Hon’ble Sudhir Agarwal, J.—Heard Sri Vishwjeet, Advocate, for petitioner and Sri Shambhoo Chopra, Advocate, for respondents.

2. This writ petition under Article 226 has arisen from the order dated 13.10.2011, passed by respondent No. 2, Assistant Commissioner, Income Tax, Agra for the Assessment Year 2009-10 under Section 143 (3) of Income Tax Act, 1961 (hereinafter referred to as “Act, 1961”) and the order dated 4.3.2013 passed by Commissioner of Income Tax-I, Agra, under Section 264 of Act, 1961 dismissing the petition of Assessee against the aforesaid order of Assessing Authority.

3. Petitioner, a registered partnership firm, is engaged in the business of executing civil works contracts in different Departments. For the Assessment year 2009-10, return was filed under Section 139 (1) of Act, 1961 disclosing net taxable income as Rs. 4,99,500/-. Petitioner claimed depreciation of Rs. 25,67,785/- as per the depreciation chart and submitted accounts, i.e. trading, profit and loss accounts, balance sheet, deprecation chart etc.

4. As a condition of receiving contract and for execution thereof, petitioner used to take Fixed Deposit Receipts (hereinafter referred to as “F.D.R.”) furnished with the Department as Security and therefore petitioner claimed that the interest earned on such fixed deposits cannot be treated “income from other sources” and instead the said income was his “business income”.

5. Petitioner’s return was selected for scrutiny as a consequence whereof respondent No. 2 issued notice under Section 143 (2) and 142 (1) of Act, 1961. Respondent No. 2 took the view that expenses incurred by Firm are not properly vouched, the disclosed turn over was not to be accepted and hence it calculated profit by following a flat rate of 8 per cent on the gross receipt of Rs. 12,68,14,480/- with the condition that no penal action shall be taken against petitioner and consequently passed order on 13.10.2011. It determined income from business of civil contracts at Rs. 1,01,45,158/-. After deduction of salary etc, it assessed final income of Firm as Rs. 89,04,219/-. Respondent No. 2 also treated interest accrued on F.D.R. of Rs. 10,53,681/- as “income from other sources” and taxed accordingly. Petitioner, thereafter, preferred a Revision petition under Section 264 of Act, 1961 before Commissioner which has been rejected by order dated 4.3.2013.

6. There are two questions. First whether the depreciation claimed by petitioner has rightly been disallowed or not. In this regard, the Revenue has referred to Sections 44AD, 44 AE and 44 AF of Act, 1961. The aforesaid provisions, as they stood in the relevant Assessment Year read as under:

“44AD. Special provision for computing profits and gains of business of civil construction, etc.—(1) Notwithstanding anything to the contrary contained in Sections 28 to 43C, in the case of an assessee engaged in the business of civil construction or supply of labour for civil construction, a sum equal to eight per cent of the gross receipts paid or payable to the assessee in the previous year on account of such business or, as the case may be, a sum higher than the aforesaid sum as declared by the assessee in his return of income, shall be deemed to be the profits and gains of such business chargeable to tax under the head “Profits and gains of business or profession”:

Provided that nothing contained in this sub-section shall apply in case the aforesaid gross receipts paid or payable exceed an amount of forty lakh rupees.

(2) Any deduction allowable under the provisions of Sections 30 to 38 shall, for the 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 the assessee is a firm, the salary and interest paid to its partners shall be deducted from the income computed under sub-section (1) subject to the conditions and limits specified in clause (b) of Section 40.

(3) The written down