Devi Construction Company, Pune V. JCIT (OSD), Circle 1(2), Pune

ITA 2521/PUN/2012

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 72153 (ITAT-PUNE)
• Duration Of Justice: 9 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 20-12-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ADARSH KUMAR MODI
• Assessee Lawyers: NILESH KHANDELWAL
• Keywords: Depreciation; Question of law
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH B, PUNE BEFORE SHRI SHAILENDRA KUMAR YADAV, JUDICIAL MEMBER AND SHRI R.K. PANDA, ACCOUNTANT MEMBER ITA NO. 2521/PN/2012 (ASSESSMENT YEAR 2009-10) DEVI CONSTRUCTION COMPANY, C/O. MZSK & ASSOCIATES, LEVEL 3, BUSINESS BAY, PLOT NO.84, WELLESLEY ROAD, NEAR RTO, PUNE-411001 .. APPELLANT PAN NO.AAAFD8922A VS. JCIT(OSD) CIRCLE-1 (2), PUNE. .. RESPONDENT APPELLANT BY : SHRI NILESH KHANDELWAL RESPONDENT BY : SHRI ADARSH KUMAR MODI DATE OF HEARING : 20-09-2013 DATE OF PRONOUNCEMENT : 24-09-2013 ORDER PER R.K. PANDA, AM : THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DT.27-07- 2012 OF THE CIT(A)-II, PUNE RELATING TO ASSESSMENT YEAR 2009-10. 2. THE ONLY EFFECTIVE GROUND RAISED BY THE ASSESSEE READS AS UNDER : ON FACTS & CIRCUMSTANCES PREVAILING IN THE CASE & AS PER PROVISIONS OF LAW, IT BE HELD THAT DISALLOWANCE OF RS.2,11,895 /- PERTAINING TO THE CLAIM OF DEPRECIATION ON VEHICLE MADE BY THE AO, RE STRICTING CLAIM TO 15% OF THE VALUE INSTEAD OF 50% AS CLAIMED BY THE A SSESSEE AND THAT CONFIRMED BY THE 1ST APPELLATE AUTHORITY IS IMPROPE R & UNJUSTIFIED & NOT IN ACCORDANCE WITH THE PROVISIONS OF THE ACT. I T FURTHER BE HELD THAT THE APPELLANT IS ELIGIBLE TO CLAIM SUCH DEDUCTION. THE ADDITION MADE BY THE AO AND THAT CONFIRMED BY THE 1ST APPELLATE AUTH ORITY BE DELETED. THE CLAIM OF THE APPELLANT BE ALLOWED. THE APPELLAN T BE GRANTED JUST AND PROPER RELIEF AS PER PROVISIONS OF LAW AND FACT S PREVAILING IN THE CASE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE IS A PARTNERSHIP FIRM ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND REAL ESTATE 2 DEVELOPMENT ALONG WITH GENERATION AND DISTRIBUTION OF WIND ENERGY. IT FILED ITS RETURN OF INCOME ON 29-09-2009 DECLARING INCOME OF RS.7,64,46,180/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS THE AO NOTED THAT THE ASSESSEE HAS PURCHASED ONE INNOVA MO TOR CAR IN THE MONTH OF MARCH 2009 AND HAS CLAIMED DEPRECIATION @50% PER AN NUM. ON BEING ASKED BY THE AO TO EXPLAIN AS TO WHY THE DEPRECIATI ON SHALL NOT BE RESTRICTED @15% PER ANNUM IT WAS EXPLAINED THAT SUC H CLAIM OF DEPRECIATION WAS MADE IN TERMS OF PROVISIONS OF SEC TION 32 R.W. RULE 5, APPENDIX-5. THE GOVT. NOTIFICATION NO.10/2009 DATE D 19-01-2009 (FILE NO.142/09/TPL) WAS BROUGHT TO THE NOTICE OF THE AO WHICH HAS ENHANCED THE RATE OF DEPRECIATION ON PURCHASE OF NEW COMMERC IAL VEHICLES FROM 01- 01-2009 TO 31-03-2009 @50% PER ANNUM WITH A VIEW TO PROVIDE BOOST TO THE AUTOMOBILE INDUSTRY. IT WAS FURTHER EXPLAINED THAT THE ASSESSEE HAD PUT TO USE THE SAID MOTOR CAR BETWEEN THE PERIOD 01-01- 2009 TO 31-03-2009 AND MOTOR CAR PURCHASED WAS USED FOR THE PURPOSE OF BUS INESS AND PROFESSION BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT TH E DEFINITION OF COMMERCIAL VEHICLE WAS CLARIFIED BY WAY OF NOTE TO LIGHT MOTOR VEHICLE WHICH INCLUDES A MOTOR CAR ALSO. IT WAS SUBMITTED THAT THE MOTOR CAR PURCHASED BY THE ASSESSEE FITS INTO THE DEFINITION OF LIGHT MOTOR VE HICLE SPECIFIED IN SECTION 2 OF THE MOTOR VEHICLES ACT. 4. THE AO HOWEVER WAS NOT SATISFIED WITH THE EXPLA NATION GIVEN BY THE ASSESSEE AND RESTRICTED THE DEPRECIATION TO 15% PER ANNUM AS AGAINST 50% PER ANNUM CLAIMED BY THE ASSESSEE. IN APPEAL T HE LD.CIT(A) UPHELD THE ACTION OF THE AO IN REDUCING SUCH DEPRECIATION TO 15%. 3 4.1 AGGRIEVED WITH SUCH ORDER OF THE CIT(A) THE AS SESSEE IS IN APPEAL BEFORE US. 5. THE LD. COUNSEL FOR THE ASSESSEE AT THE OUTSET SUBMITTED THAT ALTHOUGH A NUMBER OF DECISIONS WERE RELIED ON BY TH E ASSESSEE BEFORE THE CIT(A) HE HAS NOT AT ALL CONSIDERED THOSE DECISIONS . REFERRING TO THE DECISION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF DALEEP S. CHANDANI VS. ACIT REPORTED IN 14 SOT 233 HE SUBMITT ED THAT THE TRIBUNAL IN THE SAID DECISION HAS HELD THAT A MOTOR CAR HAVI NG WEIGHT NOT EXCEEDING 7500 KGS IS COVERED BY THE DEFINITION OF LIGHT MOT OR VEHICLE AND IS A COMMERCIAL VEHICLE AS DEFINED IN EXPLANATION TO 3 RD PROVISO TO SECTION 32 AND THEREFORE THE ASSESSEE IS ENTITLED TO DEPREC IATION @40% ON THE CAR PURCHASED DURING THE PERIOD FROM 01-01-2009 TO 31-0 3-2009 TILL SUCH CAR IS USED BY HIM FOR HIS CONSTRUCTION BUSINESS. HE ALSO REFERRED TO THE DECISION OF HONBLE MUMBAI HIGH COURT IN THE CASE OF CIT VS. BIRLA GLOBAL ASSET FINANCE CO. LTD AND SUBMITTED THAT THE HONBLE HIGH COURT IN THE SAID DECISION HAS HELD THAT COMMERCIAL VEHICLE MEANS LIGHT MOTOR VEHICLE. THE EXPRESSION LIGHT MOTOR VEHICLE SHALL HAVE THE MEANING AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLE ACT, 1988. THE HONBLE HIGH COURT ACCORDINGLY ALLOWED DEPRECIATION @50% IN RES PECT OF COMMERCIAL VEHICLES USED BY THE ASSESSEE IN ITS BUSINESS. HE ACCORDINGLY SUBMITTED THAT THIS BEING A COVERED MATTER IN FAVOUR OF THE A SSESSEE BY THE DECISION OF THE TRIBUNAL AS WELL AS THE DECISION OF THE JURISDI CTIONAL HIGH COURT, THEREFORE, THE GROUND RAISED BY THE ASSESSEE SHOULD BE ALLOWED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE ON THE OTHE R HEAVILY RELIED ON THE ORDER OF THE AO AND THE CIT(A). 4 7. WE HAVE CONSIDERED THE RIVAL ARGUMENTS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE CIT(A) AND THE PAPER BOOK FILED ON BEHALF OF THE ASSESSEE. WE HAVE ALSO CONSIDERED TH E VARIOUS DECISIONS RELIED ON BY THE LD. COUNSEL FOR THE ASSESSEE. THE RE IS NO DISPUTE TO THE FACT THAT THE ASSESSEE IN THE INSTANT CASE HAS PURC HASED ONE INNOVA MOTOR CAR IN THE MONTH OF MARCH 2009 AND THE SAME HAS BEE N PUT TO USE FOR THE PURPOSE OF BUSINESS. THE DISPUTE IS REGARDING THE RATE OF DEPRECIATION WHICH ACCORDING TO THE ASSESSEE IS 50% PER ANNUM AN D WHICH ACCORDING TO THE REVENUE IS 15% PER ANNUM. IT IS THE CASE OF THE ASSESSEE THAT IT IS ENTITLED TO DEPRECIATION @50% PER ANNUM IN TERMS OF PROVISIONS OF SECTION 32 R.W. RULE 5 AND APPENDIX 5. IT IS ALSO THE ARGU MENT OF LD. COUNSEL FOR THE ASSESSEE THAT THE NOTIFICATION ISSUED BY THE CB DT VIDE NOTIFICATION NO.10/2009 DATED 19-01-2009 (FILE NO.142/09/TPL) WH ICH ENHANCED THE RATE OF DEPRECIATION ON PURCHASE OF NEW COMMERCIAL VEHICLES FROM 01-01- 2009 TO 31-03-2009 AT 50% PER ANNUM WITH A VIEW TO PROVIDE BOOST TO AUTOMOBILE INDUSTRY SUPPORTS THE CASE OF THE ASSESS EE. 7.1 WE FIND THE ISSUE HAS BEEN DECIDED IN FAVOUR O F THE ASSESSEE BY THE DECISION OF THE JURISDICTIONAL HIGH COURT IN TH E CASE OF CIT VS. BIRLA GLOBAL ASSET FINANCE CO. LTD. (SUPRA). WE FIND THE HONBLE MUMBAI HIGH COURT IN THE SAID DECISION HAS OBSERVED AS UND ER : 3. THE RESPONDENT-ASSESSEE FILED ITS RETURN OF INC OME DECLARING A TOTAL LOSS OF RS.3,60,29,219/-. THE RESPONDENT CARRIES ON BUSINES S OF ASSET BASED FINANCE/INVESTMENT AND TRADE FINANCE. THE ASSESSING OFFICER (A.O.) MADE THE ASSESSMENT ORDER UNDER SECTION 143(3). THE ASSESSEE CLAIMED DEPRECIATION OF RS.42,35,755/- AT THE RATE OF 50% ON MOTOR CARS OF THE TOTAL VALUE OF RS.84,71,510/- CLAIMING THEM TO BE NEW MOTOR VEHICL ES. THE A.O. HELD THAT THE RESPONDENT WAS ENTITLED TO DEPRECIATION AT ONLY 20% . THE RESPONDENT CONTENDED THAT THE VEHICLES WERE LIGHT MOTOR VEHICLES ELIGIBL E FOR DEPRECIATION AT 50%, BUT THE A.O. HELD THAT THE RESPONDENT HAD FAILED TO SUB STANTIATE AS TO HOW THE SAME COULD BE TERMED COMMERCIAL VEHICLES'. HE OBSERVED THAT TO AVAIL OF THE DEPRECIATION AT 50%, THE VEHICLES MUST BE USED FOR COMMERCIAL PURPOSES AND MERELY BECAUSE THE RESPONDENT USED THE VEHICLES IN ITS BUSINESS, THE VEHICLES COULD NOT BE CATEGORIZED AS COMMERCIAL VEHICLES. TH IS WAS ON THE BASIS THAT TO BE 5 CATEGORIZED AS COMMERCIAL VEHICLES, THE SAME MUST E ARN REVENUE BY BEING USED IN THE BUSINESS OF HIRING. 4. THE COMMISSIONER OF INCOME TAX (APPEALS) [CIT(A) ] HELD IN THE RESPONDENT'S FAVOUR, INTER-ALIA, ON THE BASIS OF TH E PREVIOUS DECISION OF THE CIT(A) AS WELL AS THE TRIBUNAL. THE TRIBUNAL UPHELD THE DE CISION IN THIS REGARD. THE TRIBUNAL HELD THAT THE VEHICLES WERE USED BY THE RE SPONDENT IN ITS BUSINESS, THAT THE VEHICLES WERE COMMERCIAL VEHICLES AND THAT THE RESPONDENT WAS ENTITLED TO DEPRECIATION AT 50% IN RESPECT THEREOF. 5(A) SECTION 32(1)(I) OF THE INCOME TAX ACT, 1961, READS AS UNDER:- '32. DEPRECIATION.- (1) IN RESPECT OF DEPRECIATION OF (I) BUILDINGS, MACHINERY, PLANT OR FURNITURE, BEING TANGIBLE ASSETS: (II) KNOW-HOW, PATENTS, COPYRIGHTS, TRADE MARKS, LI CENCES, FRANCHISES OR ANY OTHER BUSINESS OR COMMERCIAL RIGHTS OF SIMILAR NATURE, BE ING INTANGIBLE ASSETS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 1998, OWNED, WHOL LY OR PARTLY, BY THE ASSESSEE AND USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSIO N, THE FOLLOWING DEDUCTIONS SHALL BE ALLOWED (I) IN THE CASE OF ASSETS OF AN UNDERTAKING ENGAGED IN GENERATION OR GENERATION AND DISTRIBUTION OF POWER, SUCH PERCENTA GE ON THE ACTUAL COST THEREOF TO THE ASSESSEE AS MAY BE PRESCRIBED; II) IN THE CASE OF ANY BLOCK OF ASSETS, SUCH PERCEN TAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAYBE PRESCRIBED:' [EMPHASIS SUPPLIED] THE SAID VEHICLES FALL WITHIN THE TERM 'PLANT' IN S ECTION 32(1)(I). IN THE PRESENT CASE, SECTION 32(1) (II) APPEARING IN THE S ECOND INSTANCE APPLIES. (B)(I) IT IS AGREED THAT THE VEHICLES IN THE PRESEN T CASE ARE LIGHT MOTOR VEHICLES (LMV). RULE 5(1) OF THE INCOME TAX RULES, 1962 READS AS UNDER :- 'DEPRECIATION. 5.(1) SUBJECT TO THE PROVISIONS OF SUB-RULE(2), THE ALLOWANCE UNDER CLAUSE (II) OF SUB-SECTION (1) OF SECTION 32 IN RESPECT OF DEPRECI ATION OF ANY BLOCK OF ASSETS SHALL BE CALCULATED AT THE PERCENTAGES SPECIFIED IN THE S ECOND COLUMN OF THE TABLE IN APPENDIX-I TO THESE RULES ON THE WRITTEN DOWN VALUE OF SUCH BLOCK OF ASSETS AS ARE USED FOR THE PURPOSES OF THE BUSINESS OR PROFESSION OF THE ASSESSEE AT ANY TIME DURING THE PREVIOUS YEAR.' [EMPHASIS SUPPLIED] (II) APPENDIX-I PART-A (TANGIBLE ASSETS), III. MACH INERY AND PLANT (3) (VI) READ AS UNDER : 'III. MACHINERY AND PLANT (3) (I) . . . . . TO (V) . . . . . . . (VI) NEW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON OR AFTER THE 1ST DAY OF APRIL, 2001 BUT BEFORE THE 1ST DAY OF APRIL, 2002 AND IS P UT TO USE BEFORE THE 1ST DAY OF APRIL, 2002 FOR THE PURPOSES OF BUSINESS OR PROFESS ION [SEE NOTE 6 BELOW THE TABLE] ' (III) NOTE 6 REFERRED TO ABOVE, IN TURN, READS AS U NDER :- 6 '6. 'COMMERCIAL VEHICLE' MEANS.'LIGHT MOTOR VEHI CLE'.THE EXPRESSIONS..'LIGHT MOTOR VEHICLE'.SHALL HAVE THE MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1988)'. 6. IT IS ADMITTED THAT THE VEHICLES IN RESPECT WHER EOF DEPRECIATION HAS BEEN CLAIMED BY THE RESPONDENT AT 50% PER ANNUM ARE LIGH T MOTOR VEHICLES AND THAT THE ABOVE PROVISIONS OF THE ACT AND THE RULES APPLY IN THE PRESENT CASE. NOTE 6 APPEARS TO BE A PART OF THE TABLE. 7. IN THE CIRCUMSTANCES, THE ISSUES RAISED IN PARAG RAPH 4 OF THE APPEAL DO NOT RAISE A SUBSTANTIAL QUESTION OF LAW. THE APPEAL IS, THEREFORE, DISMISSED. 7.2 RESPECTFULLY FOLLOWING THE DECISION OF THE JURI SDICTIONAL HIGH COURT CITED (SUPRA) AND IN ABSENCE OF ANY CONTRARY MATERI AL BROUGHT TO OUR NOTICE AGAINST THE SAID DECISION WE SET-ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE ASSESSING OFFICER TO ALLOW THE DEPRECIATION @50% PE R ANNUM ON THE MOTOR CAR PURCHASED BY THE ASSESSEE. GROUND RAISED BY TH E ASSESSEE IS ACCORDINGLY ALLOWED. 8. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. PRONOUNCED IN THE OPEN COURT ON THIS THE 24 TH DAY OF SEPTEMBER 2013. SD/- SD/- (SHAILENDRA KUMAR YADAV) (R.K. PA NDA) JUDICIAL MEMBER ACCOUNTANT MEMBER PUNE DATED: 24 TH SEPTEMBER 2013 SATISH COPY OF THE ORDER FORWARDED TO : 1. ASSESSEE 2. DEPARTMENT 3. CIT(A)-I, PUNE 4 CIT-I, PUNE 5. THE D.R, B PUNE BENCH 6. GUARD FILE BY ORDER // TRUE COPY // SENIOR PRIVATE SECRETARY I TAT, PUNE BENCHES, PUNE