M/s. Innovative Infrastructure P.Ltd., Ahmedabad V. Dy.Commissioner of Income Tax,Circle-2(1)(1), Ahmedabad

ITA 3425/AHD/2015

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 2393 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 3 month(s) 3 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 12-03-2019
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: Not Allotted
• Assessment Year: 2011-2012
• Appeal Filed On: 09-12-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: LALIT P JAIN
• Keywords: Depreciation; Additional depreciation
• Section: 147; 143(3); 32(1)(iia)

Judgement Text

, C IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH, AHMEDABAD BEFORE JUSTICE SHRI P. P. BHATT, PRESIDENT & SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER ./ I.T.A. NOS. 3425 & 3426/AHD/2015 ( ASSESSMENT YEARS : 2011-12 & 2012-13) M/S. INNOVATIVE INFRASTRUCTURE P. LTD. 33A, SAURASHTRA SOCIETY, ELLISBRIDGE, AHMEDABAD - 380006 / VS. DEPUTY CIT CIRCLE 2(1)(1), AHMEDABAD ./ ./ PAN/GIR NO. : AABCI2364P ( APPELLANT ) .. ( / RESPONDENT ) / APPELLANT BY : SHRI ROHAN THAKKAR, A.R. / RESPONDENT BY : SHRI LALIT P. JAIN, SR.D.R. DATE OF HEARING 07/03/2019 !'# / DATE OF PRONOUNCEMENT 12/03/2019 / O R D E R PER PRADIP KUMAR KEDIA - AM: THE CAPTIONED APPEALS HAVE BEEN FILED AT THE INSTAN CE OF THE ASSESSEE AGAINST THE RESPECTIVE ORDERS OF THE COMMI SSIONER OF INCOME TAX (APPEALS)-2, AHMEDABAD (CIT(A) IN SHORT), DAT ED 21.09.2015 & 14.10.2015 ARISING IN THE RESPECTIVE ASSESSMENT ORD ERS BOTH DATED 21.02.2015 PASSED BY THE ASSESSING OFFICER (AO) UND ER S. 147 R.W.S. 143(3) OF THE INCOME TAX ACT, 1961 (THE ACT) IN AY 2011-12 AND UNDER S. 143(3) OF THE ACT IN AY 2012-2013. ITA NOS. 3425 & 3426/AHD/15 [M/S. INNOVATIVE INFRASTRUCTURE P. LTD. VS. DCIT] A.YS. 2011-12 & 20 12-13 - 2 - 2. AS CLAIMED ON BEHALF OF THE ASSESSEE, THE FACTS ARE SIMILAR AND COMMON ISSUES ARE INVOLVED IN BOTH ASSESSMENT YEARS AND THEREFORE BOTH THE APPEALS WERE HEARD TOGETHER AND DISPOSED O F BY COMMON ORDER. ITA NO. 3425/AHD/2015 - AY 2011-12 3. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE REA D AS UNDER: 1. THE LD. CIT(A) HAS ERRED LAW AS WELL AS ON FACT S IN RESTRICTING THE DEPRECIATION ALLOWANCE AT 15% IN PLACE OF 30% AND T HEREBY CONFIRMING THE DISALLOWANCE OF RS.41,25,205/-. 2. THE LD. CIT(A) HAS ALSO ERRED IN NOT GRANTING TH E ADDITIONAL DEPRECIATION ON TRANSIT MIXTURES WHICH IS MOUNTED O N CHASIS. (ALTERNATE GROUND TO GROUND NO # 1) 3. THE LD. CIT(A) ERRED IN MAKING ADDITION OF RS.42 9645/- ON ACCOUNT OF DIFFERENCE NOTED BY HIM IN THE AMOUNT REFLECTED AS PER 26AS AND AS REFLECTED IN BOOKS OF ACCOUNTS. 4. WHEN THE MATTER WAS CALLED FOR HEARING, THE L EARNED AR FOR THE ASSESSEE POINTED OUT THAT GROUND NO.1 OF ITS APPEAL CONCERNS ELIGIBILITY OF DEPRECIATION ALLOWANCE AT HIGHER RAT E ON TRANSIT MIXTURE WHEREAS GROUND NO.2 IS ALTERNATIVE CLAIM OF THE ASS ESSEE WHERE CASE MADE OUT IN GROUND NO.1 IS NOT ENDORSED. 5. ADVERTING TO GROUND NO.1, THE LEARNED AR POINTE D OUT THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF MANUFACTURIN G OF READY MIX CONCRETE (RMC) WHICH IS PRIMARILY REQUIRED IN CON STRUCTION BUSINESS. FOR MANUFACTURE OF RMC, THE RAW MATERIAL S SUCH AS CEMENT, KAPCHI, SAND AND FLY ASH AND CHEMICALS ARE MIXED TO PRODUCE RMC. THE MANUFACTURING OF THE RMC IS DONE AT BATCHING PL ANT AND THUS, RMC COMES INTO EXISTENCE AT THE FACTORY. THEREAFTE R, AN ANCILLARY PROCESS IS DONE AT TRANSIT MIXER I.E. MIXTURE ON TRANSIT FROM FACTORY TO SITE IS KEPT IN A WET FORM WHICH COULD BE UTILIZ ED AT CONSTRUCTION PLANT. THE MOVEMENT OF RMC IS DONE IN ROAD TRANSPO RT VEHICLE ON WHICH A TRANSIT MIXER IS SUITABLY MOUNTED. IT WAS CONTENDED THAT THE ITA NOS. 3425 & 3426/AHD/15 [M/S. INNOVATIVE INFRASTRUCTURE P. LTD. VS. DCIT] A.YS. 2011-12 & 20 12-13 - 3 - SUPPLY OF RMC ARE AGREED TO BE DELIVERED AT CONSTRU CTION SITE AND THEREFORE RATE IS FIXED AFTER FACTORING TRANSPORTAT ION COSTS FROM FACTORY TO THE DESTINATIONS. THE RATES OF RMC ARE THUS COM POSITE IN NATURE COMPRISING OF MIXTURE AND TRANSPORTATION THEREON. THIS BEING SO, SALES REVENUE ALSO INCLUDES THE TRANSPORTATION CHARGES OF TRANSIT MIXTURE AND CONSEQUENTLY, THE VEHICLE USED FOR TRANSIT SHOULD B E TAKEN AS VEHICLES USED FOR HIRE. CONSEQUENTLY, THE HIGHER RATE OF DEPRECIATION ALLOWANCE @ 30% IS ELIGIBLE TO THE ASSESSEE AS PER THE DEPRECIATION SCHEDULE AND THE REVENUE AUTHORITIES ARE NOT JUSTIF IED IN NOT GRANTING ACCELERATED DEPRECIATION ON THE VEHICLE USED FOR HI RE. THE LEARNED AR, IN ALTERNATIVE, CONTENDED THAT EVEN WHEN THE VEHICL E IS NOT TREATED TO BE USED IN A BUSINESS OF RUNNING IT ON HIRE, THE A SSESSEE WOULD BE ENTITLED FOR ADDITIONAL DEPRECIATION ON TRANSIT MIX ER WHICH IS MOUNTED ON THE TRUCK CHASSIS. 6. A SPECIFIC QUERY WAS POSED BY THE BENCH TO THE L EARNED AR FOR THE ASSESSEE TO PRIMA FACIE DEMONSTRATE THE CASE MADE OUT FOR COMPOSITE CONTRACT WHICH INCLUDE UTILIZATION OF VEH ICLE FOR REVENUE GENERATION. IN RESPONSE, THE ASSESSEE SUBMITTED TH AT THE RATES FIXED FOR SUPPLY OF MIXTURE IS COMPOSITE BUT CANNOT BE BIFURC ATED. THE LEARNED AR HOWEVER SUBMITTED IN THE SAME VAIN THAT THE TRAN SIT MIXTURES WHICH ARE MOUNTED ON THE CHASSIS ARE PURCHASED SEPARATELY AND THE COSTS THEREAFTER CAN BE SEPARATELY DEDUCED AND THEREFORE, THERE IS NO IMPEDIMENT FOR ALLOWABILITY OF ADDITIONAL DEPRECIAT ION ON TRANSIT MIXTURES SO MOUNTED AS PER THE CLAIM OF THE ASSESSE E BY WAY OF ADDITIONAL GROUNDS. 7. THE LEARNED DR, ON THE OTHER HAND, RELIED UPON T HE ORDER OF THE AUTHORITIES BELOW. 8. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIO NS. ITA NOS. 3425 & 3426/AHD/15 [M/S. INNOVATIVE INFRASTRUCTURE P. LTD. VS. DCIT] A.YS. 2011-12 & 20 12-13 - 4 - 8.1 ON CAREFUL CONSIDERATION OF GRIEVANCE RAISED AS PER GROUND NOS. 1 & 2, WE NOTICE THAT THE ASSESSEE PRIMARILY SEEKS ACCELERATED DEPRECIATION ON TRUCK/CHASSIS ON WHICH MIXERS IS MO UNTED EQUIVALENT TO WHAT IS AVAILABLE TO VEHICLES USED FOR HIRE. IT IS THE CASE OF THE ASSESSEE THAT CHASSIS TRUCK SHOULD BE TREATED AKIN TO BEING USED IN THE BUSINESS OF RUNNING IT ON HIRE OWING TO COMPOSITE N ATURE OF CONTRACT AND CONSEQUENTLY HIGHER RATE ON DEPRECIATION AT 30% SHOULD BE ALLOWED TO THE ASSESSEE INSTEAD OF ALLOWANCE AT 15% . WE DO NOT FIND MERIT IN THE AFORESAID PLEA OF THE ASSESSEE ON THE GROUND THAT THE ASSESSEE COULD NOT DEMONSTRATE SUCH NARRATIVE ON FA CTS AS TO WHETHER THE ASSESSEE HAS EARNED ANY RECEIPT TOWARDS HIRE OF VEHICLE IN THE SO CALLED COMPOSITE CONTRACT. NO EVIDENCE HAS BEEN PR ODUCED TO JUSTIFY THE PRESENCE OF ELEMENT OF RECEIPT ON ACCOUNT OF HI RE OF VEHICLE. THEREFORE, THE CONTENTION OF THE ASSESSEE IS ABSTRA CT AND CANNOT BE ENDORSED. THEREFORE, WE DECLINE TO INTERFERE WITH THE ACTION OF THE AO ON THIS SCORE. GROUND NO.1 IS ACCORDINGLY DISMISSE D. 8.2 HOWEVER, WE FIND SUBSTANTIAL FORCE IN THE ALTER NATIVE CLAIM RAISED BY THE ASSESSEE FOR ALLOWABILITY OF ADDITION AL DEPRECIATION ON MIXER MOUNTED ON THE VEHICLE AS ELIGIBLE UNDER S.32 (1)(IIA) OF THE ACT. SECTION 32(1)(IIA) OF THE ACT PROVIDES FOR ENTITLEM ENT OF ADDITIONAL DEPRECIATION IN THE CASE OF NEW PLANT AND MACHINERY INSTALLED AFTER SPECIFIED DATE BY AN ASSESSEE ENGAGED IN THE BUSINE SS OF MANUFACTURING OR PRODUCTION OF ANY ARTICLE OR THING . THE TRANSIT MIXER IS STATED TO BE MOUNTED ON THE CHASSIS TO ENABLE TH E RMC MANUFACTURED/PRODUCED AT SITE TO BE KEPT IN THE WET FORM FOR ITS UTILIZATION AT CONSTRUCTION PLANT. THEREFORE, TRAN SIT MIXER MOUNTED ON THE VEHICLE IS NOTHING BUT A PLANT AND MACHINERY WH ERE ANCILLARY PROCESS IS DONE AS A CONTINUATION OF MANUFACTURE/PR ODUCTION CONTEMPLATED UNDER S.32(1)(IIA) OF THE ACT. THEREF ORE, WE WHOLLY AGREE WITH THE ALTERNATIVE CONTENTION OF THE ASSESS EE FOR ALLOWABILITY OF ADDITIONAL DEPRECIATION MOUNTED MIXER ON FIRST P RINCIPLES. ITA NOS. 3425 & 3426/AHD/15 [M/S. INNOVATIVE INFRASTRUCTURE P. LTD. VS. DCIT] A.YS. 2011-12 & 20 12-13 - 5 - HOWEVER, THE COST OF PURCHASE OF MIXER DURING THE Y EAR REQUIRES FACTUAL EXAMINATION. CONSEQUENTLY, THE ISSUE IS RE MITTED BACK TO THE FILE OF THE AO FOR EXAMINING THE FACTUAL ASPECT AND FOR DETERMINATION OF ADDITIONAL DEPRECIATION ON MOUNTED MIXER. NEEDLE SS TO SAY, THE ASSESSEE SHALL PROVIDE FACTUAL DETAILS AND DOCUMENT ARY EVIDENCE TO ASSERT ITS CLAIM OF ADDITIONAL DEPRECIATION BEFORE AO. GROUND NO.2 IS ACCORDINGLY ALLOWED FOR STATISTICAL PURPOSES. 9. GROUND NO.3 CONCERNS ADDITION ON ACCOUNT OF DIFF ERENCE BETWEEN INCOME REFLECTED IN THE BOOKS OF ACCOUNTS QUA THE ANNUAL TAX STATEMENT UNDER S.26AS MAINTAINED BY THE INCOME TAX DEPARTMEN T. 10. THE ASSESSEE CONTENDED BEFORE US THAT 26AS STOO D REVISED BY THE INCOME TAX DEPARTMENT AFTER TAKING NOTE OF THE DISC REPANCIES AND DIFFERENCE BETWEEN THE BOOKS AND THE TAX STATEMENT HAS BEEN SCALED DOWN CONSIDERABLY. THE LEARNED AR PLEADED THAT THE AO SHOULD TAKE NOTE OF THE REVISED AND CORRECTED 26AS STATEMENT FO R DETERMINATION OF THE TRUE INCOME OF THE ASSESSEE. THE LEARNED DR AL SO FAIRLY AGREED ON SUCH CONTENTION. WE FIND THE PLEA OF THE ASSESSEE TO BE REASONABLE AND FAIR. THE ISSUE IS ACCORDINGLY SET ASIDE AND REMIT TED BACK TO THE FILE OF THE AO FOR RE-DETERMINING THE INCOME ESCAPED ASSESS MENT ON THIS SCORE, IF ANY, AFTER TAKING NOTE OF THE REVISED FIG URES EMBEDDED IN THE 26AS STATEMENT. THE ISSUE IS ACCORDINGLY RESTORED TO THE FILE OF THE AO FOR ITS DETERMINATION IN ACCORDANCE WITH LAW. G ROUND NO.3 OF THE ASSESSEES APPEAL IS ALLOWED FOR STATISTICAL PURPOS ES. 11. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 3426/AHD/2015 - AY 2012-13 12. THE GROUNDS OF APPEAL RAISED BY THE ASSESSEE RE AD AS UNDER: ITA NOS. 3425 & 3426/AHD/15 [M/S. INNOVATIVE INFRASTRUCTURE P. LTD. VS. DCIT] A.YS. 2011-12 & 20 12-13 - 6 - 1. THE LD. CIT(A) HAS ERRED IN LAW AS WELL AS ON F ACTS IN RESTRICTING THE DEPRECIATION ALLOWANCE AT 15% IN PLACE OF 30% A ND THEREBY CONFIRMING THE DISALLOWANCE OF RS.80,64,631/-. 2. THE LD. CIT(A) HAS ALSO ERRED IN NOT GRANTING TH E ADDITIONAL DEPRECIATION ON TRANSIT MIXTURES WHICH IS MOUNTED O N CHASIS. (ALTERNATE TO GROUND NO # 1) 13. IN PARITY WITH THE OBSERVATIONS MADE IN ITA NO. 3425/AHD/2015, GROUND NO.1 OF THE ASSESSEES APPEAL IS DISMISSED A ND ALTERNATIVE GROUND AS PER GROUND NO.2 IS ALLOWED FOR STATISTICA L PURPOSES. THE AO SHALL DETERMINE THE QUANTUM OF ADDITIONAL DEPREC IATION ELIGIBLE TO THE ASSESSEE AND SHALL ALLOW THE SAME UNDER S. 32(1 )(IIA) OF THE ACT IN TERMS OF OUR OBSERVATIONS NOTED IN THE PRECEDING PA RAS AND IN ACCORDANCE WITH LAW. 14. IN THE RESULT, APPEAL OF THE ASSESSEE IS PARTLY ALLOWED. 15. IN THE COMBINED RESULT, BOTH APPEAL OF THE ASSE SSEE ARE PARTLY ALLOWED. SD/- SD/- (JUSTICE P. P. BHATT) (PRADIP KU MAR KEDIA) PRESIDENT ACCOUNTANT MEMBER AHMEDABAD: DATED 12/03/2019 TRUE COPY S. K. SINHA !'#' / COPY OF ORDER FORWARDED TO:- &. / REVENUE 2. / ASSESSEE (. )*+ , / CONCERNED CIT 4. ,- / CIT (A) /. 012 33*+4 *+#4 56) / DR, ITAT, AHMEDABAD 7. 289 : / GUARD FILE. BY ORDER / 4 /5 *+#4 56) THIS ORDER PRONOUNCED IN OPEN COURT ON 12/03/201 9