COMMISSIONER OF INCOME TAX, PT vs. M/S.NARESH KUMAR GUPTA.
What did the High Court hold?
The High Court held that the Revenue had failed to refer to any provision that impedes an assessee's right to claim depreciation when income is assessed by applying a net profit rate. The Court acknowledged that a statutory impediment was introduced by an amendment to Section 44AD(2) of the Income Tax Act, 1961, effective from 1.4.1994. However, since the assessment year in dispute was 1989-90, this amendment was not applicable. Therefore, for the assessment year in question, there was no impediment to the assessee claiming depreciation even if income was calculated on a net profit of 8%. The Court found no error of jurisdiction or law in the ITAT's order. The substantial question of law was answered against the Revenue.
What were the facts?
The Revenue (Commissioner of Income Tax, Chandigarh) is in appeal against an order of the Income Tax Appellate Tribunal (ITAT), Chandigarh Bench. The assessee is M/s Naresh Kumar Gupta, Chandigarh. The assessment year in question is 1989-90. The ITAT had allowed depreciation on machinery to the assessee. The Revenue's grievance is that the assessee did not maintain account books and was assessed on a net profit rate of 8% on contract receipts, and therefore, depreciation should not have been allowed. The present proceedings are High Court Income Tax References (ITR No. 148 to 150 of 1999).
What were the issues?
1. Whether, on the facts and in the circumstances of the case, the ITAT was right in law in separately allowing depreciation on machinery when a lower net profit rate of 8% on contract receipts had been upheld and no account books have been maintained? Assessee's arguments: Not recorded. Revenue's arguments: The Revenue contends that since the assessee did not maintain account books and was assessed at a net profit rate of 8%, the ITAT erred in allowing depreciation on machinery. The Revenue argues that the net profit rate applied was lower than normally applied rates, implying this should preclude depreciation. The Revenue relies on an amendment to Section 44AD(2) of the Income Tax Act, 1961, introduced on 1.4.1994.
Which sections of the Income-tax Act were involved?
44AD(2)
AI-generated summary — verify with the full judgment below
ITR No.148 to 150 of 1999 -1- IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH
I.T.R. No.148 to 150 of 1999.
Date of Decision:-07.11.2013. Commissioner of Income Tax, Chandigarh.
.........Applicant.
Versus M/s Naresh Kumar Gupta, Chandigarh.
.........Respondent. CORAM: Hon'ble Mr. Justice Rajive Bhalla
Hon'ble Mr. Justice Dr. Bharat Bhushan Parsoon.
***** Present:- Ms. Urvashi Dhugga, Advocate for the applicant. Rajive Bhalla, J (Oral)
The question of law referred by the Income Tax Appellate Tribunal, Chandigarh Bench is as follows:
“Whether, on the facts and in the circumstances of the case, the ITAT was right in law in separately allowing depreciation on machinery when a lower net profit rate of 8% on contract receipts had been upheld and no account books have been maintained?”
Counsel for the revenue submits that as the assessee did not maintain account books and was assessed at a net profit of 8%, the Income Tax Appellate Tribunal has erred in allowing depreciation on machinery particularly as net profit rate is lower than the rate which is normally applied. Yag Dutt 2013.11.18 13:31 I attest to the accuracy and integrity of this document
ITR No.148 to 150 of 1999 -2-
No one is present on behalf of the assessee.
We have heard counsel for the revenue and do not find any error of jurisdiction or of law.
Counsel for the revenue is unable to refer to any provision that places any impediment on the right of an assessee to claim depreciation where his income is assessed by applying a net profit rate. It is admitted that a statutory impediment was introduced by way of amendment on 1.4.1994 in Section 44AD(2) of the Income Tax Act, 1961. The assessment in the present reference pertains to 1989-90 thereby clearly proving that in the assessment in dispute, there was no impediment on the right of the assessee to claim depreciation even if his income has been calculated on net profit of 8%.
In this view of the matter, we dispose of the reference by answering the substantial question of law against the revenue.
(Rajive Bhalla) Judge (Dr. Bharat Bhushan Parsoon)
Judge
November 07, 2013
'Yag Dutt' Yag Dutt 2013.11.18 13:31 I attest to the accuracy and integrity of this document
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