Depreciation & interest deductable even where the profit of assessee is determined on percentage basis

Even if the income is determined on estimated percentage basis under section 144 by AO on account of “books of account” were disbelieved, the benefit of claiming depreciation and interest cannot be denied if proof of purchase of machinery and other items and payment of interest is available with assessee.

The Commissioner of Income Tax Versus Y. Ramachandra Reddy – ANDHRA PRADESH HIGH COURT

The respondent is a civil contractor, and is an assessee under the Act. He submitted returns for the Assessment Year 1994-95 declaring loss of Rs.15,24,198/-. Thereafter, revised returns were filed showing enhanced figures of loss, being Rs.93,11,879/-. The Assessing Officer issued notice to the respondent. The books of account were not believed and obviously, by taking recourse to Section 144 of the Act, the Assessing Officer passed an order to the effect that the total receipts are to the tune of Rs.9,52,52,636/- and net profit at 9%, works out to Rs.85,72,737/-. A sum of Rs.1,49,294/- was added towards miscellaneous receipts. AO took the view that since the profit is determined on estimation basis, deduction of depreciation or interest would not be allowed. Continue reading

Civil construction & installation cost eligible for windmill depreciation 80%

Civil construction & installation cost incurred for setting up the windmill is a integral part of windmill and same is also eligible for windmill depreciation at the rate of 80%.

In the case, The Dy. Commissioner of Income Tax Versus Aminity Developers & Builders -ITAT PUNE

The assessee has installed turbine in the wind mill and aggregate cost of turbine incurred is Rs. 7,41,56,986/- and claim windmill depreciation at the rate of 80% on aggregate cost.

The total cost of the wind mill after segregation is as under :

1. Cost of Turbine                                                  Rs.5,64,40,792/-
2. Cost of Civil Construction                                    Rs.52,23,108/-
3. Installation and Commissioner                             Rs.1,23,93,086/-

In the opinion of the A.O, the depreciation is to be allowed at 10% on the civil work and 15% on the erection and commissioning work treating such expenses in the block of building and plant & machinery respectively as against claim of 80% made by assessee. Continue reading

Order u/s 147 not sustainable without disposing off assessee objections raised

Reassessment order u/s 147 without first disposing off the preliminary objections raised by the assessee can not  be sustained and is thus liable to be quashed.

Supreme Court in GKN Driveshafts (India) Ltd. vs. ITO & Ors. (2003) 259 ITR 19  had devised the process to be followed while carrying out assessment order u/s 147 . It clarified that when a notice u/s 148 is issued, the assessee upon submission of return of income can claim reasons for issue of notice u/s 148, which the assessing officer is bound to submit within a reasonable period.  Upon receipt of the reasons, assessee has the right to file his objections to the issuance of notice u/s 147.The assessing officer is bound to dispose off  such objections by way of a speaking order.

However, it has sometimes been observed that assessing officers, without first disposing off assessee’s objection by way of a separate speaking order, have proceeded with assessment proceedings. Continue reading

Guidance note on tax audit report u/s 44AB- Edition 2014

Guidance Note on tax audit report u/s 44AB of the Income-Tax Act, 1961 – Edition 2014

Download guidance note on tax audit u/s 44ab Edition 2014

Recently CBDT revised the Form 3CD tax audit report and the deadline for filing tax audit report is also drawing nearer i.e. 30th November, 2014 for AY 2014-15. Since the release of the Revised Tax Audit Report, Tax Professionals and others were waiting for the release of this Guidance note on tax audit report to understand the new reporting requirements. The Institute of Chartered Accountants of India (ICAI) has finally released Guidance Note on tax Audit u/s 44AB of the Income-Tax Act, 1961 – Edition 2014.

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TDS credit cannot be claim unless income not shown in ITR

No TDS credit can be claimed in returns if the corresponding income, on which TDS was deducted, not shown in returns. Further such TDS amount shall be treated as deemed to be income received by invoking section 198.

In ANDHRA PRADESH HIGH COURT, Sri Y. Rathiesh Versus The Commissioner of Income Tax-I

Assessee gave loan to the two companies. The 1st company was just showing the accumulated interest, in its account books without making actual payment to assessee. further, the 1st company deducted tax at source (TDS) on the amount of interest payable and issued TDS credit certificates, in relation thereto. whereas the second one was paying interest regularly.

In the returns filed by him, the appellant was adopting a hybrid system. While in respect of his transaction with the 1st company, he adopted cash system and with regards to the transaction with the 2nd company, he adopted the mercantile system. The result was that he did not pay the tax on the interest payable to him by the 1st company, even while he enjoyed the entire benefit of TDS credit made in that behalf. Continue reading