALS, VIJAYAWADA VS. ACI T, THE HONBLE TRIBUNAL HAS CONSIDERED THE SIMILAR ISSUE AND HELD AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS OF THE PARTIE S AND PERUSED THE ORDERS OF REVENUE AUTHORITIES AS WELL AS OTHER MATERIALS ON RECORD. WE HAVE ALSO APPLIED OUR MIND TO THE DECISIONS RELIED UPON BY THE PARTIES. AS CAN BE SEEN, ID. CIT HAS CONSIDERED THE ASSESSMENT ORDER PASSED TO BE ERRONEOUS AND PREJUDICIAL TO THE INTERESTS OF REVEN UE SOLELY FOR THE REASON THAT ONCE PROFIT IS ESTIMATED NO FURTHER DED UCTION TOWARDS DEPRECIATION IS ALLOWABLE IN VIEW OF THE DECISIONS OF THE HON'BLE AP HIGH COURT IN CASE OF M/S INDWELL CONSTRUCTIONS VS. CIT (SUPRA) AND THE DECISION OF THE ITAT IN CASE OF SRI P.V. SITARAMASWAMY VS. A DDL.CIT IN ITA NO. 264/HYD/12 DATED 09/01/13. LD. CLI' OB.SRVED THAT O NCE INCOME IS ESTIMATED ALL RELATED EXPENSES AND OTHER ELIGIBLE DEDUCTIONS IS D EEMED TO HAVE BEEN TAKEN CARE OF AND THERE IS NO SCOPE FOR ALLOWI NG FURTHER DEDUCTIONS. HOWEVER, AS CAN BE SEEN, IN THE PRESENT CASE, THE PROVISIONS OF SECTION 44AD ARE NOT APPLICABLE AS RE CEIPTS FROM CONTRACT BUSINESS IS MUCH MORE THAN THE PRESCRIBED LIMIT. MO REOVER, AO WHILE ESTIMATING THE PROFIT FROM CONTRACT BUSINESS HAS AP PLIED A MUCH HIGHER RATE THAN THE RATE PRESCRIBED U/S 44AD. IN T HESE CIRCUMSTANCES, IT CANNOT BE SAID THAT ONCE PROFIT IS ESTIMATED NO FURTHER DEDUCTION IS ALLOWABLE BECAUSE SECTION 44AD PROVIDES THAT ONCE I NCOME IS ESTIMATED, DEDUCTION AVAILABLE U/S 30 TO 38 SHALL BE DEEMED TO HAVE BEEN GIVEN FULL EFFECT. THE HON'BLE JURISDICTIONAL HIGH COURT IN CASE OF CIT VS. V.S.Y. RAMACHANDRA REDDY (SUPRA) WHILE CONSIDERING IDENTICAL ISSUE OF ALLOWANCE OF DEPRECIATION AND REMUNERATION AND I NTEREST PAYMENT TO PARTNERS IN CASE OF ESTIMATION OF PROFIT ON CONTRAC T BUSINESS HELD IN THE FOLLOWING MANNER: 'FOR EXAMPLE, SECTION 44AD OF THE ACT PROVIDES FOR DETERMINATION OF THE INCOME OF AN ASSESSEE FROM THE BUSINESS AT 8% OF TH E TOTAL TURNOVER OR THE GROSS RECEIPTS OF THE PREVIOUS YEAR UNDER CERTA IN CIRCUMSTANCES. SUB- SECTION (2) IS TO THE EFFECT THAT IF ANY DEDUCTION ALLOWABLE UNDER SECTIONS 30 TO 38, WHICH TAKES IN ITS FOLD THE DEDUCTION SUC H AS DEPRECIATION AND INTEREST, SHALL BE DEEMED TO HAVE BEEN EFFECTED. T HE PROCEDURE UNDER THAT SECTION, HOWEVER, APPLIES ONLY WHEN THE TURNOV ER IS BELOW A PARTICULAR FIGURE WHICH AT THE RELEVANT POINT OF TI ME WAS RS. 40,00,000/-. AS OF NOW, IT IS RS.1 CRORE. IN THE INSTANT CASE, SECTI ON 44AD OF THE ACT DOES NOT APPLY BECAUSE THE TURNOVER WAS ABOVE THE STIPULATED AMOUNT. THEREFORE, THE FEASIBILITY OF DEDUCTION OF TURNOVER AND INTEREST C ANNOT BE SAID TO HAVE BEEN TAKEN AWAY. ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 8 THE LEARNED COUNSEL FOR THE APPELLANT IS NOT ABLE T O POINT OUT ANY PROVISION OF LAW IN THE ACT OR RULES MADE THERE UNDER, WHICH RES TRICTS THE ALLOWANCE OF THE DEPRECIATION AND INTEREST. ON THE OTHER HAND, THE F ACILITY CREATED UNDER THE ACT IS SO FIRM AND STRONG THAT IF FOR ANY REASON IT BECOME S IMPERMISSIBLE OR UNNECESSARY FOR AN ASSESSEE TO SEEK THE ALLOWANCE O F 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 ARCH DISTINCTION. HIS UND ERSTANDING OF THE MATTER IS THAT SECTION 44AD OF THE ACT, THAT PROVIDES FOR A COMPREHENSIVE FORMULA OF DETERMINING NET PROFIT DERIVED BY A CIVI L CONTRACT OR AT 8%, TAKES IN ITS FOLD, ALLOWANCE OF DEPRECIATION, INTER EST AND OTHER BENEFITS. THE FACT, HOWEVER, REMAINS THAT SUCH A PROVISION WAS NO T IN EXERCISE IN THE ASSESSMENT YEAR 1994-95. IF AN ASSESSEE IS ENTITLED TO CLAIM DEDUCTION OF IN TEREST; BE IT UNDER SECTION 36(1)(III) OF THE ACT OR ANY OTHER RELEVANT PROVISION AND OF DEPRECIATION UNDER SECTION 37 OF THE ACT, IN THE ORDINARY COURSE OF ASSESSMENT, THERE IS NO REASON WHY THE SAME FACILITIES BE NOT EXTENDED T O HIM, MERELY BECAUSE THE PROFIT IS DETERMINED ON THE BASIS OF ES TIMATION AS WAS DONE IN THE INSTANT CASE. WE ARE OF THE VIEW THAT DEPRECIATION AND INTEREST, WHICH ARE OTHERWISE DEDUCTABLE IN THE ORDINARY COURSE OF ASSE SSMENT, REMAIN THE SAME LEGAL CHARACTER, OVEN WHERE THE PROFIT OF ASSESSEE IS DETERMINED ON PERCENTAGE BASIS. THE CONCLUSIONS ARRIVED AT BY US, GET SUPPORT FROM THE CIRCULAR DATED 31.08.1965 ISSUED BY THE CENTRAL BOARD OF DIRECT TA XES. THOUGH THE CIRCULAR WAS WITH REFERENCE TO THE 1922 ACT, IT HOLDS GOOD F OR THE ANALOGOUS PROVISIONS UNDER THE 1961 ACT. THE LEARNED COUNSEL FOR THE APPELLANT RELIED ON A J UDGMENT OF THIS COURT IN INDWELL CONSTRUCTIONS V. COMMISSIONER OF INCOME TAX . THAT WAS A CASE IN WHICH THIS COURT TOOK THE VIEW THAT ONCE THE BOOKS OF ACCOUNT ARE DISBELIEVED FOR A PARTICULAR PURPOSE, THEY CANNOT BE RELIED UPO N IN THE CONTEXT OF INTEREST. IN THE INSTANT CASE, WE ARE CONCERNED WITH THE DEPRE CIATION. THE OCCASION TO DENY THE DEDUCTION OF DEPRECIATION OR INTEREST WOUL D ARISE IF ONLY THE MATERIAL PLACED BEFORE THE ASSESSING AUTHORITY IN PROOF OF P URCHASE OF MACHINERY AND OTHER ITEMS AND PAYMENT OF INTEREST IS DISBELIEVED. NO FINDING OF THAT NATURE WAS RECORDED BY THE ASSESSING OFFICER.. AS CAN BE SEEN FROM THE AFORESAID EXTRACTED PORTION , HON'BLE HIGH COURT AFTER TAKING NOTE OF THE DECISION OF THE SAME HIGH COURT IN CASE OF MIS INDWELL CONSTRUCTIONS VS. CIT (SUPRA) H ELD THAT EVEN IN CASE OF ESTIMATION OF PROFIT ON CONTRACT BUSINESS, DEDUC TION TOWARDS DEPRECIATION AND INTEREST IS ALLOWABLE AS THERE IS NO PROVISION UNDER THE ACT RESTRICTING SUCH ALLOWANCE. THE HON'BLE JURISDI CTIONAL HIGH COURT IN CASE OF CIT VS. SRI VENKATESWARA SWAMY LORRY ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 9 SERVICE(SUPRA) WHILE DISMISSING THE APPEAL OF THE R EVENUE AGAIN HELD THAT IN CASE OF ESTIMATION OF INCOME AFTER REJECTIN G THE BOOKS OF ACCOUNT FURTHER DEDUCTION TOWARDS DEPRECIATION AND INTEREST AND REMUNERATION PAYMENT TO PARTNERS IS STILL ALLOWABLE . THEREFORE, RESPECTFULLY FOLLOWING THE VIEW EXPRESSED BY HON'BL E JURISDICTIONAL HIGH COURT AS AFORESAID, WE HOLD THAT EXERCISE OF P OWER U/S 263 OF THE ACT AND THE CONSEQUENT ORDER PASSED BY LD. CIT DIRECTING ASSESSING OFFICER TO DISALLOW DEPRECIATION IS NOT VALID. ACCORDINGLY, W E SET ASIDE THE IMPUGNED ORDER OF LD. CIT FOR BOTH THE ASSESSMENT YEARS AND RESTORE T HE ASSESSMENT ORDERS PASSED BY AO. 8. IN THE RESULT, BOTH THE APPEALS OF ASSESSEE ARE A LLOWED. 10. WE RESPECTFULLY FOLLOWING THE DECISION OF THE CO ORDINATE BENCH OF THE TRIBUNAL, WE FIND THAT THE CROSS APPEAL FILED B Y THE ASSESSEE DESERVES TO BE ALLOWED. ACCORDINGLY, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION AND ORDER ACCORDINGLY. 11. IN THE RESULT, THE APPEAL FILED BY THE REVENUE IS DISMISSED AND CROSS OBJECTION FILED BY THE ASSESSEE IS ALLOWED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 29 TH OCT15. SD/- SD/- ( (( ( . . . . ) ( ) ( ) ( ) ( . .. . ) )) ) ( (( ( G. MANJUNATHA) ( (( ( V. DURGA RAO ) )) ) / // / ACCOUNTANT MEMBER / // / JUDICIAL MEMBER /VISAKHAPATNAM: 6 / DATED : 29 TH OCT15 VG/SPS ITA NO.58/VIZAG/2013 & CO 48/VIZAG/2013 R.K. KATADI, KAKINADA 10 / - 7 / COPY OF THE ORDER FORWARDED TO :8 1. , / THE APPELLANT THE DCIT, CIRCLE-1, KAKINADA 2. -., / THE RESPONDENT M/S. R.K. KATADI, 16-23-62, PALLAM RAJU NAGAR, KAKINADA-533 001, EAST GODAVARI DIST. 3. ; / THE CIT-1, VISAKHAPATNAM 3. ; () / THE CIT(A), VISAKHAPATNAM 4. -, , / // / DR, ITAT, VISAKHAPATNAM 5 . . . . / GUARD FILE / BY ORDER // TRUE COPY // @A ( SR.PRIVATE SECRETARY ) , / // / ITAT, VISAKHAPATNAM