The DCIT, Circle-1(1)(2), Ahmedabad V. Dholu Construction & Projects Ltd., Ahmedabad

ITA 119/AHD/2020

• Counselvise Citation: [2022] 106 COUNSELVISE.COM (IT) 8766 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 4 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-06-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Assessment Year: 2014-2015
• Appeal Filed On: 30-01-2020
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: ABHIMANYU SINGH YADAV
• Keywords: Depreciation; Earning of tax free income; Question of law; Set aside
• Section: 32; 143(3); 142(1); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “B” BENCH, AHMEDABAD BEFORE SHRI PRAMOD M. JAGTAP, VICE PRESIDENT & Ms. MADHUMITA ROY, JUDICIAL MEMBER I .T .A . N o . 1 1 9/ A h d /2 0 2 0 ( A s s e s s me nt Y ea r : 20 1 4- 15 ) DC I T C ir c l e- 1( 1 )( 2 ) , Ah me da bad V s . M/ s . D hol u Co ns tr u cti o n & Pr oj e ct s Lt d., 4 01 , G a l a A rg os , G uj a r a t C ol l eg e R oa d Ell is br id ge , A h me d a ba d [ P AN N o. A A BC D 5 7 6 0E ] (Appellant) .. (Respondent) Appellant by : Shri Bandish Soparkar, A.R. Respondent by: Shri Abhimanyu Singh Yadav, Sr. DR D a t e of H ea r i ng 09.06.2022 D a t e of P r o no u n ce me nt 10.06.2022 O R D E R PER MADHUMITA ROY, JM: The instant appeal filed by the Revenue is directed against the order dated 25.11.2019 passed by the Ld. CIT(A)-1, Ahmedabad arising out of the order dated 20.12.2016 passed DCIT, Circle-1(1)(2), Ahmedabad under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as “the Act”) for A.Y. 2015-16 with the following grounds: “1. The CIT(A) has erred in directing the AO to allow depreciation of Rs. 1,57,41,103/- @ 30% notwithstanding that they do not fall within the clauses (2) or (3) of Part III of New Appendix I of I.T. Rules and that the allowable rate of depreciation is only 15% as per clause (1). 2. The CIT(A) has erred in law and facts in restricting the disallowance of Rs. 1,24,955/- u/s 14A of the Act to Rs. 5,240/- 3. It is, therefore, prayed that the order of ld. CIT(A) may be set aside and that of the Assessing Officer be restored.” 2. At the time of hearing of the instant appeal the Ld. Counsel appearing for the assessee submitted before us that this ground of appeal relating to ITA No. 119/Ahd/2020 DCIT vs. Dholu Construction & Projects Ltd. Asst.Year –2014-15 - 2 - depreciation on commercial vehicle has already been decided in favour of the assessee in assessee’s own case in ITA No. 3144, 3145 & 3146/Ahd/2016 for A.Y. 2010-11, 2012-13 & 2013-14 a copy whereof has also been submitted before us. He, therefore, supports the order passed by the First Appellate Authority. 4. On the contrary, the Ld. DR relied upon the order passed by the authorities below. 5. We have also perused the order passed by the Coordinate Bench in assessee’s own case in ITA No. 3144, 3145 & 3146/Ahd/2016 for A.Y. 2010-11, 2012-13 & 2013-14. While deciding the issue in favour of the assessee the Hon’ble Bench was pleased to observed as follows: “16.Now we come to ground relating to restricting depreciation on hire of heavy goods vehicles from 30% to 15%. 17.On verification of the depreciation chart, it is noticed that the assessee has claimed deprecation of Rs. 28,05,595/- at 50% on loader vehicles as against allowable depreciation at 15%. As such, vide Point No. 1 of notice u/s, 142(1) dated 03/02/2015, the assessee was requested to justify its claim of depreciation at 50% on loader vehicles. In response thereto, the assessee vide letter dated 16/02/2015 stated that the heavy goods vehicle owned by us are used on hire a/id, as such the depreciation at 50% is allowable. In support of the same, the assessee furnished copy of New Appendix-l in item No. 3(via) of machinery and plant. The submission made by the assessee has been gone through carefully but the same is found to be not acceptable. The 50% depreciation is allowable as per New Appendix-l in item No. 3(via) new commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of ^[October], 2009 and is put to use before the 1st day of ^[October], 2009 for the purposes of business or profession [See paragraph 6 of the Notes below this Table]. A careful perusal of the above, it can be seen that the condition for 50% depreciation is only that the assets should be covered in the note-6 of table defines "Commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not” include "maxi-cab", "motor-cab", "tractor" and "road-roller". The expressions "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "road-roller" ITA No. 119/Ahd/2020 DCIT vs. Dholu Construction & Projects Ltd. Asst.Year –2014-15 - 3 - shall have the meanings respectively assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988). 18.As per Wikipedia dictionary, a loader vehicle means a backhoe loader, also called a loader backhoe, digger in layman's terms, or colloquially shortened to backhoe within the industry, is a heavy equipment vehicle that consists of a tractor like unit fitted with a shovel/bucket on the front and a small backhoe on the back. The assessee claimed of depreciation at 50% on loader vehicle does not cover any of the vehicles defined in Note-6 of New Appendix-1 of I. T. Rules. In view of the above, the assessee's claim for depreciation at 50% on loader vehicle is restricted to 15% and excess claim of depreciation of Rs. 8,41,678/- on loader vehicle is disallowed and added to the total income. 19. We have heard both the parties and gone through the material available on record. And in support of its contention, ld. A.R. cited an order of Jurisdictional High Court in the matter of Pr. CIT vs. Durga Construction Co. [2018] 93 taxmann.com 436 (Guj.) wherein in similar circumstances, claim of the assessee was allowed and relevant para is reproduced: 5. The assessee has been awarded contract for providing equipments on hire with manpower to execute the work of excavation, loading and removal of minerals from one place to another. The entire operation is scheduled and controlled by the principal. The assessee is required to provide stipulated equipments and vehicles on hire. The assessee would not be allowed to remove any equipments or vehicles provided under the contract without prior permission of the principal. The business of the assessee-firm itself was providing equipments and motor vehicles on hire. 6. CIT [A] accepted the assessee's contention and reversed the decision of Assessing Officer, relying on the earlier decision. The Appellate Commissioner has also relied on CBDT Circular No. 652 which provides that under sub-item 2[ii] of Item III of Appendix I to the Rules, higher rate of depreciation would be admissible on motor buses, motor lorries and motor taxis used in the business of running them on hire. It was clarified that higher depreciation will also be admissible on motor lorries used in the assessee's business of transportation of goods on hire. 7. The revenue carried the matter in appeal before the Tribunal. The Tribunal confirmed the view of the CIT [A] taking note of the scope of work awarded to the assessee under the tender terms as also placing reliance on the CBDT Circular No. 652 dated 14th June 1993. 8. Against such judgment, the Revenue has filed the present appeal. 9. Facts in all other appeals are substantially similar and are therefore not separately recorded. 10. Section 32 [1] of the Income-tax Act, 1961 ["the Act" for brevity] provides for depreciation in respect of buildings, machinery, plant or furniture, being tangible assets as well as certain intangible assets owned wholly or partly by the assessee and ITA No. 119/Ahd/2020 DCIT vs. Dholu Construction & Projects Ltd. Asst.Year –2014-15 - 4 - used for the purpose of the business or profession, at the prescribed rates. New Appendix I, which is applicable for AY 2006-2007 and onwards, in Part-A contends specific rate of depreciation for "tangible assets". Capital-Ill thereof pertains to "machinery and plant". Under sub-item [2] of Item [3] (iii), the rate of depreciation on "motor buses, motor lorries and motor taxis used in the business of running them on hire" is prescribed @ 30%. It is in this context, we have to test the correctness of the view taken by CIT [A] and the Tribunal. Revenue's main contention appears to be that the assessee had not given the said machinery on hire since the assessee was awarded the contract for mining. However, we have noticed some of the leading terms of the tender. These terms inter alia required the assessee to provide machinery for hire for excavation of overburden; transportation of such excavated overburden minerals; transportation of minerals from mines to pit-head, stock piles or at any other place, and the transportation of overburden of minerals and excavated minerals to be done by running motor vehicles such as tippers, dumpers, etc. Essentially, therefore, the assessee was awarded contract for providing such equipments on hire. It was in this context, the assessee has highlighted that the assessee has no control over the equipments so hired and it was the principal which would decide to deploy the equipments at the appropriate place. 11. From the material available on record though the assessee essentially was awarded contract for providing specialized equipments and trained manpower for mining and transportation of excavated minerals on hire, the terms of the tender and the eventual contract awarded would suggest that the assessee was given the work of mining. The assessee was essentially required to provide equipments and manpower on hire. In view of such discussion, we find no error in the view taken by the Tribunal. Even if the assessee had used such equipments and manpower for its direct mining operations for the contract, if it was so awarded, we wonder whether that would make any difference particularly in view of CBDT Circulars No. 609 and 652 and the decision of the Supreme Court in case of I.C.D.S. Ltd. v. CIT [2013] 350 ITR 527/212 Taxman 550/29 taxmann.com 129. However, when this issue does not arise for direct consideration, we need not conclude the same. 12. All in all, we see no error in the view taken by the Tribunal. No question of law arises. Tax Appeals are dismissed. 20. Respectfully following the aforesaid Jurisdictional High Court order, we allow the claim of the depreciation on commercial vehicle retained by the assessee to 15% to 50%. Therefore, we allow this ground of appeal.” In view of the order passed by the Coordinate Bench we do not find any reason in interfering the order passed by the First Appellate Authority. Thus, the ground of appeal preferred by the Revenue is, thus, dismissed. ITA No. 119/Ahd/2020 DCIT vs. Dholu Construction & Projects Ltd. Asst.Year –2014-15 - 5 - 6. Ground No.2:- It appears from the order passed by the Ld. CIT(A) while deciding the issue in favour of the assessee he has observed as follows: “5.4. I have carefully considered the facts of the case, assessment order and contention of the appellant. The AO has made disallowances of Rs.1,24,9557-as per rule 8D on the ground that the appellant has not allocated any expenditure to earn the exempt income. The Appellant has contended that AO has passed the order without considering the submission and ignoring the fact that exempt income is only Rs.5,2407-. It is seen that appellant has not allocated any expenditure to earn the exempt income and therefore AO is justified to compute 14A disallowance as per rule 8D. However, I agree with the appellant submission that exempt income is only Rs.5,240/-. Therefore as per decision of Gujarat High Court in the case of Corrtech Energy Pvt. Ltd. disallowances cannot exceed exempt income in view of the above 14A disallowance is restricted to Rs.5,240/-. The ground of appeal is accordingly partly allowed.” 7. It is a settled principle of law that the disallowance under Section 14A cannot be exceeded the exempt income and therefore, the order passed by the Ld. CIT(A) in restricting the addition to the exempt income earned by the assessee relying upon the ration laid down by the Hon’ble Gujarat High Court in the case of CIT vs. Corrtech Energy Pvt. Ltd. reported in, 239 of 2014, thus, in our considered opinion is just and proper without any ambiguity so as to warrant interference. This ground of appeal preferred by the Revenue is found to be devoid of any merit and thus, dismissed. 8. In the result, the appeal preferred by the Revenue is dismissed. This Order pronounced in Open Court on 10/06/2022 Sd/- Sd/- (PRAMOD M. JAGTAP) (Ms. MADHUMITA ROY) VICE PRESIDENT JUDICIAL MEMBER Ahmedabad; Dated 10/06/2022 TANMAY, Sr. PS TRUE COPY ITA No. 119/Ahd/2020 DCIT vs. Dholu Construction & Projects Ltd. Asst.Year –2014-15 - 6 - आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं धत आयकर आय ु त / Concerned CIT 4. आयकर आय ु त(अपील) / The CIT(A)- 5. वभागीय त न ध, आयकर अपील!य अ धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड' फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील य अ धकरण, अहमदाबाद / ITAT, Ahmedabad 1. Date of dictation 09.06.2022 2. Date on which the typed draft is placed before the Dictating Member 09.06.2022 3. Other Member..................... 4. Date on which the approved draft comes to the Sr.P.S./P.S .06.2022 5. Date on which the fair order is placed before the Dictating Member for pronouncement .06.2022 6. Date on which the fair order comes back to the Sr.P.S./P.S 10 .06.2022 7. Date on which the file goes to the Bench Clerk 10 .06.2022 8. Date on which the file goes to the Head Clerk.......................................... 9. The date on which the file goes to the Assistant Registrar for signature on the order.......................... 10. Date of Despatch of the Order..........................................