The ACIT, Visakhapatnam V. M/s. Srivalli Shipping & Transport., Visakhapatnam

ITA 268/VIZ/2016

• Counselvise Citation: [2017] 126 COUNSELVISE.COM (IT) 6456 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 7 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2011-2012
• Appeal Filed On: 04-05-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SHRIV APPALA RAJU
• Assessee Lawyers: SHRI GVN HARI
• Keywords: Business income; Depreciation
• Section: 143(3)

Judgement Text

IN THEINCOMETAXAPPELLATETRIBUNAL VISAKHAPATNAMBENCH,VISAKHAPATNAM BEFORESHRI V. DURGA RAO,HONBLEJUDICIAL MEMBER& SHRI D.S.SUNDERSINGH,HONBLEACCOUNTANTMEMBER ITA NO.268/VIZ/2016 (ASST.YEAR :2011-12) ACIT,CIRCLE-1(1), VISAKHAPATNAM. VS. M/S. SRIVALLI SHIPPING& TRANSPORT PRIVATE LTD.,D.NO. 23-22-21, SECONDFLOOR,SIVALAYAMSTREET, ONE TOWNAREA,VISAKHAPATNAM. PAN NO.AAIFS2071 B (APPELLANT) (RESPONDENT) ASSESSEE BY : SHRIG.V.N.HARI ADVOCATE. DEPARTMENTBY : SHRIV.APPALA RAJU SR.DR DATE OFHEARING : 21/12/2017. DATE OFPRONOUNCEMENT : 22/12/2017. ORDE R PERV.DURGA RAO,JUDICIAL MEMBER THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF COMMISSIONER OF INCOME TAX (APPEALS)-1, VISAKHAPATNAM, DATED 26/02/2016 FORTHEASSESSMENT YEAR2011-12. 2. FACTS OF THE CASE IN BRIEF ARE THAT THE ASSESSEE IS CARRYING IN THE BUSINESS OF C & F AGENCY AND TRANSPORT CONTRACTS, FILED ITS RETURN OF INCOME BY DECLARING TOTAL INCOME OF RS. 3,95,57,900/-. IN THE RETURN OF INCOME, ASSESSEE HAS CLAIMED HIGHER DEPRECIATION AT 30% ON TRAILERS, DUMPERS & MOTOR LORRIES, WHICH WERE USED FOR 2 ITANO.268/VIZ/2016 (M/S. SRIVALLISHIPPING& TRANSPORTPVT.LTD.) TRANSPORTATION BUSINESS. THE ASSESSING OFFICER HAS DISALLOWED THE HIGHER DEPRECIATION AND ONLY GRANTED NORMAL DEPRECIATION AT 15% AND ASSESSMENT IS COMPLETED UNDER SECTION 143(3) OF THE INCOME TAX ACT,1961 (HEREINAFTERREFERREDTO AS'ACT'). 3. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER HAS NOTED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION ON TRAILERS, DUMPERS & MOTOR LORRIES AT 30%. USUALLY, THE RATE OF DEPRECIATION IS 30%, ONLY IN THE CASE OF VEHICLES, WHICH ARE LET OUT FOR HIRE AND NOT IN THE CASE OF VEHICLES USED FOR INTERNAL PURPOSES OF THE BUSINESS. THEREFORE, ASSESSING OFFICER ASKED THE ASSESSEE TO EXPLAIN FOR THE CLAIM OF HIGHER DEPRECIATION. IN REPLY, THE ASSESSEE BY LETTER DATED 07/03/2014, SUBMITTED THAT ITS MAIN BUSINESS ACTIVITY WAS TO ACT AS CLEARING & FORWARDING (C & F) AGENT AS WELL ASTRANSPORTATIONANDFURTHERSUBMITTEDASFOLLOWS:- 'AS A C&F AGENT, WE NEED NOT REQUIRED ANY LORRIES, DUMPERS & TRAILERS ETC., FOR OUR OWN BUSINESS. WE ARE ACTING AS AGENTS FOR OUR CUSTOMERS WHO IMPORT & EXPORT FOR THEIR BUSINESS FOR VARIOUS LOGISTICS OPERATIONS. DURING THE COURSE OF THEIR IMPORT & EXPORT ACTIVITY, THEY NEED TRANSPORTATION ALSO FOR THEIR BUSINESS, WHICH WE ARE HIRING THE VEHICLES ON THEIR BEHALF FROM OUR FLEET OF VEHICLES............ AS WE ARE IN THE BUSINESS OF C&F WHICH NOT REQUIRED ANY VEHICLES LIKE LORRIES, DUMPERS AND TRAILERS. OUR CORE BUSINESS ALSO INCLUDES TRANSPORTATION BY HIRING THE VEHICLES AND FOR THIS WE HAVE ACQUIRED THE DUMPERS, TRAILERS & LORRIES ETC. THE NAME OF THE FIRM IS 'SRIVALLI SHIPPING & TRANSPORT' ITSELF INDICATES OUR BUSINESS IS C&F AGENT & TRANSPORTATION ACTIVITIES.' 4. THE ASSESSING OFFICER AFTER CONSIDERING THE ABOVE EXPLANATION GIVEN BY THE ASSESSEE HAS NOTED THAT AS SEEN FROM THE BILLS RAISED BY 3 ITANO.268/VIZ/2016 (M/S. SRIVALLISHIPPING& TRANSPORTPVT.LTD.) THE ASSESSEE, THE SAME ARE COMPOSITE BILLS COVERING VARIOUS HEADS OF ITEMS LIKE DOCUMENTATION CHARGES, STEVEDORING CHARGES, HANDLING CHARGES, WHARFAGE CHARGES, DEMURRAGE CHARGES, CONVEYANCE CHARGES FOR CUSTOMS INSPECTION, LINER AGENT CHARGES, STORAGE CHARGES ETC., APART FROM TRANSPORTATION CHARGES. BESIDES, AS PER THE ASSESSEES SUBMISSIONS, TRANSPORTATION IS ALSO ONE OF THE SERVICE/FACILITY PROVIDED BY THE ASSESSEE TO ITS CUSTOMERS. AS SEEN FROM THE PARTNERSHIP DEED, THE BUSINESS OF THE ASSESSEE IS SHIPPING, CLEARING AND FORWARDING, STEAMER AGENCY, ETC. OR ANY OTHER BUSINESS AS MAY BE AGREED UPON BY THE PARTNERS. THEREFORE, THE ACTIVITY OF TRANSPORTATION IS ONLY INCIDENTAL TO THE MAIN ACTIVITY OF CLEARING AND FORWARDING. ACCORDINGLY, ASSESSING OFFICER DISALLOWED THE HIGHER DEPRECIATION CLAIMED BY THE ASSESSEE. 5. ON APPEAL BEFORE THE LD. CIT(A), IT WAS SUBMITTED THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF C & F AND ALSO TRANSPORT CONTRACTS. THE BUSINESS OF TRANSPORT CONTRACTS IS NOT AN INCIDENTAL AND FILED ALL THE DETAILS BEFORE THE LD. CIT(A) IN RESPECT OF RECEIPTS OF THE BUSINESS OF THE ASSESSEE. THE LD. CIT(A) AFTER CONSIDERING THE DETAILS FILED BY THE ASSESSEE, DIRECTED THE ASSESSING OFFICER TO ALLOWHIGHER DEPRECIATIONCLAIMED BY THEASSESSEE. 4 ITANO.268/VIZ/2016 (M/S. SRIVALLISHIPPING& TRANSPORTPVT.LTD.) 6. ON BEING AGGRIEVED, REVENUE CARRIED THE MATTER IN APPEAL BEFORETHETRIBUNAL. 7. LD. DEPARTMENTAL REPRESENTATIVE RELIED ON THE ORDER PASSED BY THE ASSESSING OFFICER. 8. ON THE OTHER HAND, LD. COUNSEL FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE IS CARRYING ON THE BUSINESS OF C & F AGENCY AS WELL AS TRANSPORT BUSINESS AND IN THE TRANSPORT BUSINESS, ASSESSEE HAS RECEIVED SUBSTANTIAL AMOUNTS AND, THEREFORE, THE ASSESSING OFFICER IS NOT CORRECT IN DISALLOWING THE CLAIM OF THE ASSESSEE ON THE GROUND THAT TRANSPORTATION BUSINESS CARRIED OUT BY THE ASSESSEE IS AN INCIDENTAL TO THE MAIN BUSINESS. HESTRONGLY SUPPORTEDTHEORDER PASSED BY THELD. CIT(A). 9 . WE HAVE HEARD BOTH THE SIDES, PERUSED THE MATERIAL AVAILABLEONRECORDANDORDERSOFTHEAUTHORITIESBELOW. 10 . THE ONLY ISSUE INVOLVED IN THIS APPEAL IS WHETHER ASSESSEE IS ELIGIBLE FOR HIGHER DEPRECIATION OR NOT. THE CASE OF THE ASSESSEE IS THAT ASSESSEE IS CARRYING ON THE BUSINESS OF C & F AGENCY AND ALSO TRANSPORTATION BUSINESS. INSOFAR AS TRANSPORTATION BUSINESS, THE ASSESSEE HAS USED TRAILERS, DUMPERS & MOTOR LORRIES AND SUBMITTED BEFORE THE ASSESSING OFFICER THAT HE IS ENTITLED FOR DEPRECIATION AT 30%. THE CASE OF THE ASSESSING OFFICER IS THAT THE MAIN ACTIVITY OF THE ASSESSEE IS ONLY C & F AGENCY AND 5 ITANO.268/VIZ/2016 (M/S. SRIVALLISHIPPING& TRANSPORTPVT.LTD.) TRANSPORTATION BUSINESS CARRIED OUT BY THE ASSESSEE BY USING TRAILERS, DUMPERS & MOTOR LORRIES IS ONLY INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. THEREFORE, HE ONLY ALLOWED NORMAL DEPRECIATION AT 15%. BEFORE THE LD. CIT(A), THE ASSESSEE HAS FILED ALL THE DETAILS OF THE BUSINESS RECEIPTS. THE LD. CIT(A) BY CONSIDERING THE DETAILS, GAVE A CATEGORICAL FINDING THAT IN THE TOTAL GROSS RECEIPTS OF RS. 55,75,16,582/-, THE ASSESSEE HAS RECEIVED RS. 22,99,64,332/- FROM TRANSPORT BUSINESS. THEREFORE, HE IS OF THE OPINION THAT THE TRANSPORTATION BUSINESS IS CARRIED OUT BY THE ASSESSEE BY USING THE VEHICLES, SUCH AS TRAILERS, DUMPERS & MOTOR LORRIES IS NOT AN INCIDENTAL TO THE BUSINESS OF THE ASSESSEE, AS THE RECEIPTS FROM THE TRANSPORTATION ARE SUBSTANTIAL AND DIRECTED THE ASSESSING OFFICER TO ALLOW HIGHER RATE OF DEPRECIATION. FOR THE SAKE OF CONVENIENCE, THE RELEVANT PORTION OF THE LD. CIT(A)S ORDER ISEXTRACTEDASUNDER:- 5.3.1 ON THE OTHER HAND, THE AR CONTENDED THAT THE TRANSPORTATION IS PART OF THE MAIN BUSINESS OF THE ASSESSEE AND, THEREFORE, IT IS NOT MERELY INCIDENTAL TO CLEARING AND FORWARDING BUSINESS. IT IS FURTHER SUBMITTED THAT CLEARING AND FORWARDING AGENCY BUSINESS DOES NOT AUTOMATICALLY INVOLVE TRANSPORTATION. IN FACT, IT IS CONTENDED THAT TRANSPORTATION IS PART OF THE MAIN BUSINESS OF THE ASSESSEE AS CAN BE SEEN FROM THE ASSESSEE'S NAME ITSELF I.E 'SRIVALLI SHIPPING AND TRANSPORT'. FURTHER, THE AR FURNISHED THE DETAILS OF THE TURNOVER FOR THE PREVIOUS YEAR RELEVANT FOR THE ASST. YR. 2011-12, AS DETAILED BELOW: SERVICE DETAILS TURNOVER AMOUNT C H A RECEIPTS 490,44,602 CARGO HANDLING RECEIPTS 843,17,989 6 ITANO.268/VIZ/2016 (M/S. SRIVALLISHIPPING& TRANSPORTPVT.LTD.) PORT SERVICE RECEIPTS 430,66,123 TRANSPORT RECEIPTS 2299,64,332 REIMBURSEMENT RECEIPTS 1511,23,536 5.3.2 I HAVE CAREFULLY CONSIDERED THE ABOVE. OUT OF THE GROSS BUSINESS RECEIPTS OF RS.55,75,16,582/-, THE ASSESSEE RECEIVED RS.22,99,64,332/- FROM ITS TRANSPORT BUSINESS. THUS, IT IS CLEAR THAT TRANSPORTATION IS NOT MERELY INCIDENTAL TO THE ASSESSEE'S BUSINESS AS THE RECEIPTS FROM TRANSPORT BUSINESS ARE ALSO SUBSTANTIAL. 5.3.3 I HAVE ALSO PERUSED THE DECISIONS OF THE HON'BLE SUPREME COURT AND HIGH COURTS RELIED ON BY THE AR IN THIS REGARD. THE HON'BLE ANDHRA PRADESH HIGH COURT IN THE CASE OF CIT V A.M. CONSTRUCTIONS (SUPRA) HAS HELD THAT TIPPERS ARE ELIGIBLE FOR HIGHER RATE OF DEPRECIATION AS THE SUBSTANTIAL INCOME OF THE ASSESSEE IS FROM HIRING OF TIPPERS. THE RELEVANT PORTION OF THE ORDERS OF THE HON'BLE HIGH COURT IS EXTRACTED BELOW:- THE FACT THAT THE TIPPERS ARE ELIGIBLE FOR DEPRECIATION IS NOT DISPUTED, BUT THE O DISPUTE IS WITH REGARD TO THE RATE AT WHICH THE DEPRECIATION TO BE ALLOWED. I FINDING OF THE TRIBUNAL IS THAT IN VIEW OF THE FACT THAT SUBSTANTIAL INCOME OF T ASSESSEE IS FROM HIRING OF THESE TIPPERS HE WOULD BE ENTITLED TO DEPRECIATION 40% NOTWITHSTANDING THE FACT THAT HE USES THEM FOR HIS AGRICULTURAL OPERATIC ALSO. FURTHER, SUB-ITEM (2)(U) OF ITEM II OF APPENDIX I DOES NOT SAY THAT THE MOL LORRIES SHOULD BE EXCLUSIVELY USED FOR HIRE OR BUSINESS BY THE ASSESSEE 5.3.4 THE HON'BLE SUPREME COURT IN THE CASE OF GUPTA GLOBAL EX1M (P) LTD. (SUPRA) HAS APPROVED THE SIMILAR VIEW. THE RELEVANT PORTION OF THE ORDER IS EXTRACTED BELOW: WHAT IS RELEVANT FOR CONSIDERATION UNDER SUB-ITEM(2)(II) OF ITEM III OF APPENDIX I TO THE I.T. RULES 1962 IS WHETHER THE ASSESSEE WAS IN THE BUSINESS OF HIRING OUT HIS TRUCKS IN ADDITION TO HIS BUSINESS OF TRADING IN TIMBER. THE ORDER OF ASSESSMENT CLEARLY INDICATES THAT THE ASSESSEE WAS ONLY IN THE BUSINESS OF TRADING IN TIMBER. WE DO NOT HAVE THE RETURNS FILED BY THE ASSESSEE BEFORE US. WE DO NOT HAVE THE CONSTITUTION OF THE ASSESSEE COMPANY BEFORE US. THERE IS NO EVIDENCE TO INDICATE THAT THE ASSESSEE WAS IN THE BUSINESS OF HIRING OUT MOTOR LORRIES FOR RUNNING THEM TO EARN BUSINESS INCOME. THE ENTIRE INFERENCE IS DRAWN BY CIT(A) ONLY ON THE FOOTING THAT THE AO HAD TREATED RS.12,59,639 AS PART OF TOTAL BUSINESS INCOME WHICH IS NOT DETERMINATIVE OF THE ABOVE TEST VIZ., WHETHER THE TRUCKS WERE USED IN THE TRANSPORTATION BUSINESS AS CLAIMED BY THE ASSESSEE. FOR THE AFORESTATED REASONS, WE SET ASIDE THE IMPUGNED JUDGMENT OF THE HIGH COURT AND WE REMIT THE MATTER TO CIT(A) FOR DE NOVO EXAMINATION OF THE CASE IN ACCORDANCE WITH LAW. 7 ITANO.268/VIZ/2016 (M/S. SRIVALLISHIPPING& TRANSPORTPVT.LTD.) 5.3.5 IN VIEW OF THE FACTS NARRATED ABOVE AND ALSO IN THE LIGHT OF THE RATIO LAID DOWN BY THE HON'BLE HIGH COURT OF ANDHRA PRADESH AND THE HON'BLE SUPREME COURT, DISCUSSED ABOVE, I AM OF THE VIEW THAT THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION AT HIGHER RATE AS IT IS RUNNING ITS VEHICLES I.E. MOTOR LORRIES, TRAILERS AND DUMPERS ON HIRE. ACCORDINGLY, THE AO IS DIRECTED TO ALLOW THE DEPRECIATION CLAIM OF THE ASSESSEE. 11. FROM THE ABOVE ORDER OF THE LD. CIT(A), IT IS CLEAR THAT TRANSPORTATION BUSINESS CARRIED OUT BY THE ASSESSEE BY USING TRAILERS, DUMPERS & MOTOR LORRIES IS NOT AN INCIDENTAL TO THE BUSINESS OF THE ASSESSEE. OUT OF THE GROSS RECEIPTS OF RS.55,75,16,582/-, THE ASSESSEE RECEIVED RS. 22,99,64,332/-. THE LD. DEPARTMENTAL REPRESENTATIVE FAILED TO PRODUCE ANY MATERIAL TO SHOW THAT THE ABOVE FINDING GIVEN BY THE LD. CIT(A) IS NOT CORRECT. THEREFORE, BY CONSIDERING THE FACTS AND CIRCUMSTANCES OF THE CASE, WE ARE OF THE OPINION THAT THERE IS NO INFIRMITY IN THE ORDER PASSEDBY THELD. CIT(A). 12 . INTHERESULT,APPEAL FILEDBY THEREVENUEIS DISMISSED. ORDERPRONOUNCED INOPENCOURT ONTHIS22 ND DAY OF DEC.,2017. SD/- SD/- (D.S. SUNDER SINGH) (V. DURGA RAO) ACCOUNTANTMEMBER JUDICIAL MEMBER DATED : 22 ND DECEMBER, 2017. VR/- 8 ITANO.268/VIZ/2016 (M/S. SRIVALLISHIPPING& TRANSPORTPVT.LTD.) COPY TO: 1. THE ASSESSEE M/S. SRIVALLI SHIPPING & TRANSPORT PRIVATE LTD., D.NO. 23-22-21, SECOND FLOOR, SIVALAYAM STREET, ONE TOWN AREA, VISAKHAPATNAM. 2. THE REVENUE - DCIT, CIRCLE-4(1), VISAKHAPATNAM. 3. THE PR.CIT-1, VISAKHAPATNAM. 4. THE CIT(A)-1, GUNTUR. 5. THE D.R., VISAKHAPATNAM. 6. GUARD FILE. BYORDER (VUKKEMRAMBABU) SR.PRIVATESECRETARY, ITAT,VISAKHAPATNAM.