M/S LALI CONSTRUCTION CO. vs. THE ASSTT.COMMISSIONER OF INCOME TAX

This appeal has been preferred by the appellant-assessee under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 18.8.2000, passed by Income Tax Appellate Tribunal, Chandigarh Bench (in short, “the Tribunal') in ITA No.732/CHD/93, for the assessment year 1990-91. On 22.4.2003, the appeal was admitted to consider following substantial questions of law:- i) Whether on the facts and in the circumstances of the case, the learned ITAT is justified not to allow the depreciation and interest from the flat rate of net profit applied by him, in view of Circular No.29 DCXLX7F No.47/239/65 ITC dated 31.3.1965? ii) Whether the depreciation and interest are allowable integrity of this document High Court Chandigarh deductions from the net profits even if total income is calculated by applying net profit rate? iv) Whether on the facts and in the circumstances of the case, there are any reasonable basis for applying a net profit rate of 10% of gross receipts by the Tribunal?

A few facts relevant for the decision of the controversy involved as narrated in the appeal may be noticed. The assessee is a partnership firm doing its business at Patiala in Punjab State. It is engaged in the business of civil construction work relating to telecom authorities. For the assessment year 1990-91, the appellant firm filed its return of income showing total income at ` 4,72,000/-. The case was taken up for scrutiny and assessment was framed vide order dated 18.10.1991, Annexure P.

We have heard learned counsel for the appellant and perused the record.

The matter is no longer res integra. This Court while dealing integrity of this document High Court Chandigarh with similar issues in ITA No.126 of 2001 (M/s Lali Construction Co. Officer, Patiala) decided on 20.11.2007, recorded as under:- “The points raised in this appeal may be categorized into following three issues: a) Whether, while applying net profit rate to the gross receipts, the assessee is entitled for deduction on account of depreciation allowance from such receipts? b) Whether interest paid on the borrowed capital is to be deducted from gross receipts while applying net profit rate? c) Whether the net profit rate of 10% applied by the ITAT in the present case is just and reasonable? No.72 of 1995 (Commissioner of Income Tax, Patiala vs. M/s Gian Chand Labour Contractors Khanauri District Sangrur) decided on 6.11.2007 wherein it has been held that application of net profit rate takes into consideration all factors and the deductions which are referred to under Section 29 of the Act are deemed to have been taken into consideration while making integrity of this document High Court Chandigarh such estimate. Accordingly, the said issue is decided against the assessee. Referring to the third point it deserves to be mentioned that the Assessing officer had applied net profit rate of 12.5%. On appeal, the CIT(A) having regard to the fact that there were certain defects in the wages registers maintained by the appellant, estimated the net profit at 9% of the receipts i.e. of ` 75,98,134/-. However, the ITAT estimated the net profit rate of 10% of the receipts and further noticed that the said appellate Tribunal in similar cases had been adopting the net profit rate of 10%. No illegality or perversity could be pointed out warranting interference by this Court. The net profit rate of 10% adopted by the ITAT in the facts and circumstances of the instant case appears to be just and reasonable. Accordingly, the third issue is decided against the assessee.

In view of the above, the appeal is disposed of in the same terms as in M/s Lali Construction Co.’s case (supra). (Ajay Kumar Mittal) Judge August 04, 2014 (Fateh Deep Singh) Judge ‘gs’