Late Shri v. Gopinathan

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN MONDAY, THE 9TH JUNE 2008 / 19TH JYAISHTA 1930 ITR.No. 17 of 2000() -------------------- RA NO.291/COCH/1997 IN ITA 138/COCH/1990 of I.T.A.TRIBUNAL,COCHIN BENCH .................... APPLICANT: ----------- COMMISSIONER OF INCOME TAX, THIRUVANANTHAPURAM BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.GEORGE K. GEORGE, SC FOR IT RESPONDENTS: ------------- LATE SHRI. V. GOPINATHAN, REPRESENTED BY SRI. G. YATHEESH,MULAVANA PADINJATTATHIL, PRAYAR SOUTH, OACHIRA. BY THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 09/06/2008, ALONG WITH ITR NO. 18 OF 2000 THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: -------------------------------------------- I.T.R. Nos. 17 & 18 OF 2000 -------------------------------------------- Dated this the 9th day of June, 2008 JUDGMENT Ramachandran Nair,J. Heard standing counsel appearing for the applicant and Sri. DaleP Kurien appearing for the respondent. The question involved iswhether the assessee is entitled to deduction of depreciation andinterest from the net-income computed for the assessment years 1985-86 and 1986-87. It is seen that for the earlier three assessment years,1980-81, 1981-82 and 1982-83, the Tribunal declined to grant anydeduction of depreciation and interest from the net income computedby the Officer. When the department brought to the notice of theTribunal the earlier decision, they took the stand that for these twoyears the net income computed is at 12% as against 10% computed forthe earlier years and therefore the assessee should be granted thededuction claimed. However, the Tribunal has not taken into accountthe net effect of grant of deduction of interest and depreciation. Inother words, it is not known whether the grant of deduction claimedwill result in net income computed below 10% fixed by the Tribunalfor the earlier years. Even though there is nothing wrong in granting of depreciation and interest from estimated income, normal deductions aregranted only when income estimated is gross income and not netincome. We feel it was wrong for the Tribunal to have granteddeduction of interest and depreciation without reference to final result.For the sake of consistency we feel the Tribunal should have onlyconsidered the relief in the computation of net income. In this case,since the Officer has estimated net income there is no scope forgranting deduction therefrom. In the circumstances, we set aside theorders of the Tribunal, restore the appeals back to the Tribunal forhearing the assessee and department and to consider quantum of reliefin the estimation of rate of profit. References are answered as above. A copy of this judgment under the seal of the High Court andsignature of the Registrar-General shall be forwarded to the Income taxAppellate Tribunal, Cochin Bench, Cochin. (C.N.RAMACHANDRAN NAIR)Judge. (V. K. MOHANAN) Judge.