Commissioner of Income-tax Vs. Anand Prakash Mittal - Court Judgment

Excerpt:
- - 5. we are of opinion that the tribunal has clearly erred in not appreciating the scope and ambit of section 256. a question of law does not cease to be a question of law because the tribunal has held that it has correctly decided the issue. the tribunal has precisely rejected the application solely on the ground that it has correctly decided the question of law.1. none is present for the respondent in spite of service.2. the commissioner of income-tax has moved this application under section 250(2) for requiring the tribunal to state the case and refer questions of law said to be arising out of the tribunal's order passed in i. t. a. no. 2166/jp of 1996. the questions of law proposed by the revenue for the purpose of making a reference are as under :'1. whether, on the facts and in the circumstances of the case, the income-tax appellate tribunal was justified in law in allowing further deductions on account of depreciation and interest paid to the creditors in spite of the fact that if the whole of the order of the assessing officer is read, no separate claims on these counts were admissible being covered in the net profit rate ?2. whether, on the facts and in the circumstances of the case, the income-tax appellate tribunal was justified in law in allowing further deductions as in 1 above and thereby reducing the total income of the assessee to an amount less than the returned income ?'2. the assessee, who is a building contractor, filed returns showing his income from building contract with mes at rs. 96,580. the assessing officer rejected the books of account and applied net profit rate of 12.5 per cent, on the contract receipts and enhanced the income to rs. 3,31,497 on contract receipts of mes contract and accepted the return filed in respect of other income at rs. 18,390. however, in computing the income from contracts with mes, no allowance for depreciation or interest paid to the creditors was made.3. on appeal, the commissioner of income tax (appeals) reduced the computation of total income by the assessing officer by rs. 1 lakh and disallowed the claim to the interest on borrowed capital and depreciation of plant and machinery as also vehicle used in the construction work by holding that rs. 1 lakh deducted in the quantum of assessment will include all these allowances and disallowances and no further relief is called for.4. against disallowance of deduction on account of depreciation and interest on borrowed capital out of the income on the basis of gross profit rate applied by the assessing officer as reduced by the commissioner of income-tax (appeals), the assessee appealed before the tribunal. the tribunal following its earlier decision in another case allowed the claim of the assessee in respect of depreciation and interest on borrowed capital. the application of the assessee (sic) for making reference under section 256(1) of the aforesaid two questions was rejected by the tribunal by holding that it has reached the just and correct decision after taking into consideration the decisions of the allahabad and punjab and haryana high courts and held that no referable question of law arises in allowing depreciation and interest on borrowed capital.5. we are of opinion that the tribunal has clearly erred in not appreciating the scope and ambit of section 256. a question of law does not cease to be a question of law because the tribunal has held that it has correctly decided the issue. the tribunal has precisely rejected the application solely on the ground that it has correctly decided the question of law.6. we are of the opinion that once a net profit rate was applied for computing the estimated income after rejecting books of account and further lump sum deduction was allowed by clarifying that this deduction includes allowances and deduction claimed by the assessee, it certainly raises a question of law, about the right to claim such deductions.7. we, therefore, allow this application and direct the tribunal to state the case and refer the following question of law which, in our opinion, do arise :'whether, on the facts and in the circumstances of the case, the income-tax appellate tribunal was justified in law in allowing further deduction on account of depreciation and interest on borrowed capital particularly keeping in view the finding recorded by the commissioner of income-tax (appeals) about the inclusion of these deductions in the reduction made by him in the income assessed by the assessing authority ?'8. no order as to costs.