Sh. Rakesh Jain, Ludhiana V. DCIT, Ludhiana

CO 32/CHANDI/2011

• Counselvise Citation: [2011] 122 COUNSELVISE.COM (IT) 6142 (ITAT-CHANDIGARH)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Cross Objection
• Pronouncement Date: 30-06-2011
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 29-06-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 15-03-2011
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Assessee Lawyers: RAJESH MEHRU
• Keywords: Depreciation; Additional depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL: B BENCH: CH ANDIGARH BEFORE SHRI D K SRIVASTAVA, AM AND MS. SUSHMA CHOWL A, JM ITAS NO. 150 & 151/CHANDI/2011 ASSESSMENT YEAR: 2006-07 & 2007-08 D.C.I.T. CIRCLE VIII, LUDHIANA V. RAKESH JAIN, 131 0, COURT ROAD CIVIL LINES, LUDHIANA PAN: ADXPJ 2919 F C.O. NO. 32/CHANDI/2011 ARISING OUT OF ITA NO. 151/CHANDI/2011 ASSESSMENT YEAR: 2007-08 RAKESH JAIN, 1310, COURT ROAD . D.C.I.T. CIRCLE VII , LUDHIANA CIVIL LINES, LUDHIANA PAN: ADXPJ 2919 F (APPELLANT) (RESPONDENT) DEPARTMENT BY: SMT. SARITA KUMARI ASSESSEE BY: S/SHRI SUDHIR SEHGAL & RAJESH MEHRU ORDER D K SRIVASTAVA : WHILE THE APPEALS BEARING ITAS NO. 150/CHANDI/201 1 AND 151/CHANDI/2011 ARE DIRECTED AGAINST TWO SEPARATE O RDERS PASSED BY THE LD. CIT(A) ON THE SAME DATE, I.E., 10.12.2010, THE MEMO OF CRO SS-OBJECTIONS FILED BY THE ASSESSEE ARISES OUT OF THE ORDER PASSED BY THE LD. CIT(A) ON 10.12.2010 FOR AY 2007- 08. THE ISSUES INVOLVED IN THE APPEALS FILED BY THE DEPARTMENT AND THE MEMO OF CROSS-OBJECTIONS FILED BY THE ASSESSEE ARE COMMON. WE THEREFORE, FIND IT CONVENIENT TO DISPOSE OFF THE PRESENT BUNCH OF THE MATTERS BY A CONSOLIDATED ORDER. ITA NO. 150/CHANDI/2011: AY 2006-07: DEPARTMENTS A PPEAL 2. THE DEPARTMENT HAS TAKEN THE FOLLOWING GROUNDS O F APPEAL: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN ALLOWING OF DEPRECIATION ON T IPPERS, VIBRATORS, VIBRATOR SOIL COMPACTOR 40% INSTEAD OF 15% ALLOWED BY THE AO AND FURTHER ERRED IN THE ALTERNATIVE IN GRANTING ADDITIONAL DEPRECIATION WITHOUT APPRECIATING THE PROVISIONS OF SECTION 32(1)(IIA). 2. THAT THE ORDER OF LD. CIT(A), LUDHIANA BE SET AS IDE AND THAT OF THE AO BE RESTORED. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD OR AMEND ANY GROUND OF APPEAL BEFORE IT IS FINALLY DISPOSED OFF. ITAS NO. 150,151/CHANDI/2011 & C.O NO. 32/CHANDI/201 1 DCIT, C-VII, LUDHIANA V. RAKESH JAIN 2 3. THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF CIVI L CONSTRUCTION AS ALSO IN THE EXECUTION OF CONTRACT WORK. HE FILED HIS RETURN OF INCOME ON 31.10.2006 RETURNING TOTAL INCOME AT RS. 5,14,470/- AS AGAINST WHICH THE ASSES SMENT WAS COMPLETED U/S 143(3)/147 ON 3.5.2010 ASSESSING THE TOTAL INCOME A T RS. 43,08,450/-. THE DIFFERENCE BETWEEN THE RETURNED INCOME AND THE ASSESSED INCOME HAS ARISEN ON ACCOUNT OF ALLOWANCE OF DEPRECIATION AT A LOWER RATE THAN THE ONE AT WHICH IT WAS CLAIMED BY THE ASSESSEE. PERUSAL OF THE ASSESSMENT ORDER SHOWS THA T THE ASSESSEE HAD CLAIMED DEPRECIATION AT THE RATE OF 40% ON TIPPERS, VIBRATO R, VIBRATOR SOIL COMPACTOR. THE AO EXAMINED THE CLAIM OF THE ASSESSEE AND NOTICED THAT DEPRECIATION AT THE RATE OF 40% WAS ADMISSIBLE ON COMMERCIAL VEHICLES AND NOT ON TI PPERS, VIBRATOR, VIBRATOR SOIL COMPACTOR AND THEREFORE ALLOWED DEPRECIATION @ 15% ON THE GROUND THAT TIPPERS, VIBRATOR AND VIBRATOR SOIL COMPACTOR WERE ITEMS OF ORDINARY PLANT AND MACHINERY. 4. AGGRIEVED BY THE ORDER PASSED BY THE AO, THE ASS ESSEE FILED APPEAL BEFORE THE LD. CIT(A) UPON WHICH THE LD. CIT(A) DIRECTED THE A O TO ALLOW DEPRECIATION AT THE RATE OF 40% ON TIPPERS, VIBRATOR, VIBRATOR SOIL COMPACTO R AS AGAINST 15% ALLOWED BY THE AO WITH THE FOLLOWING OBSERVATIONS:- 5 I HAVE GONE THROUGH THE FACTS OF THE CASE AS WEL L AS WRITTEN SUBMISSIONS MADE BY THE LEARNED. A.R. THE ISSUE TO BE DECIDED IN THIS CASE IS THE ALLOWABILITY OF DEPRECIATION AS REGARD TO THE C OMMERCIAL VEHICLES WHICH ARE TREATED AS THE PLANT AND MACHINERY BY THE AO. THE ARGUMENT OF A.R ARE ON THE BASIS OF THE FUNCTIONAL TESTS AND VIEW TAKEN BY THE RESPECTIVE COURTS AND TRIBUNALS. THE HIGHER DEPRECIATION IS ON THE BASIS OF THE RIGOROUS AND HARD USE OF THE COMMERCIAL VEHICLES IN COMPARISON TO THE STA TIONED AND PERMANENTLY INSTALLED MACHINERY. FURTHER THESE VEHICLES HAVE B EEN REGISTERED WITH THE DTO, THE AUTHORITY RESPONSIBLE FOR THE REGISTRATION OF THE COMMERCIAL VEHICLE. THIS FACT HAS ALSO BEEN ACKNOWLEDGED BY THE AO. FU RTHER THE VEHICLES ARE MOVING VEHICLES ARE USED TO MOVE EARTH AND THUS HAV E TO BE TREATED WITH AT PAR WITH OTHER COMMERCIAL VEHICLES SUCH AS TRUCKS E TC. THESE VEHICLES ARE SPECIAL PURPOSE VEHICLES DOES NOT CHANGE THE CHARAC TERISTICS OF THE ASSETS. TIPPERS ARE TRUCKS WITH THE HYDRAULIC ATTACHMENTS F OR THE UNLOADING OF EARTH. SIMILARLY THE VIBRATORS HAVE THE ADDITIONAL FUNCTIO NS BUT BASIS CHARACTER OF THE VEHICLES NECESSARILY REMAINED THE SAME. IN THE DEC IDED CASE BY THE HON'BLE COURTS THRUST HAVE BEEN MADE ON THE HIGHER RATE OF DEPRECIATION ON THE TIPPERS & DUMPERS KEEPING IN VIEW THE ABOVE FACTS. FURTHER THE ASSESSEE IS ALSO ELIGIBLE FOR THE ADDITIONAL DEPRECIATION @ 20% . IN CASE THESE VEHICLES ARE ITAS NO. 150,151/CHANDI/2011 & C.O NO. 32/CHANDI/201 1 DCIT, C-VII, LUDHIANA V. RAKESH JAIN 3 TREATED AS THE PLANT AND MACHINERY. SO FOR THE SUS TENANCE OF JUST AND EQUITY THE GROUND IS ALLOWED. 5. AGGRIEVED BY THE ORDER PASSED BY THE LD. CIT(A), THE DEPARTMENT IS NOW IN APPEAL BEFORE THIS TRIBUNAL. IN SUPPORT OF APPEAL, IT WAS SUBMITTED THAT THE TIPPERS, VIBRATOR AND VIBRATOR SOIL COMPACTOR WERE NOT COMME RCIAL VEHICLES AND THEREFORE THE AO WAS JUSTIFIED IN RESTRICTING THE RATE OF DEPRECI ATION TO 15% AS AGAINST 40% CLAIMED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE LD. CIT(A) WAS NOT JUSTIFIED IN FURTHER HOLDING THAT THE ASSESSEE WAS ELIGIBLE TO G ET ADDITIONAL DEPRECIATION. 6. IN REPLY, THE LD. COUNSEL FOR THE ASSESSEE SUPPO RTED THE ORDER PASSED BY THE LD. CIT(A). HE SUBMITTED THAT THE BUSINESS OF THE ASSE SSEE WAS ULTIMATELY TAKEN OVER BY A COMPANY, NAMELY, M/S S.C. JAIN CONSTRUCTION COMPA NY PVT LTD AND THAT THE DEPARTMENT HAS ALLOWED DEPRECIATION AT THE RATE OF 40% ON TIPPERS, VIBRATOR AND VIBRATOR SOIL COMPACTOR WHILE PASSING THE ASSESSMEN T ORDER IN THE CASE OF S.C. JAIN CONSTRUCTION COMPANY PVT LTD ON 29.12.2010 U/S 143( 3) FOR AY 2008-09 AND THEREFORE IT WAS THE DEPARTMENT WHICH BELIEVED THAT THE APPRO PRIATE RATE OF DEPRECIATION WAS 40% AND NOT 15%. HIS SECOND SUBMISSION WAS THAT THE ORDER PASSED BY THE LD. CIT(A) IS IN CONFORMITY WITH THE DECISION TAKEN BY THIS TR IBUNAL IN GUJARAT TUBEWELL CO. V. ITO, 43 TTJ AHD 331; HINDUSTAN CONSTRUCTION CO V. I TO, 32 TTJ 278; ACIT V. A.M CONSTRUCTIONS, 238 ITR 775 (A.P) AND SHIV CONSTRUCT ION CO. V. CIT, 165 ITR 160 (GUJ). 7. WE HAVE HEARD BOTH THE PARTIES AND CAREFULLY CON SIDERED THEIR SUBMISSIONS INCLUDING THE AUTHORITIES REFERRED TO BY THEM. THE ORDER OF THE LD. CIT(A) WITH REGARD TO DEPRECIATION IS IN TWO PARTS. IN FIRST PART HE DIRECTED THE AO TO ALLOW DEPRECIATION @ 40% AS AGAINST 15% ALLOWED BY THE LD. CIT(A) ON T HE THREE AFORESAID THREE ITEMS. IN THE SECOND PART OF HIS ORDER, HE HAS HELD THAT T HE ASSESSEE IS ELIGIBLE TO ADDITIONAL DEPRECIATION. WE SHALL NOW DEAL WITH BOTH THE ASPE CTS AS THEY HAVE BEEN SPECIFICALLY CHALLENGED BY THE DEPARTMENT. 8. APROPOS THE DISPUTE AS TO WHETHER THE ASSESSEE I S ENTITLED TO DEPRECIATION AT THE RATE OF 40% ON TIPPERS, VIBRATOR AND VIBRATOR S OIL COMPACTOR, THE ISSUE IS WHETHER THEY ARE IN THE NATURE OF COMMERCIAL VEHICLES. THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION AT THE RATE OF 40% ON COMMERCIAL VEHIC LES. THE WORD COMMERCIAL VEHICLES INCLUDES WITHIN ITS AMBIT ALL THE VEHICLE S WHICH FALL IN THE CATEGORY OF COMMERCIAL VEHICLES. THE LD. CIT(A) HAS GIVEN DETAI LED JUSTIFICATION FOR TREATING THE TIPPER, VIBRATOR AND VIBRATOR SOIL COMPACTOR AS COM MERCIAL VEHICLES. WE ARE IN AGREEMENT WITH HIS REASONING AND DECISION IN THE MA TTER. SIMILAR VIEW HAS BEEN TAKEN BY OTHER BENCHES OF THIS TRIBUNAL AND ALSO BY THE H IGH COURTS TO WHICH REFERENCE HAS ITAS NO. 150,151/CHANDI/2011 & C.O NO. 32/CHANDI/201 1 DCIT, C-VII, LUDHIANA V. RAKESH JAIN 4 ALREADY BEEN MADE BY THE LD. COUNSEL FOR THE ASSESS EE. IN THIS VIEW OF THE MATTER, WE HOLD THAT THE LD. CIT(A) HAS RIGHTLY DIRECTED THE A O TO ALLOW DEPRECIATION @ 40% ON TIPPERS, VIBRATOR AND VIBRATOR SOIL COMPACTOR. 9. APROPOS THE ISSUE AS TO WHETHER THE ASSESSEE IS ELIGIBLE TO ADDITIONAL DEPRECIATION ON THE AFORESAID ITEMS, THE LD. COUNSE L FOR THE ASSESSEE FAIRLY CONCEDED THAT THE ASSESSEE HAD NEVER PRESSED ANY CLAIM TOWAR DS ADDITIONAL DEPRECIATION EITHER BEFORE THE AO OR BEFORE THE LD. CIT(A) AND THEREFOR E THE OBSERVATIONS OF THE LD. CIT(A) THAT THE ASSESSEE IS ENTITLED TO ADDITIONAL DEPRECIATION NEED TO BE VACATED. WE THEREFORE VACATE THE OBSERVATIONS MADE BY THE LD. C IT(A) THAT THE ASSESSEE IS ENTITLED TO ADDITIONAL DEPRECIATION ON THE AFORESAID ITEMS. 10. IN VIEW OF THE FOREGOING, GROUND NO. 1 TAKEN BY THE DEPARTMENT IS PARTLY ALLOWED. 11. GROUNDS NO. 2 & 3 TAKEN BY THE DEPARTMENT ARE G ENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 12. APPEAL BEARING ITA NO. 150/CHADNI/2011 IS PARTL Y ALLOWED. ITA NO. 151/CHANDI/2011: AY 2007-08: DEPARTMENTS A PPEAL 13. GROUND NO. 1 TAKEN BY THE DEPARTMENT READS AS U NDER: 1 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A) II, LUDHIANA HAS ERRED IN ALLOWING OF DEPRECIATION ON T IPPERS, VIBRATOR, VIBRATOR SOIL COMPACTOR AND ROAD ROLLER AT THE RATE OF 40% I NSTEAD OF 15% ALLOWED BY THE AO AND FURTHER ERRED IN THE ALTERNATIVE IN GRAN TING ADDITIONAL DEPRECIATION WITHOUT APPRECIATING THE PROVISIONS OF SECTION 32(1 )(IIA). 14. WE HAVE HEARD BOTH THE PARTIES. THE ISSUE RAISE D IN GROUND NO. 1 IS IDENTICAL TO GROUND NO. 1 TAKEN BY THE DEPARTMENT IN AY 2006- 07. FOLLOWING OUR ORDER DISPOSING OFF THE DEPARTMENTS APPEAL FOR AY 2007-0 8, WE CONFIRM THE ORDER OF LD. CIT(A) TO THE EXTENT THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION @ 40% ON TIPPER, VIBRATOR AND VIBRATOR SOIL COMPACTOR. WE H OWEVER VACATE HIS DIRECTION THAT THE ASSESSEE IS ELIGIBLE FOR ADDITIONAL DEPRECIATIO N ON THE AFORESAID ITEMS, FOR THE REASONS GIVEN EARLIER IN THIS ORDER. GROUND NO.1 IS PARTLY ALLOWED. 15. GROUND NO. 2 TAKEN BY THE DEPARTMENT READS AS U NDER: 2 ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LD. CIT(A)-II, LUDHIANA HAS ERRED IN ALLOWING THE EXPENSES TO THE EXTENT OF 60% OUT OF RS. ITAS NO. 150,151/CHANDI/2011 & C.O NO. 32/CHANDI/201 1 DCIT, C-VII, LUDHIANA V. RAKESH JAIN 5 2,09,374/- DISALLOWED BY THE AO ON ACCOUNT OF REPAI R AND MAINTENANCE OF MACHINERY. 16. WE HAVE HEARD BOTH THE PARTIES. THE LD. CIT(A) HAS DEALT WITH THE ISSUE IN PARA 6 OF HIS APPELLATE ORDER AS UNDER: 6 GROUND NO. B: ADDITION OF RS. 2,09,374/- ON ACCO UNT OF REPAIR AND MAINTENANCE OF MACHINERY THE ADDITION HAS BEEN MA DE ON THE FACT THAT THE BILLS OF EXPENSES WERE ON THE SMALL LOOSE SLIPS NOT ON THE REGULAR BILLS. WHEREAS THE A.R SUBMITTED THAT THE AO NOT PROVIDED SUFFICIENT TIME TO CONTEST THIS ADDITION. FURTHER THE APPELLANT SUBMITTED THA T THE APPELLANT GAVE ALL THE INFORMATION RELATED TO THESE EXPENSES. CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, I AM OF THE VIEW THAT ALLOWANCE SHALL BE PROVIDED TO THE APPELLANT FOR THE PROPER MAINTENANCE AND THUS EXPENSES SHALL BE ALLOWED TO THE EXTENT OF 60%. THE AO DIRECTED ACCORDINGLY. THEREFORE, T HIS GROUND OF APPEAL IS ALSO PARTLY ALLOWED. 17. IN OUR OPINION, THE LD. CIT(A) HAS CORRECTLY AP PRECIATED THE FACTUAL ASPECTS OF THE CASE. HE IS RIGHT IN DELETING THE ADDITION TO THE EXTENT OF 60% FOR THE REASONS GIVEN BY HIM IN HIS APPELLATE ORDER. WE ARE IN AGR EEMENT WITH HIS REASONING. IN THIS VIEW OF THE MATTER, GROUND NO. 2 IS DISMISSED. 18. GROUNDS NO. 3 AND 4 TAKEN BY THE DEPARTMENT ARE GENERAL IN NATURE AND DO NOT REQUIRE ANY SPECIFIC ADJUDICATION. 19. ITA NO. 151/CHANDI/2011 FILED BY THE DEPARTMENT IS PARTLY ALLOWED. CROSS-OBJECTION NO. 32/CHANDI/2011 IN ITA NO. 151/C HANDI/2011 20. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE DID NOT PRESS THE MEMO OF CROSS-OBJECTIONS. IN THIS VIEW OF THE MATTER, M EMO OF CROSS-OBJECTION FILED BY THE ASSESSEE IS DISMISSED. 21. APPEALS FILED BY THE DEPARTMENT ARE PARTLY ALLO WED WHEREAS THE MEMO OF CROSS-OBJECTION IS DISMISSED. ORDER PRONOUNCED ON 30 JUNE 2011 SD/- SD/- (SUSHMA CHOWLA) (D K SRIVA STAVA) JUDICIAL MEMBER ACCOUNTANT MEM BER CHANDIGARH: THE 30 JUNE 2011 SURESH COPY TO: 1. THE APPELLANT, D.C.I.T. C-VII, LUDHIANA 2. THE RESPONDENT, RAKESH JAIN, LUDHIANA 3. THE CIT(A), LUDHIANA ITAS NO. 150,151/CHANDI/2011 & C.O NO. 32/CHANDI/201 1 DCIT, C-VII, LUDHIANA V. RAKESH JAIN 6 4. THE LD. CIT, LUDHIANA 5. THE D.R, INCOME-TAX DEPARTMENT, CHANDIGARH ASSISTANT REGISTRAR, ITAT, CHANDIGARH