M/s Swastik Sales Agencies, V. The ACIT 5 (1),

ITA 138/IND/2009

• Counselvise Citation: [2009] 115 COUNSELVISE.COM (IT) 1506 (ITAT-INDORE)
• Duration Of Justice: 7 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2009
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Next Hearing Date: 21-10-2009
• Assessment Year: 2005-2006
• Appeal Filed On: 17-03-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: MUKUL SHASHTRI
• Keywords: Depreciation
• Section: 142(1); 143(2); 32

Judgement Text

PAGE 1 OF 7 IN THE INCOME TAX APPELATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JM AND SHRI V.K. GUPTA, AM ITA NO.138/IND/2009 AY: 2005-06 M/S. SWASTIK SALES AGENCIES, 31, KACHHI MOHALLA, INDORE (PAN AHXPA 0022 A) ..APPELLANT V/S. ACIT-CIR.5(1), INDORE ..RESPONDENT ASSESSEE BY : SHRI MUKUL SHASHTRI, CA DEPARTMENT BY : SMT. APARNA KARAN, SR. DR ORDER PER JOGINDER SINGH, JM THIS APPEAL IS BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, INDORE, DATED 3.12.2008 FOR THE AY 2005-06. THE FIRST GROUN D RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE FIR ST APPELLATE AUTHORITY IS UNJUSTIFIED IN RESTRICTING THE DISALLOWANCE OF DEPR ECIATION @25% IN PLACE OF 40% CLAIMED BY THE ASSESSEE. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD LD. REPRESENTATIVES OF BOTH SIDES AND CONSIDERED THE ARGUMENTS ADVANCED BY THEM . THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT NO DISA LLOWANCE WAS MADE IN EARLIER YEARS AND THE ASSESSEE IS ALSO PLYING THE V EHICLE ON HIRE, CONSEQUENTLY, THE HIRE RATE OF DEPRECIATION IS ALLOWABLE TO THE A SSESSEE. ON THE OTHER HAND, PAGE 2 OF 7 THE LD. SR. DR STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT NECESSARY EVIDENCE WAS NOT BROUGHT ON RECORD BY THE ASSESSEE JUSTIFYING ITS CLAIM. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON THE FIL E. BRIEF FACTS ARE THAT THE ASSESSEE FIRM IS ENGAGED IN TRADING OF TOBACCO, MAT CHES, TENDU LEAVES AND AGARBATTI ETC. DECLARED INCOME OF RS.14,83,970/- IN ITS RETURN FILED ON 31.10.2005. THE CASE WAS SELECTED FOR SCRUTINY, THE REFORE, NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED TO THE ASSESSEE T O WHICH THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME, PREFERR ED WRITTEN SUBMISSIONS AND PRODUCED BOOKS OF ACCOUNTS WHICH WERE TEST-CHEC KED BY ASSESSING OFFICER. THE ASSESSEE IS THE OWNER OF TRUCK NO.MP-0 9-KC-6151 AND CLAIMED DEPRECIATION @40% (RS.1,07,381/-). HOWEVER, THE ASS ESSING OFFICER WAS OF THE VIEW THAT THE DEPRECIATION ALLOWABLE ON THE TRU CK IS @25%, CONSEQUENTLY, THE EXCESS CLAIM OF RS.40,268/- WAS DISALLOWED AND THE REMAINING AMOUNT OF RS.67,113/- WAS ADDED TO THE TOTAL INCOME OF THE AS SESSEE. ON APPEAL, THE STAND OF THE LD. ASSESSING OFFICER WAS AFFIRMED, WH ICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. IF THE ARGUMENTS ADVANCED BY THE RESPECTIVE LD. COUNSEL AND THE MATERIAL ON RECORD ARE ANALYSED, THERE IS N O DISPUTE THAT THE ASSESSEE IS TRADING IN TOBACCO, AGARBATTI, TENDU LEAVES AND MATCHES ETC. THE STAND OF THE REVENUE IS THAT THE ASSESSEE AS SUCH IS NOT IN THE BUSINESS OF PLYING TRUCKS ON HIRE. THERE IS A FURTHER MENTIONED IN THE APPELL ATE ORDER THAT INFERENCE CAN PAGE 3 OF 7 BE DRAWN THAT THE TRUCK MIGHT HAVE LET OUT ON HIRE OCCASIONALLY. THE LD. FIRST APPELLATE AUTHORITY PLACED RELIANCE ON THE DECISION IN CIT VS. GUPTA GLOBAL EXIM PVT. LTD. (305 ITR 132) (SC) AND AFFIRMED THE ASSESSMENT ORDER. HOWEVER, THE ASSESSEE HAS FILED AN AFFIDAVIT STATIN G THAT FOR AY 2004-05, THE HIGHER RATE OF DEPRECIATION U/S 32 WAS ALLOWED TO T HE ASSESSEE. THE ASSESSEE ALSO FILED STATEMENT OF FREIGHT RECEIVED AND DEPREC IATION CLAIMED AND ALLOWED FOR AY 2004-05 AND 2005-06, WHEREIN, THE CLAIMED DE PRECIATION @40% WAS ALLOWED. ASSESSEE ALSO PRODUCED THE COPY OF ASSESSM ENT ORDER DATED 29.12.2006 (AY 2004-05), WHEREIN, NO SUCH DISALLOWA NCE WAS MADE. THE ASSESSEE ALSO PRODUCED THE COPY OF AUDIT REPORT FIL ED BEFORE THE REVENUE. THE ASSESSEE ALSO FILED PAPER BOOK RUNNING INTO 1 TO 12 PAGES IN THE FORM OF ADDL. EVIDENCE, TO THE FACT THAT THESE DOCUMENTS WERE NOT FILED BEFORE THE ASSESSING OFFICER. HOWEVER, THE LD. SR. DR OBJECTED TO THE ADMISSION OF ADDL. EVIDENCE CONTAINED IN THE PAPER BOOK. WE HAVE FOUND THAT IN THE PAPER BOOK, THE ASSESSEE HAS FURNISHED AN AFFIDAVIT IN SUPPORT OF THESE DOCUMENT I.E. STATEMENT OF FREIGHT RECEIVED AND CLAIMED DEPRECIAT ION ALLOWED FOR AY 2004- 05, 2005-06, COPY OF ASSESSMENT ORDER, COPY OF ACKN OWLEDGMENT EVIDENCING FILING OF RETURN OF INCOME, COPY OF COMPUTATION OF INCOME AND STATEMENT OF DEPRECIATION. KEEPING IN VIEW THE NATURE OF THESE D OCUMENTS, THESE ARE ADMITTED. IT IS ALSO SEEN THAT THE ASSESSEE HAS SHO WN HIRING CHARGES AS INCOME FROM THE IMPUGNED TRUCK, THEREFORE, ONE CLEA R FACT IS OOZING OUT THAT THE TRUCK WAS USED FOR HIRING PURPOSES ALSO THOUGH MAY NOT BE FULL TIME. WE PAGE 4 OF 7 ARE OF THE VIEW THAT DEPRECIATION ALLOWANCE IS A CO NCESSION GRANTED BY THE STATE WHILE COMPUTING INCOME BASED ON MANY FACTORS RELEVANT TO WHOLESOME FISCAL ADMINISTRATION. DEPRECIATION IS DIMINUTION I N VALUE OF AN ASSET WHEN APPLIED FOR THE PURPOSES OF MAKING PROFIT OR GAIN. DEPRECIATION IS THUS RELATED TO AN NOTIONAL LOSS OF THE ASSET AGAINST ACTUAL LOS S IN THE SENSE OF OUTGOING OF BUSINESS BY REASON OF WEAR & TEAR. EVEN OTHERWISE, DEPRECIATION IS A ALLOWABLE DEDUCTION BOTH ACCORDING TO ACCOUNTING PRINCIPLE AN D ALSO AS PER THE ACT. WE ARE AWARE THAT DEDUCTION U/S 32(1) CANNOT BE CLAIME D BY SOMEONE WITHOUT REAL CONNECTION WITH THE ASSET AND CLAIMANT MUST BE ONE WHO HAS REAL CONNECTION WITH THE ASSET. THE HONBLE BOMBAY HIGH COURT EVEN WENT TO THE EXTENT THAT EVEN THE VEHICLES UNDER REPAIR ARE ELIG IBLE FOR DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE TRUCKS. THE WORD USED IN SEC. DENOTES ACTUALLY USED FOR THE PURPOSES OF THE BUSINESS. HOWEVER, THE QUES TION BEFORE US PERTAINS TO RATE OF DEPRECIATION. THE WORD HIRE USED IN THE ENT RY RELATING TO MOTOR LORRY/TRUCK ETC. IS ONLY MEAN TO DENOTE THAT THE US E OF THE VEHICLE IS NOT BY THE OWNER HIMSELF FOR HIS OWN PURPOSES BUT IT IS GIVEN TO ANOTHER FOR USE OF LIMITED PERIOD FOR HIRE CONSIDERATION. FOR THE PURP OSE OF THIS ENTRY, THERE IS NO QUALITATIVE DIFFERENCE BETWEEN THE VEHICLES USED FO R A SPECIFIED PERIOD FOR CONSIDERATION AND LETTING THE VEHICLES ON HIRE FOR SHORT DURATION ON PAYMENT OF HIRE CHARGES. SINCE THE ASSESSEE RECEIVED HIRE RENT AL CHARGES, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO HIGHER RATE O F DEPRECIATION BY TREATING THE VEHICLE USED IN THE BUSINESS OF RUNNING THEM ON HIR E AND OWN BUSINESS OF THE PAGE 5 OF 7 ASSESSEE. FOR THIS PROPOSITION, WE ARE FORTIFIED BY THE DECISION IN CIT VS. MADAN & CO. (254 ITR 445) (MAD) AND CIT VS. BANSAL CREDIT LTD. (126 TAXMAN 149)(DEL). THE HONBLE MADHYA PRADESH HIGH C OURT IN CIT VS. SHARMA MOTOR SERVICE (148 CTR 75) HELD THAT VEHICLE USED FOR TRANSPORTING PASSENGERS/GOODS AS A REGULAR BUSINESS ARE ENTITLED TO HIGHER RATE. WE ARE AWARE THAT THE HONBLE RAJASTHAN HIGH COURT IN CIT VS. SARDAR STONES (215 ITR 350) (RAJ) WAS OF THE VIEW THAT THE TRUCKS PRIM ARILY SELF USE BUT OCCASIONALLY HIRED OUT ARE NOT ELIGIBLE FOR HIGHER RATE. HOWEVER, RESPECTFULLY FOLLOWING THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT, HONBLE MADRAS & DELHI HIGH COURTS (SUPRA), WE ARE OF THE VIEW THA T THE ASSESSEE IS ENTITLED TO HIGHER RATE OF DEPRECIATION. OUR VIEW FURTHER FI NDS STRENGTH FROM THE FACT THAT IN THE CASE OF THE ASSESSEE FOR EARLIER YEARS, HIGHER RATE OF DEPRECIATION WAS ALLOWED BY THE DEPARTMENT, THEREFORE, WITHOUT B RINGING INTO ANY CONTRARY EVIDENCE, EVEN FOR THE SAKE OF THE CONSISTENCY, THE DEPARTMENT IS NOT PERMITTED TO DEVIATE FROM ITS EARLIER STAND. ON THE ISSUE OF CONSISTENCY, WE ARE FORTIFIED BY THE DECISIONS FROM THE HONBLE APE X COURT IN UNION OF INDIA VS. SATISH PANNALAL SHAH (249 ITR 221), UNION OF INDIA & OTHERS VS. KUMUDINI NARAYAN DALAL & OTHERS (249 ITR 219) (SC), BERGER P AINTS INDIA LTD. VS. CIT (266 ITR 99) (SC), CIT VS. ALLIED FINANCE P. LTD (2 89 ITR 318) (DEL), CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS ALLOWE D. EVEN OTHERWISE WHEN TWO VIEW ARE AVAILABLE, WHICH FAVOURS THE ASSESSEE HAS TO BE PREFERRED. PAGE 6 OF 7 4. THE NEXT GROUND RAISED IS THAT THE LD. FIRST APP ELLATE AUTHORITY ERRED IN MAKING ADHOC DISALLOWANCE OF RS.50,000/- OUT OF TOU R & TRAVELLING EXPENSES OF RS.9,38,899/-. DURING HEARING OF THIS APPEAL, IT WA S CONTENDED ON BEHALF OF THE ASSESSEE THAT ALL MAJOR VOUCHERS WERE PRODUCED BY THE ASSESSEE, ALL BILLS OF DIESEL, TOLL TAXES AND NECESSARY DOCUMENTS WERE ALSO FURNISHED. ON THE OTHER HAND, THE LD. DR CONTENDED THAT THE NECESSARY EVIDENCE WAS NOT FURNISHED BY THE ASSESSEE, THEREFORE, THE ASSESSING OFFICER WAS JUSTIFIED IN MAKING PART DISALLOWANCES AND AFFIRMATION BY THE LD . CIT(A). 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON THE FIL E. BRIEF FACTS ARE THAT THE ASSESSEE CLAIMED RS.9,38,899/- UNDER THE HEAD TOUR & TRAVELLING EXPENSES OUT OF WHICH THE LD. ASSESSING OFFICER MADE ADHOC DISAL LOWANCES OF RS.50000/- ON THE PLEA THAT FIRSTLY THE EXPENSES ARE NOT FULLY VO UCHED AND SECONDLY THERE IS A INVOLVEMENT OF PERSONAL NATURE EXPENSES ALSO. HOWEV ER, THE STAND OF THE ASSESSEE IS THAT THE EXPENSES WERE INCURRED FOR THE PURPOSES OF BUSINESS ONLY FOR WHICH NECESSARY DETAILS WERE CLAIMED TO BE FURN ISHED. THE DETAIL OF SOME OF THE EXPENSES, CLAIMED BY THE ASSESSEE, HAS BEEN REPRODUCED AT CONCLUDING PAGE OF THE IMPUGNED ORDER. AFTER ANALYSING THE DET AILS, IT WAS CONCLUDED AS UNDER: 3.01 LOOKING TO THE DETAILS OF THE EXPENSES SOME OF WHICH HAS BEEN REPRODUCED ABOVE, IT IS DIFFICULT TO APPRECIATE THAT THE ENTIRE EXPENSES WOULD BE INCURR ED FOR PURPOSES OF BUSINESS ONLY. IN VIEW OF THE FACT THAT THE APPELLANT CLAIMED UNDER THIS HEAD RS.9,38,899/- , PAGE 7 OF 7 DISALLOWANCE MADE BY THE AO IS VERY REASONABLE AND HENCE THE SAME IS CONFIRMED. HOWEVER, IN VIEW OF THE FINDING OF THE ASSESSING OF FICER THAT SOME OF THE EXPENSES WERE NOT VOUCHED PROPERLY, THE POSSIBILITY OF PERSONAL USE CANNOT BE RULED OUT, THEREFORE, WITHOUT GOING INTO MUCH DELIB ERATION AND TO PUT AN END TO THE LITIGATION, THE DISALLOWANCE IS RESTRICTED T O RS.25,000/- IN PLACE OF RS.50,000/- SUSTAINED BY THE LD. FIRST APPELLATE AU THORITY, CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. IN THE RESULT, THIS APPEAL OF THE ASSESSEE IS PARTL Y ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23 .10.200 9. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 23 .10.2009 !VYAS! COPY TO: APPELLANT/RESPONDENT/CIT/CIT(A)/DR