Veerapaneni Chennakeshava Rao , Hyderabad V. Income Tax Officer, Ward-9(4), Hyderabad

ITA 1277/Hyd/2018

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 9607 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-01-2020
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB-A
• Next Hearing Date: 31-12-2019
• Assessment Year: 2014-2015
• Appeal Filed On: 14-06-2018
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Depreciation; Condonation of delay

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES SMC, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO. 1277/HYD/2018 ASSESSMENT YEAR: 2014-15 VEERAPANENI CHENNAKESHAVA RAO, HYDERABAD [PAN: AGMPC5859M] VS INCOME TAX OFFICER, WARD-9(4), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI T.CHAITANYA KUMAR, AR FOR REVENUE : SHRI SUNKU SRINIVAS, DR DATE OF HEARING : 31-12-2019 DATE OF PRONOUNCEMENT : 08-01-2020 O R D E R THIS APPEAL FILED BY THE ASSESSEE FOR THE AY.2014-15, IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCO ME TAX (APPEALS)7, HYDERABAD, DATED 14-03-2018. 2. AT THE OUTSET, IT IS SEEN THAT THERE IS A DELAY OF 11 ( ELEVEN) DAYS IN FILING THE APPEAL BEFORE THE TRIBUNAL. THE A SSESSEE HAS FILED AN APPLICATION FOR CONDONATION OF DELAY ALONG WITH AN AFFIDAVIT, EXPLAINING THE REASONS FOR THE DELAY. IT IS STATED IN THE APPLICATION, THAT THE APPEAL PAPERS WERE MADE READY BY THE ASSESSEES COUNSEL ON 30-05-2018 AND WERE SENT TO ASS ESSEES RESIDENCE FOR SIGNATURE AND SINCE REMITTANCE OF APPEAL FEES WAS ALSO TO BE MADE ON THAT DAY ITSELF, THE SAME COULD NOT B E DONE AS THE ASSESSEE WAS OUT OF STATION TO LOOK AFTER STONE CRU SHING PLANTS AT KARNATAKA AND HENCE HE COULD NOT SIGN THE PAP ERS ITA NO. 1277/HYD/2018 :- 2 -: IMMEDIATELY. THUS, THERE IS A DELAY OF 11 DAYS IN FI LING OF THE APPEAL. 3. LD.DR WAS ALSO HEARD AND BEING SATISFIED WITH THE REASONABLENESS FOR THE DELAY IN FILING THE APPEAL, I AM INCLINED TO CONDONE THE DELAY. 4. THE GROUNDS RAISED BY ASSESSEE IN THIS APPEAL ARE AS UNDER: 1) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) IS ERRONEOUS, ILLEGAL AND HELD CONTRARY TO THE FACTS OF THE INSTA NT CASE. 2) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER WITH OUT GIVING ANY FURTHER OPPORTUNITY. 3) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING DEPRECIATION OF RS.3,71,831/-. 4) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN D ISALLOWING THE CHIT LOSS OF RS.11,596/- 5) THE LEARNED COMMISSIONER, OF INCOME-TAX (APPEALS ) ERRED IN CONFIRMING THE ACTION OF THE ASSESSING OFFICER IN T AXING THE RENTAL INCOME OF RS.7,08,000/- UNDER THE HEAD OTHER SOURCE S INSTEAD OF INCOME FROM HOUSE PROPERTY. 6) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) OUGHT TO HAVE CONSIDERED THE FACT THAT THE SAID AMOUNT WAS OFFERE D INCOME FROM HOUSE PROPERTY. 7) ANY OTHER GROUNDS/GROUND MAY BE URGED AT THE TIM E OF HEARING. 5. BRIEF FACTS OF THE CASE ARE THAT, THE ASSESSEE, AN INDIVIDUAL IS ENGAGED IN THE BUSINESS OF RUNNING A P ETROL PUMP IN THE NAME AND STYLE OF CHENNA KESHAVA FILLING STATIO N AT ITA NO. 1277/HYD/2018 :- 3 -: DVK ROAD, NALGONDA TOWN. HE FILED HIS RETURN OF INC OME FOR THE AY.2014-15 ON 01-11-2014, DECLARING INCOME OF RS.7,98,840/-. THE CASE OF ASSESSEE WAS SELECTED FO R SCRUTINY UNDER CASS. 6. DURING THE ASSESSMENT PROCEEDINGS U/S.143(3) OF THE OF THE INCOME TAX ACT [ACT], THE ASSESSING OFFICER (AO) N OTICED THAT THE ASSESSEE HAS SHOWN GROSS RENT ON LAND UNDER THE HEAD INCOME FROM HOUSE PROPERTY OF RS.7,08,000/- AND ALSO CLAIMED 30% THEREFROM AS DEPRECIATION AND BALANCE AMO UNT OF RS.4,95,600/- WAS OFFERED TO TAX. THE AO OBSERVED THA T THE DEPRECIATION CANNOT BE CLAIMED ON VACANT LAND AND FURTH ER THAT THE LAND ON WHICH FILLING STATION IS FUNCTIONING WAS GIVEN ON LEASE TO BHARAT PETROLEUM CORPORATION LTD [BPCL] AND SINCE THERE IS NO BUILDING ON THE SAID LAND, AO HELD THAT THE GROSS AMOUNT OF RS.7,08,000/- IS TO BE BROUGHT TO TAX, UNDER TH E HEAD INCOME FROM OTHER SOURCES. HE ALSO DISALLOWED THE CLAIM OF DEPRECIATION OF RS.2,12,400/- THERE FROM. THEREAFT ER, AO ALSO OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPRECIA TION ON CERTAIN MACHINERY WHICH ARE AS UNDER: S.NO AMOUNT RS. 1 DEPRECIATION ON EARTH MOVING MACHINERY 60,012 2 DEPRECIATION ON LORRY KANTA 10,935 3 MACHINERY I ACCOUNT 1,19,264 4 MACHINERY II ACCOUNT 26,622 5 ASHOK LEYLAND 1,55,006 TOTAL : 3,71,831 6.1. SINCE THE ASSESSEE WAS INTO THE BUSINESS OF RUN NING PETROL BUNK, HE WAS ASKED TO FURNISH DEPRECIATION CLA IMED ON THESE ASSETS, WHICH ARE USED IN THE BUSINESS. THE ASSE SSEE ITA NO. 1277/HYD/2018 :- 4 -: EXPLAINED THAT THE ASSETS WERE PURCHASED IN THE MONTH OF MARCH, 2013 AND AN AGREEMENT WAS ENTERED WITH BPCL F OR THEIR USE THEREAFTER. HOWEVER, THE AO OBSERVED THAT THE OPERATION BASED ON THE AGREEMENT WITH BPCL TO USE THE OI L TANKER COMMENCED ONLY FROM 01-04-2014 AND SINCE THE ASSESSEE IS NOT INTO THE BUSINESS OF RUNNING PETROL TAN KERS, HE HELD THAT THE SAME DATE IS TO BE TAKEN I.E., 01-04-2014 AND DEPRECIATION CAN BE ALLOWED THEREON ONLY FROM THAT DATE ITSELF. HE THEREFORE DISALLOWED DEPRECATION OF RS.3,71,831/- . 6.2. THE ASSESSEE HAD ALSO CLAIMED CHIT LOSS OF RS.1 1,596/-. THE ASSESSEE WAS ASKED TO FURNISH INFORMATION ON THE F UNDS THAT WERE DEPLOYED FROM THE CHITS INTO THE BUSINESS. S INCE THE ASSESSEE DID NOT FURNISH ANY INFORMATION, THE CHIT LOSS OF RS.11,596/- WAS DISALLOWED. 6.3. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEF ORE THE CIT(A), WHO CONFIRMED THE ORDER OF AO AND THE ASSESSE E IS IN SECOND APPEAL BEFORE THE TRIBUNAL. 7. LD.COUNSEL FOR THE ASSESSEE SUBMITTED THAT ASSESSEE HAD GIVEN THE LAND ON RENT TO BPCL AND THE BPCL HAD SET UP TH E PETROL BUNK ON THE SAID LAND AND HAS BEEN PAYING LEAS E RENT TO THE ASSESSEE. THEREFORE, THE RENTAL INCOME HAS TO BE TR EATED AS INCOME FROM HOUSE PROPERTY AND 30% CLAIMED BY THE ASSESSEE WAS THE STANDARD DEDUCTION UNDER THE SAID HEAD, AND NO T THE DEPRECIATION AS OBSERVED BY THE AO. HE ALSO DREW MY A TTENTION TO THE DOUBLE ADDITION BY THE AO ONE IS ADDITION OF RS.4,95,600/- I.E., NET RENTAL INCOME OFFERED BY THE A SSESSEE AND ALSO RENTAL INCOME FROM LAND, WITHOUT DEPRECATION OF ITA NO. 1277/HYD/2018 :- 5 -: RS.7,08,000/-. HE THEREFORE SUBMITTED THAT THE DOUBLE ADDITION MAY BE DELETED IF THE TOTAL ADDITION IS NOT DELETE D. 8. LD.DR, HOWEVER, SUBMITTED THAT SINCE THERE IS NO BUILDING ON THE LAND WHICH IS GIVEN ON LEASE TO THE BP CL, THE RENTAL INCOME THERE FROM HAS TO BE TREATED AS INCOME F ROM OTHER SOURCES AND NOT AS INCOME FROM HOUSE PROPERTY , AS CLAIMED BY THE ASSESSEE. 9. HAVING REGARD TO THE RIVAL CONTENTIONS AND MATERIAL ON RECORD, I FIND THAT THE RENTAL INCOME ONLY FROM BUILDIN GS AND THE LAND APPURTENANT THERETO CAN BE TREATED AS INCOME FRO M HOUSE PROPERTY. ADMITTEDLY, IN THIS CASE, RENTAL INCO ME IS ONLY FOR THE LAND LEASED OUT TO BPCL AND THEREFORE, IT CANNOT BE TREATED AS INCOME FROM HOUSE PROPERTY AND AO HAS RI GHTLY TREATED THE SAME AS INCOME FROM OTHER SOURCES. HOWE VER, I DIRECT THE AO TO DELETE THE ADDITION OF RS.4,95,600/- MADE IN THE ASSESSMENT OF INCOME WHICH WAS ALREADY OFFERED BY THE ASSESSEE. THUS, GROUND NOS.5 & 6 ARE DISMISSED. 9.1. AS REGARDS GROUND NO.4 WITH REGARD TO DISALLOWAN CE OF CHIT LOSS OF RS.11,596/-, ASSESSEE HAD NOT FILED ANY DETAILS BEFORE THE TRIBUNAL AND THEREFORE THE SAME IS CONFIRME D. HENCE GROUND NO.4 IS REJECTED. 9.2. AS REGARDS GROUND NO.3 WITH REGARD TO DEPRECIATIO N ON MACHINERY AND VEHICLES USED FOR PETROL BUNK, I FIND THAT THE PETROL BUNK HAD COMMENCED ITS BUSINESS FROM 01-04-201 4 BUT THE ASSESSEE HAS ALREADY PUT THE MACHINERY TO USE. THE EXPENDITURE INCURRED BY THE ASSESSEE FOR ACQUISITION OF ITA NO. 1277/HYD/2018 :- 6 -: MACHINERY HAS TO BE CAPITALISED BUT THE DEPRECIATION THE REON IS TO BE ALLOWED FROM THE DATE WHEN THE MACHINERY HAS BEEN PUT TO USE. ADMITTEDLY, THE BUSINESS OF PETROL BUNK STARTED F ROM 01-04-2014 AND THEREFORE, THE MACHINERY HAD TO BE PUT TO USE PRIOR TO SUCH DATE FOR TRIAL RUN AND OTHER PURPOSES. T HEREFORE, IN MY OPINION, DEPRECIATION ON THE ASSET AS CLAIMED BY THE ASSESSEE IS ALLOWABLE AT THE APPLICABLE RATE. THUS, G ROUND NO.3 IS ALLOWED. 10. SINCE THE OTHER GROUNDS RAISED BY ASSESSEE ARE A CADEMIC IN NATURE, THERE IS NO NEED FOR SEPARATE ADJUDICATION . HENCE, THE GROUNDS RAISED BY THE ASSESSEE ARE TREATED AS PARTLY ALLOWED. 11. IN THE RESULT, THE APPEAL OF ASSESSEE IS PARTLY ALL OWED. ORDER PRONOUNCED IN THE OPEN COURT ON 8 TH JANUARY, 2020 SD/- (P. MADHAVI DEVI) JUDICIAL MEMBER HYDERABAD, DATED: 08-01-2020 TNMM/PVV COPY TO : 1.VEERAPANENI CHENNAKESHAVA RAO, C/O. SHRI T.CHAITANYA KUMAR, ADVOCATE, FLAT NO.102, GOWRI APARTMENTS, HIMAYATNAGAR, HYDERABAD. 2. INCOME TAX OFFICER, WARD-9(4), HYDERABAD. 3. CIT(APPEALS)-7, HYDERABAD. 4. PR.CIT-7, HYDERABAD. 5. D.R. ITAT, HYDERABAD. 6. GUARD FILE.