Commissioner of Income Tax vs Amritlal Khatri

N.N. Mathur, J.—This is a reference application u/s 256(2) of the income tax Act, 1961 at the instance of the Commissioner, Jodhpur. The respondent-assessee is a contractor. During the course of assessment proceedings, the Assessing Officer applied provisions of section 145 of the Act on account of certain discrepancies noticed in the books of account of the respondent-assessee. The Assessing Officer applied net profit rate of 10 per cent on total receipts shown. This rate of net profit was applied after considering admissible depreciation. The Commissioner (Appeals) directed that depreciation should be allowed from income worked out at the rate of 10 per cent on the contract receipts. The Tribunal has confirmed the order of the Commissioner (Appeals).

It is submitted by Mr. Bhandawat that the Tribunal has erred in law in not appreciating the fact that when income was determined by applying a net profit rate, all such deductions are treated to be allowed. It is also submitted that the claim in this regard cannot be considered to be covered by the provisions of section 40(b) as in the instant case provisions of section 145 were invoked and the income was not determined according to the provisions of sections 28 to 43C.

The question of law sought to be referred is concluded by the decision of this Court in Commissioner of Income Tax Vs. Jain Construction Co. and Others, , wherein it is held that in case of estimation of income, depreciation should be allowed separately. In our view, no referable question of law arises from the order of the Tribunal. The reference application is rejected.