Cipriani Harrison Valves Pvt. Ltd., Anand V. The Jt.CIT, Anand Range, Anand

ITA 1239/AHD/2014

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 8948 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 year(s) 11 month(s) 5 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-03-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 29-03-2017
• Assessment Year: 2010-2011
• Appeal Filed On: 25-04-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Set aside
• Section: 32; 147; 131; 68; 246; 69; 145; 27; 148; 54; 37; 6; 56; 263; 63; 132; 12; 28; 144; 10; 90; 154; 2; 11; 15; 271(1)(b); 139; 143(3); 92; 142(1); 201

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, AHMEDABAD BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI MANISH BORAD, ACCOUNTANT MEMBER ./ ITA NO. 1239/AHD/2014 / ASSESSMENT YEAR: 2010-11 CIPRIANI HARRISON VALVES PVT LTD, PLOT NO.1901, PHASE-IV, GIDC ESTATE, V.U. NAGAR, DIST. ANAND PAN : ACCC 7015 Q VS. JCIT, ANAND RANGE, ANAND [ / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI ANIL N. SHAH, AR REVENUE BY : SHRI JAMES KURIAN, SR DR / DATE OF HEARING : 29/03/2017 / DATE OF PRONOUNCEMENT: 30/03/2017 / O R D E R PER MANISH BORAD, ACCOUNTANT MEMBER: THIS APPEAL OF THE ASSESSEE FOR ASSESSMENT YEAR 201 0-11 IS DIRECTED AGAINST THE ORDER OF THE CIT(A)-II, BARODA VIDE APP EAL NO.CAB/II-198/13-14, DATED 21.01.2014, ARISING OUT OF ORDER UNDER SECTIO N 143(3) OF THE INCOME-TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT), F RAMED ON 28.01.2013 BY JCIT, ANAND RANGE, ANAND. 2. ASSESSEE HAS RAISED 12 GROUNDS OF APPEAL, BUT, I N ALL, ONLY TWO ISSUES ARE RAISED AGAINST THE ORDER OF LD. CIT(A); FIRSTLY, CO NFIRMING LD. ASSESSING OFFICERS ACTION OF ALLOWING DEPRECIATION ON MOTOR CAR @ 15% AS AGAINST DEPRECIATION CLAIMED @ 50% BY THE ASSESSEE AND SECONDLY, AGAINST THE ESTIMATED DISALLOWANCE OF TRAVELLING EXPENDITURE @ 20% AT RS. 74,814/-. 3. BRIEFLY STATED FACTS, AS CULLED OUT FROM THE REC ORD, ARE THAT THE ASSESSEE IS A PRIVATE LIMITED COMPANY, ENGAGED IN MANUFACTURING O F MACHINE PARTS. E-RETURN OF INCOME DECLARING TOTAL INCOME AT RS.28,95,390/- WAS FILED ON 11.10.2010, ITA NO. 1239/AHD/2014 CIPRIANI HARRISON VALVES PVT LTD VS. JCIT AY : 2010-11 - 2 ACCOMPANIED WITH AUDIT REPORT IN FORM NO.3CA & 3CD. CASE WAS PICKED UP FOR SCRUTINY ASSESSMENT AND NOTICE UNDER SECTION 14 3(2) FOLLOWED BY 142(1) OF THE ACT WERE DULY ISSUED AND SERVED UPON THE ASSESS EE. ASSESSMENT WAS COMPLETED ASSESSING INCOME AT RS.32,51,570/- AFTER MAKING DISALLOWANCE OF DEPRECIATION ON MOTOR CAR AT RS.2,81,360/- BY RESTR ICTING THE DEPRECIATION CLAIM BY APPLYING THE RATE OF 15% AS AGAINST 50% CHARGED BY THE ASSESSEE AND ALSO DISALLOWANCE OF RS.74,814/- WAS MADE ON ACCOUNT OF TRAVELLING EXPENDITURE FOR LACK OF PROPER JUSTIFICATION AND EVIDENCES. 4. AGGRIEVED, ASSESSEE WENT IN APPEAL BEFORE THE LD . CIT(A), BUT COULD NOT SUCCEED AS ALL THE DISALLOWANCES WERE CONFIRMED. 5. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 6. FIRST, WE WILL TAKE UP THE GROUND RELATING TO CL AIM OF DEPRECIATION ON MOTOR CAR, CLAIMED BY THE ASSESSEE AT 50%; WHEREAS BOTH THE LOWER AUTHORITIES HAVE RESTRICTED IT TO 15%. LD. COUNSEL SUBMITTED T HAT THE MOTOR CAR IN QUESTION WAS PURCHASED IN PREVIOUS ASSESSMENT YEAR, I.E. AY 2009-10, ON 28.03.2009 FOR BUSINESS PURPOSES. DEPRECIATION IN AY 2009-10 WAS C LAIMED @ 25% BEING HALF OF 50% AS THE MOTOR CAR WAS PURCHASED IN THE MONTH OF MARCH 2009 AND THIS DEPRECIATION WAS CLAIMED AS PER THE CBDT CIRCULAR N O.10/2009 DATED 19.01.2009. LD. COUNSEL FURTHER REFERRED TO APPEND IX-I (SEE RULE 5) RELATING TO RATES OF DEPRECIATION APPEARING IN PAGE 17 OF THE P APER-BOOK WHICH SPECIFIES THAT IF A NEW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON OR AFTER THE FIRST DAY OF JANUARY 2009, BUT BEFORE THE FIRST DAY OF APRIL 2009, AND I S PUT TO USE BEFORE FIRST DAY OF APRIL 2009 FOR THE PURPOSES OF BUSINESS OR PROFESSION , THEN THE ASSESSEE WOULD BE ELIGIBLE TO CLAIM DEPRECATION @ 50% OF THE WRITTEN DOWN VALU E. LD. COUNSEL ALSO REFERRED TO THE DEFINITION OF COMMERCIAL VEHICLE AP PEARING AT PAGE 18 OF THE PAPER-BOOK, AS PER WHICH, COMMERCIAL VEHICLE MEANS HEAVY GOODS VEHICLE, HEAVY PASSENGER MOTOR VEHICLE, LIGHT MOTOR VEHIC LE, MEDIUM GOOD AND MEDIUM ITA NO. 1239/AHD/2014 CIPRIANI HARRISON VALVES PVT LTD VS. JCIT AY : 2010-11 - 3 PASSENGER MOTOR VEHICLE BUT DOES NOT INCLUDE MAXI -CAB, TRACTOR AND ROAD- ROLLER. REFERRING THE ABOVE DETAILS AS APPEARING IN THE INC OME-TAX RULES, LD. COUNSEL ALSO REFERRED AND RELIED ON THE DECISION OF THE CO-ORDINATE BENCH, MUMBAI IN THE CASE OF M/S. BLUE STEEL ENGINEERS VS. DCIT IN ITA NO.6411/MUM/2010, PRONOUNCED ON 11.05.2012 AND ALSO CO-ORDINATE BENCH, PUNE DECISION IN THE CASE OF GERA DEVELOPMENTS (P.) LTD VS. JCIT, REPORTED IN [2015] 61 TAXMANN.COM 88 (PUNE-TRIB.), DATED 31.12. 2014. 7. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTATI VE VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF LOWER AUTHORITIES. 8. WE HAVE HEARD THE RIVAL CONTENTIONS, PERUSED THE RECORD PLACED BEFORE US AND GONE THROUGH THE DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. ASSESSEES GRIEVANCE THROUGH THIS GROUND IS AGAINST LD. CIT(A)S ORDER CONFIRMING THE ACTION OF LD. ASSESSING OFFICER REST RICTING THE DEPRECIATION ON MOTOR CAR @ 15% AS AGAINST 50% CLAIMED BY THE ASSES SEE. ON PERUSAL OF RECORDS, WE FIND THAT THE IMPUGNED MOTOR CAR WAS PURCHASED O N 28.03.2009, I.E., IN PREVIOUS ASSESSMENT YEAR 2009-10. ADMITTEDLY, THIS MOTOR CAR WAS PURCHASED IN THE NAME OF ASSESSEE-COMPANY AND USED FOR THE PU RPOSES OF ASSESSEES BUSINESS. THE CONTROVERSY INVOLVED HEREIN IS WHETH ER THE DEPRECIATION ON THIS CAR SHOULD BE ALLOWED @ 15% OR 50%. WE CAN FIND RE PLY TO THIS QUESTION IN NEW APPENDIX I (SEE RULE 5) OF INCOME-TAX RULES, WHICH SPECIFIES THE RATE AT WHICH DEPRECIATION IS ADMISSIBLE IN PART A RELATING TO T ANGIBLE ASSETS AT III. MACHINERY AND PLANT. UNDER THIS HEAD AT (3)(VIA) READS THAT N EW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON OR AFTER THE 1ST DAY O F 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, DEPRECIATION WILL BE ADMISSIBLE @ 50%. 9. FURTHER, COMMERCIAL VEHICLE HAS BEEN DEFINED AT NOTE NO.6 OF PART A OF THE NEW APPENDIX I, WHICH DEFINES COMMERCIAL VEHICL E AS 'HEAVY GOODS VEHICLE', ITA NO. 1239/AHD/2014 CIPRIANI HARRISON VALVES PVT LTD VS. JCIT AY : 2010-11 - 4 'HEAVY PASSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHIC LE', 'MEDIUM GOODS VEHICLE' AND 'MEDIUM PASSENGER MOTOR VEHICLE' BUT DOES NOT INCLU DE 'MAXI-CAB', 'MOTOR-CAB', 'TRACTOR' AND 'ROAD-ROLLER'. WE FURTHER FIND THAT MOTOR CAR PURCHASED BY THE ASSESSEE IS A LIGHT MOTOR VEHICLE WHICH IS WELL WIT HIN THE DEFINITION OF COMMERCIAL VEHICLE AND THIS IS ALSO NOT DISPUTED TH AT THE MOTOR CAR HAS BEEN USED OTHERWISE THAN FOR BUSINESS PURPOSES, WHICH SH OWS THAT ASSESSEE HAS RIGHTLY CLAIMED DEPRECIATION @ 50% AS THE IMPUGNED MOTOR CAR WAS PURCHASED ON 28.03.2009. OUR VIEW FURTHER GETS SUPPORT FROM THE DECISION OF THE CO- ORDINATE BENCH, PUNE IN THE CASE OF GERA DEVELOPMEN TS (P.) LTD (SUPRA) ADJUDICATING SIMILAR ISSUE OF CLAIM OF DEPRECIATION @ 50% INSTEAD OF NORMAL RATE OF 15% AND THE ISSUE WAS DECIDED IN FAVOUR OF THE A SSESSEE BY OBSERVING AS FOLLOWS:- 8. THE SECOND GROUND OF APPEAL RAISED BY THE ASSES SEE IS WITH REGARD TO THE RATE OF ALLOWANCE OF DEPRECIATION ON HONDA MOTOR CAR. TH E ASSESSEE CLAIMED DEPRECIATION ON HONDA MOTOR CAR @ 50 PER CENT ON TH E GROUND THAT IT WAS A 'LIGHT MOTOR VEHICLE' AND WAS THEREFORE, COVERED WI THIN THE MEANING OF A COMMERCIAL VEHICLE. THE ASSESSEE HAD RELIED UPON TH E CBDT NOTIFICATION NO. 10/2009 DT. 19TH JAN., 2009 WHICH PRESCRIBES THAT E NHANCED DEPRECIATION @ 50 PER CENT IS ALLOWABLE ON NEW COMMERCIAL VEHICLES AC QUIRED ON OR AFTER 1ST JAN., 2009 BUT BEFORE 1ST APRIL, 2009 AND WHICH ARE PUT T O USE BEFORE 1ST APRIL, 2009 FOR THE PURPOSE OF BUSINESS OR PROFESSION. THE AO, HOWEVER, ALLOWED DEPRECIATION AT THE NORMAL RATE OF 15 PER CENT ON THE GROUND THA T THE ENHANCED RATE OF DEPRECIATION @ 50 PER CENT ALLOWED BY THE CBDT NOTI FICATION DT. 19TH JAN., 2009 (SUPRA) WOULD COVER ONLY TRUCKS AND OTHER HEAVY VEH ICLES AND NOT A MOTOR CAR. THE CIT(A) HAS ALSO AFFIRMED THE AFORESAID STAND OF THE AO, AGAINST WHICH ASSESSEE IS IN APPEAL BEFORE US. 9. IN THIS CONTEXT, THE LEARNED REPRESENTATIVE FOR THE ASSESSEE SUBMITTED THAT THE OBJECTION OF THE IT AUTHORITIES THAT A MOTOR CAR DO ES NOT AMOUNT TO A COMMERCIAL VEHICLE IS MISCONCEIVED HAVING REGARD TO THE DEPREC IATION TABLE ANNEXED TO THE IT RULES, 1962. IN THIS CONTEXT, IT IS NOTED THAT R . 5(1) OF THE IT RULES, 1962 (IN SHORT 'THE RULES') PRESCRIBES THAT THE DEPRECIATION ALLOWANCE IS TO BE CALCULATED AT THE PERCENTAGES SPECIFIED IN THE TABLE IN APPENDIX- I THEREOF. THE CONTENTS OF THE TABLE SO FAR AS THEY ARE RELEVANT FOR OUR PURPOSE R EAD AS UNDER : 'III. MACHINERY AND PLANT 3. (I) TO (VI).... ITA NO. 1239/AHD/2014 CIPRIANI HARRISON VALVES PVT LTD VS. JCIT AY : 2010-11 - 5 (VIA) NEW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON O R AFTER THE 1ST DAY OF APRIL, 2009 BUT BEFORE THE 1ST DAY OF APRIL, 2009 A ND IS PUT TO USE BEFORE THE 1ST DAY OF APRIL, 2009 FOR THE PURPOSES OF BUSI NESS OR PROFESSION.' 10. FURTHER, PARA 6 OF THE NOTES BELOW READS AS UND ER : '6. 'COMMERCIAL VEHICLE' MEANS . . . . . . . . . . 'LIGHT MOTOR VEHICLE', . . . . . . . . . . . . . . . . . THE EXPRESSIONS . . . . . . . . . . . . . . 'LIGHT MOTOR VEHICLE', . . . . . . . . . . . . . . SHALL HAVE THE MEANINGS RESPECTIVELY ASSIGNED TO TH EM IN S. 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1998).' 11. A CONJOINT READING OF THE AFORESAID PROVISIONS WOULD REVEAL THAT THE VEHICLE IN RESPECT OF WHICH ASSESSEE SEEKS TO CLAIM DEPRECIATI ON @ 50 PER CENT IS A 'LIGHT MOTOR VEHICLE' AND THEREFORE, THE CLAIM FOR ENHANCE D RATE OF DEPRECIATION IS ON A SOUND FOOTING. OSTENSIBLY, THE AFORESAID PROVISIONS OF THE DEPRECIATION TABLE ANNEXED AS APPENDIX-I TO THE RULES CLEARLY APPLY AN D THEREFORE, THE LOWER AUTHORITIES WERE NOT JUSTIFIED IN DENYING ASSESSEE' S CLAIM FOR ALLOWANCE OF DEPRECIATION @ 50 PER CENT ON THE VEHICLE IN QUESTI ON, SUBJECT TO THE FULFILLMENT OF OTHER CONDITIONS. AS A CONSEQUENCE, WE SET ASIDE TH E ORDER OF THE CIT(A) AND DIRECT THE AO TO RECOMPUTE THE DEPRECIATION ALLOWAB LE ON THE IMPUGNED VEHICLE AS PER OUR AFORESAID DIRECTION AND IN ACCORDANCE WI TH LAW. THUS, ON THIS ASPECT ASSESSEE SUCCEEDS FOR STATISTICAL PURPOSES. 10. RESPECTFULLY FOLLOWING THE DECISION OF CO-ORDIN ATE BENCH, AND, IN VIEW OF OUR DISCUSSION ABOVE, WE ARE OF THE VIEW THAT ASSES SEE SHOULD BE ALLOWED THE CLAIM OF DEPRECIATION @ 50% ON THE WDV AS ON 01.04 .2009 OF MOTOR CAR PURCHASED FOR BUSINESS PURPOSES ON 28.03.2009. IN THE RESULT, THIS GROUND OF ASSESSEE IS ALLOWED. 11. SECOND GROUND OF THE ASSESSEE IS AGAINST THE DI SALLOWANCE OF TRAVELLING EXPENSES. DURING THE COURSE OF ASSESSMENT PROCEEDI NGS, DETAILS WERE CALLED FOR RELATING TO DIRECTORS TRAVELLING EXPENSES, BUT ASS ESSEE WAS UNABLE TO SUBSTANTIATE THE TRAVELLING EXPENSES WITH EVIDENCES AS WELL AS WAS UNABLE TO PROVE THE BUSINESS NEXUS OF THE EXPENDITURE ON TRAV ELLING AT RS.3,74,069/-. 12. LD. ASSESSING OFFICER GROSSLY ESTIMATED 20% DIS ALLOWANCE AT RS.74,814/-. EVEN IN APPEAL BEFORE THE LD. CIT(A), ASSESSEE COUL D NOT GET ANY RELIEF AS ITA NO. 1239/AHD/2014 CIPRIANI HARRISON VALVES PVT LTD VS. JCIT AY : 2010-11 - 6 ASSESSEE WAS AGAIN UNABLE TO PROVIDE DETAILS OF JOU RNEY UNDERTAKEN BY THE DIRECTORS, COUNTRIES VISITED AND THE PURPOSE OF SUC H TRAVEL UNDERTAKEN ETC. 13. AGGRIEVED, THE ASSESSEE IS NOW IN APPEAL BEFORE THE TRIBUNAL. 14. LD. COUNSEL REFERRED TO VARIOUS DOCUMENTS ANNEX ED IN THE PAPER-BOOK IN SUPPORT OF THE TRAVELLING EXPENDITURE INCURRED AND REQUESTED THAT NO DISALLOWANCE IS CALLED FOR AS THE BOOKS OF ACCOUNTS ARE AUDITED AND NO ADVERSE COMMENTS HAVE BEEN MADE BY THE AUDITORS IN THE REPO RT. 15. ON THE OTHER HAND, LD. DEPARTMENTAL REPRESENTAT IVE VEHEMENTLY ARGUED SUPPORTING THE ORDERS OF LOWER AUTHORITIES AND ALSO SUBMITTED THAT ASSESSEE HAS MISERABLY FAILED TO FILE ANY CONCRETE DETAILS PROVI NG THE NEXUS OF TRAVELLING UNDERTAKEN BY THE DIRECTORS BEFORE BOTH THE LOWER A UTHORITIES. 16. WE HAVE HEARD THE RIVAL CONTENTIONS AND PERUSED THE RECORD PLACED BEFORE US. THE ISSUE INVOLVED IN THIS GROUND IS AG AINST LD. CIT(A)S ORDER CONFIRMING 20% DISALLOWANCE OF TRAVELLING EXPENDITU RE OF RS.74,814/-. ON PERUSAL OF ASSESSMENT ORDER, WE FIND THAT ASSESSEE HAS DEBITED RS.15,69,777/- AS TRAVELLING EXPENDITURE AND OUT OF THIS AMOUNT, RS.3 ,74,069/- WAS RELATED TO DIRECTORS TRAVELLING. SPECIFIC QUERY WAS RAISED B Y THE ASSESSING OFFICER FOR SATISFYING HIM ABOUT THE BUSINESS NEXUS OF THE TRAV ELLING EXPENDITURE INCURRED BY THE DIRECTORS. IN LACK OF PROPER REPLY, LD. ASS ESSING OFFICER AND THEREAFTER LD. CIT(A) CONFIRMED THE DISALLOWANCE AT RS.74,814/-. 17. AT THIS JUNCTURE, IT IS WELL EVIDENT THAT, UNDO UBTEDLY, THE ASSESSEE HAD INCURRED TRAVELLING EXPENDITURE, BUT SPECIFICALLY C OULD NOT PROVE THE BUSINESS NEXUS OF DIRECTORS TRAVELLING EXPENDITURE TO THE S ATISFACTION OF LOWER AUTHORITIES. IT IS ALSO NOT DISPUTED THAT BOOKS OF ACCOUNTS ARE AUDITED AND NO MAJOR ADVERSITY HAS BEEN DETECTED BY THE ASSESSING AUTHORITY WHILE COMPLETING ITA NO. 1239/AHD/2014 CIPRIANI HARRISON VALVES PVT LTD VS. JCIT AY : 2010-11 - 7 THE ASSESSMENT AND IT IS ALSO THE FACT THAT LEDGER ACCOUNT OF TRAVELLING EXPENDITURE WAS PLACED ON RECORD. WE, THEREFORE, I N VIEW OF ABOVE FACTS, ARE OF THE VIEW THAT IT WILL MEET THE ENDS OF JUSTICE IF T HE DISALLOWANCE IS RESTRICTED TO 15% OF THE DIRECTORS TRAVELLING EXPENSES OF RS.3,7 4,069/-, WHICH WILL WORK OUT TO RS.56,110/-; AND WE ORDER ACCORDINGLY. IN THE RESULT, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 18. IN THE RESULT, ASSESSEES APPEAL IS PARTLY ALLO WED. ORDER PRONOUNCED IN THE COURT ON 30 TH MARCH, 2017 AT AHMEDABAD. SD/- SD/- (RAJPAL YADAV) JUDICIAL MEMBER (MANISH BORAD) ACCOUNTANT MEMBER AHMEDABAD; DATED, 30/03/2017 **BT ! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. $ & / CONCERNED CIT 4. & ) ( / THE CIT(A)- 5. $ , $ , /DR,ITAT, AHMEDABAD, 6. 0 / GUARD FILE. / BY ORDER, TRUE COPY (ASSTT.REGISTRAR) $ ITAT, AHMEDABAD