JUDGMENT judgment of court was delivered by L. Narasimha Reddy J.-This appeal under section 260A of Income-tax Act, 1961 (for short "the Act"), is preferred by Revenue feeling aggrieved by order dated August 10, 1999, passed by Hyderabad Bench "A" of Income-tax Appellate Tribunal (for short "the Tribunal") in I. T. A. No. 1336/H/1997, by raising following questions of law: "1. Whether, on facts and in circumstances of case, Tribunal is correct in law in directing Assessing Officer to allow depreciation and interest payments from estimate of profit made at 12 per cent.? 2. Whether, on facts and in circumstances of case, Tribunal is correct in law in directing Assessing Officer to grant reliefs on those items which are not claimed by assessee? 3. Whether, on facts and in circumstances of case, Tribunal is correct in granting depreciation though it was already granted by Assessing Officer?" respondent is civil contractor and is assessee under Act. He submitted returns for 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. Assessing Officer issued notice to respondent. books of account were not believed and obviously, by taking recourse to section 144 of Act, Assessing Officer passed order to effect that total receipts are to tune of Rs. 9,52,52,636 and net profit at 9 per cent. works out to Rs. 85,72,737. sum of Rs. 1,49,294 was added towards miscellaneous receipts. He took view that since profit is determined on estimation basis, deduction of depreciation or interest would not be allowed. However, unabsorbed depreciation of Rs. 14,77,938 for assessment years 1990-91 and 1991-92, was deducted and taxable income was arrived at Rs. 72,71,820. Feeling aggrieved by order passed by Assessing Officer, respondent filed appeal before Commissioner of Income-tax (Appeals) (for short "the Commissioner"). Through his order dated June 30, 1997, Commissioner took view that net profits ought to have been worked out at 12 per cent. of total receipts and deduction of depreciation and interest ought to have been allowed, as usual. appellant on one hand and respondent on other filed appeals before Tribunal assailing order of Commissioner. Tribunal dismissed both appeals and confirmed order passed by Commissioner. Revenue approached this court through this appeal. Sri J. V. Prasad, learned counsel for appellant, submits that though Commissioner was justified in taking net profits at 12 per cent., having regard to nature of business undertaken by respondent, he was not correct in permitting deduction of depreciation and interest. He submits that exercise undertaken by Commissioner or for that Assessing Officer is akin to one provided for under section 44AD of Act which provides for comprehensive exercise of arriving net profits at fixed percentage and that would be inclusive of allowance of depreciation and interest. He submits that exercise being comprehensive in nature, two components cannot be dealt with separately. Sri A. V. Krishna Koundinya, learned senior counsel for respondent, on other hand, submits that determination of taxable income by taking recourse to section 144 of Act, namely, best judgment assessment has nothing to do with allowance of depreciation under section 32 of Act. He contends that these two operate on totally different planes and there is hardly any meeting point between them, particularly, at time when assessment in question was made. respondent himself was not sure as to exact loss sustained by him in assessment year 1994-95. Initially, he declared loss of Rs. 15,24,198 and he came forward with revised return indicating loss of Rs. 93,11,879. That itself was sufficient for Assessing Officer to disbelieve books of account and he has chosen to adopt procedure prescribed under section 144 of Act, namely, best judgment assessment. In matters of this nature, amount of turnover on one hand, and nature of business undertaken by assessee, on other, become relevant. net profits were taken at 9 per cent. Assessing Officer had extended benefit of allowance of unabsorbed depreciation for assessment years 1990-91 and 1991-92. However, he refused to allow deduction of depreciation and interest for concerned assessment year. grievance of respondent was not much about percentage, at which net profit was determined. Rather, it was about non-allowance of current depreciation and interest. matter landed before Commissioner by way of appeal preferred by respondent. Commissioner took into account nature of business as well as nondependability of books of account and took view that net profits must be arrived at on total/gross receipts. As regards allowance of current depreciation and interest, he took view that there is nothing in law which disentitles respondent to claim it. He left matter to Assessing Officer to workout details. appellant as well as respondent filed appeals before Tribunal. Through order under appeal, Tribunal upheld order of Commissioner in all respects. Though respondent filed appeal feeling aggrieved by enhancement of percentage of net profit and it was dismissed he did not pursue matter further. Department filed this appeal, pleading that current depreciation ought not to have been permitted to be deducted. In comprehensive, if not complicated exercise to be undertaken with reference to return, handling depreciation and interest is important step, as is determination income itself. Wherever Parliament wanted to deviate from ordinary procedure for determination of income or for that matter, depreciation in process of reckoning taxable income, specific provisions to that effect are made. While in some cases, such steps are reflected directly in very provisions of Act or in other cases they are in form of cross- reference from other provisions. Section 44AD of Act reads as under: "44AD. Special provision for computing profits and gains of business on presumptive basis.-(1) Notwithstanding anything to contrary contained in sections 28 to 43C, in case of eligible assessee engaged in eligible business, sum equal to eight per cent. of total turnover or gross receipts of assessee in previous year on account of such business or, as case may be, sum higher than aforesaid sum claimed to have been earned by eligible assessee, shall be deemed to be profits and gains of such business chargeable to tax under head'Profits and gains of business or profession'. (2) Any deduction allowable under provisions of sections 30 to 38 shall, for purposes of sub-section (1), be deemed to have been already given full effect to and no further deduction under those sections shall be allowed: Provided that where eligible assessee is firm, salary and interest paid to its partners shall be deducted from income computed under sub- section (1) subject to conditions and limits specified in clause (b) of section 40. (3) written down value of any asset of eligible business shall be deemed to have been calculated as if eligible assessee had claimed and had been actually allowed deduction in respect of depreciation for each of relevant assessment years. (4) provisions of Chapter XVII-C shall not apply to eligible assessee in so far as they relate to eligible business. (5) Notwithstanding anything contained in foregoing provisions of this section, eligible assessee who claims that his profits and gains from eligible business are lower than profits and gains specified in sub-section (1) and whose total income exceeds maximum amount which is not chargeable to income-tax, shall be required to keep and maintain such books of account and other documents as required under sub-section (2) of section 44AA and get them audited and furnish report of such audit as required under section 44AB. (6) provisions of this section, notwithstanding anything contained in foregoing provisions, shall not apply to- (i) person carrying on profession as referred to in sub-section (1) of section 44AA; (ii) person earning income in nature of commission or brokerage; or (iii) person carrying on any agency business. Explanation.-For purposes of this section,- (a)'eligible assessee' means- (i) individual, Hindu undivided family or partnership firm, who is resident, but not limited liability partnership firm as defined under clause (n) of sub-section (1) of section 2 of Limited Liability Partnership Act, 2008 (6 of 2009); and (ii) who has not claimed deduction under any of sections 10A, 10AA, 10B, 10BA or deduction under any provisions of Chapter VI-A under heading'C-Deductions in respect of certain incomes' in relevant assessment year; (b)'eligible business' means,- (i) any business except business of plying, hiring or leasing goods carriages referred to in section 44AE; and (ii) Whose total turnover or gross receipts in previous year does not exceed amount of one crore rupees." For example, section 44AD of Act provides for determination of income of assessee from business at 8 per cent. of total turnover or gross receipts of previous year under certain circumstances. Subsection (2) is to effect that if any deduction allowable under sections 30 to 38, which takes in its fold deduction such as depreciation and interest, shall be deemed to have been effected. procedure under that section, however, applies only when turnover is below particular figure which at relevant point of time was Rs. 40,00,000. As of now, it is Rs. 1 crore. In instant case, section 44AD of Act does not apply because turnover was above stipulated amount. Therefore, feasibility of deduction of turnover and interest cannot be said to have been taken away. learned counsel for appellant is not able to point out any provision of law in Act or Rules made thereunder, which restricts allowance of depreciation and interest. On other hand, facility created under Act is so firm and strong that if for any reason it becomes impermissible or unnecessary for assessee to seek allowance of depreciation for particular assessment year, he is entitled to carry it forward, for subsequent years. In such event, it assumes character of unabsorbed depreciation. In this very case, Assessing Officer permitted allowance of unabsorbed depreciation to respondent. However, he denied benefit of allowance of current depreciation and interest. No reference is made to any provision of law to make such distinction. His understanding of matter is that section 44AD of Act that provides for comprehensive formula of determining net profit derived by civil contract or at 8 per cent. takes in its fold, allowance of depreciation, interest and other benefits. fact, however, remains that such provision was not in exercise in assessment year 1994-95. If assessee is entitled to claim deduction of interest be it under section 36(1)(iii) of Act or any other relevant provision and of depreciation under section 37 of Act in ordinary course of assessment there is no reason why same facilities be not extended to him merely because profit is determined on basis of estimation as was done in instant case. We are of view that depreciation and interest, which are otherwise deductible in ordinary course of assessment, retain same legal character, even where profit of assessee is determined on percentage basis. conclusions arrived at by us get support from circular dated August 31, 1965, issued by Central Board of Direct Taxes. Though circular was with reference to 1922 Act it holds good for analogous provisions under 1961 Act. learned counsel for appellant relied on judgment of this court in Indwell Constructions v. CIT [1998] 232 ITR 776 (AP). That was case in which this court took view that once books of account are disbelieved for particular purpose, they cannot be relied upon in context of interest. In instant case, we are concerned with depreciation. occasion to deny deduction of depreciation or interest would arise if only material placed before assessing authority in proof of purchase of machinery and other items and payment of interest is disbelieved. No finding of that nature was recorded by Assessing Officer. appeal is, accordingly, dismissed. There shall be no order as to costs. miscellaneous petitions filed in this appeal shall also stand disposed of. *** Commissioner of Income-tax v. Y. Ramachandra Reddy