COMMISSIONER OF INCOME TAX Vs. SRIRAM AND COMPANY

JUDGEMENT

(1.) THIS is an appeal by the Commissioner of Income-tax, Bikaner, challenging the order passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by which it has allowed the appeal of the respondent-assessee and held that on the amount of net profit calculated on the basis of applying the rate as has been applied by the Assessing Officer in his order of assessment on best of his judgment, a deduction on account of depreciation allowance has to be made.

(2.) LEARNED counsel for the Revenue urges that once the Income-tax Officer in best of his judgment adopts a net profit rate, no depreciation can further be claimed from that net profit. On the facts, the contention of the Revenue in this case cannot be sustained. While applying the net profit rate, the Income-tax Officer in his assessment order has clearly stated that he is applying a net profit rate at 8 per cent, without taking into account depreciation and interest paid to third parties. Thus, it has clearly postulates that net profit, which has been computed by the Income-tax Officer, is without appropriating the depreciation, which claim the assessee can legitimately made under section 32 of the Income-tax Act while claiming deductions in the computation of his income from profits and gains of business as depreciation on capital assets of the business. Since depreciation was explicitly not to form part of the net profit calculated at 8 per cent., the question of denial of deduction on account of depreciation as per section 32 of the Act would not simply arise. The Tribunal, in our opinion, was right in allowing the deduction on account of depreciation under section 32 and gives no rise to any substantial question of law, which may require consideration.