ITO, Ward-1, Paradeep, Paradeep V. Aditya Earth Movers, Paradeep

ITA 383/CTK/2014

• Counselvise Citation: 38322114 RSA 2014
• Duration Of Justice: 1 year(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-11-2015
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2007-2008
• Appeal Filed On: 09-10-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUVENDU DUTTA
• Assessee Lawyers: S K JENA
• Keywords: Depreciation; Reassessment proceedings
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK . , & , BEFORE S/SHRI B. RAMAKOTAIAH, ACCOUNTA NT MEMBER & PARTHA SARATHI CHAUDHURY, JUDICIAL MEMBER ! ./ ITA NO.383/CTK/2014 ( ' ' ' ' #$ #$ #$ #$ / ASSESSMENT YEAR :2007-2008) ITO, WARD - 1, PARADEEP. VS. M/S. ADITYA EARTH MOVERS, BIJAYCHANDRAPUR, ATHARBANKI, PARADEEP. ! ./ %& ! ./PAN/GIR NO. AAKFA 3612 N ( ' /APPELLANT ) .. ( ()' / RESPONDENT ) C.O.NO.46/CTK/2014 (ARISING OUT OF ITA NO.383/CTK/14 :A.Y. 2007-08 M/S. ADITYA EARTH MOVERS, BIJAYCHANDRAPUR, ATHARBANKI, PARADEEP. VS. ITO, WARD - 1, PARADEEP. ! ./ %& ! ./PAN/GIR NO. AAKFA 3612 N ( ' /APPELLANT ) .. ( ()' / RESPONDENT ) '+ - - - - /ASSESSEE BY : SHRI S.K.JENA %# - - - - /REVENUE BY : SHRI SUVENDU DUTTA '#. + / DATE OF HEARING : 3 RD NOV. 2015 /$ + /DATE OF PRONOUNCEMENT 5 TH NOV. 2015 0 0 0 0 / O R D E R PER PARTHA SARATHI CHAUDHURY, JM THIS APPEAL FILED BY THE REVENUE AND CROSS OBJECTIO N FILED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD CIT(A), BERHAM PUR DATED 7.7.2014 FOR THE ASSESSMENT YEAR 2007-08. 2. THE REVENUE IN ITS APPEAL HAS RAISED THE FOLLOWI NG GROUNDS: 1. IN THE FACTS AND ON THE CIRCUMSTANCES OF THE CA SE, WHETHER THE LD CIT(A) IS CORRECT IN HOLDING THAT THE EXCAVATOR AND THE ROCK BREAKER MACHINE ARE ENTITLED TO DEPRECIATION @ 30% WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. 2. WHETHER THE LD CIT(A) IS JUSTIFIED IN RESTRICTIN G THE DISALLOWANCE OF REPAIR AND MAINTENANCE AS MADE IN THE ORIGINAL ASSE SSMENT WITHOUT PROPERLY APPRECIATING THE FACTS OF THE CASE. ITA NO. 383/CTK/2014 C.O.46/CTK/2014 ASSESSMENT YEAR :2007-08 2 3. THE FACTS IN BRIEF AS ENUMERATED IN THE CORRESPO NDING ASSESSMENT ORDER PASSED BY THE AO U/S.143(3) R.W.S 147 ARE THAT THE ASSESSE E FIRM DERIVES INCOME BY DEPLOYING ITS OWN MACHINERIES SUCH AS EXCAVATOR AND ROCK BREA KER, ETC ON HIRE BASIS AND SUPPLY OF LABOUR UNDER DIFFERENT ORGANISATIONS. THE RETUR N OF INCOME FOR THE YEAR WAS FILED ON 11.11.2007 SHOWING TOTAL INCOME OF RS.40,380/-. SU BSEQUENTLY, IT WAS FOUND THAT THE ASSESSEE HAS DEBITED RS.16,51,164/- TOWARDS DEPRECI ATION IN THE P&L ACCOUNT WHICH INCLUDED AN AMOUNT OF RS.11,20,981/- ON EX-200 EXCA VATOR AND ROCK BREAKER @ 30% . THE AO WAS OF THE VIEW THAT UNDER SECTION 32 OF THE INCOME TAX ACT, 1961, DEPRECIATION ON PLANT AND MACHINERY IS ALLOWABLE @ 15% FROM A.Y. 2006-07 ONWARDS, THEREFORE, HE COMPLETED THE ASSESSMENT U/S.143(3) O N 7.12.2009 ON A TOTAL INCOME OF RS.62,380/- . SUBSEQUENTLY, THE ASSESSMENT WAS REO PENED BY THE AO ON THE GROUND OF EXCESS CLAIM OF DEPRECIATION AND EXCESS ALLOWANCE O F CLAIM UNDER REPAIR & MAINTENANCE. THERE WAS NO COMPLIANCE TO THE NOTIC ES OF THE AO IN THE REASSESSMENT PROCEEDINGS. ACCORDINGLY, THE AO DISALLOWED THE HI GHER CLAIM OF DEPRECIATION ON EXCAVATOR AND ROCK BREAKER AND ALLOWED NORMAL DEPRE CIATION ON THE SAME @ 15%. THE AO, THUS DISALLOWED RS.5,60,490/- UNDER THE HEAD EX CESS DEPRECIATION CLAIMED. AGGRIEVED BY THE DECISION OF THE AO, THE ASSESSEE H AS PREFERRED APPEAL BEFORE THE LD CIT(A). 4. BEFORE THE LD CIT(A), THE ASSESSEE CONTENDED THA T THE PAY LOADER OR EXCAVATOR WHICH ARE EARTH MOVING MACHINERIES EMPLOYED IN HEAV Y CONSTRUCTION WORK SUCH AS DAMS, TUNNELS, CANALS, MINES AND QUERIES, PORTABLE UNDERGROUND MACHINERY AND EARTHMOVING MACHINERY IS ENTITLED FOR DEPRECIATION @ 30% AS HAS BEEN DECIDED BY THE HONBLE M.P.HIGH COURT IN THE CASE OF CIT VS. TEJBA LI SINGH TRANSPORT CO. (1996) 220 ITR 408 (MP). THEREFORE, THE ASSESSEE IS REASONABLY JUSTIFIED IN CLAIMING 30% ITA NO. 383/CTK/2014 C.O.46/CTK/2014 ASSESSMENT YEAR :2007-08 3 DEPRECIATION ON EXCAVATOR AND ROCK BREAKER. THE AS SESSEE FURTHER STATED BEFORE THE LD CIT(A) THAT THE AO THOUGH ACCEPTED IN THE ORIGINAL ASSESSMENT BUT TOOK A DIFFERENT VIEW IN THE ASSESSMENT PASSED U/S.147 OF THE ACT PR OVIDING ONLY DEPRECIATION @ 15%. THE ASSESSEE FURTHER BROUGHT TO THE NOTICE OF THE L D CIT(A) THE DECISION OF THE KOLKATA ITAT IN THE CASE OF BOTHRA SHIPPING SERVICES VS CIT (2011) 37(II) ITCL, 56 (KOL C TRIB), WHEREIN, IT HAS BEEN HELD THAT JCB PAY LOADER, EXCA VATORS ARE COVERED WITHIN THE EXPRESSION MOTOR LORRIES WHICH ARE USED IN BUSINE SS OF RUNNING THEM ON HIRE, THEREFORE, ELIGIBLE FOR DEPRECIATION @ 30%. THE CL AIM OF DEPRECIATION U/S.32 BY APPLYING THE RATE OF 30% ASSIGNED TO ENTRY NO.III(3 )(II) OF PART A OF APPENDIX-1 OF THE INCOME TAX RULE, 1962 IS APPLICABLE FOR THE EARTH M OVING/HEAVY VEHICLE. THE ASSESSEE FURTHER POINTED OUT THAT THE LD CIT(A) HELD IN THE CASE OF PARADEEP EARTH MOVERS IN AN APPEAL IN IT APPEAL NO.0484/2010-11 & I.T. APPEAL N O.0339/2012-13, VIDE ORDER DT 27.3.2012 AND 16.9.2013, RESPECTIVELY, ON A SIMILA R DISPUTE OF DEPRECIATION ON EXCAVATOR AND BACKHOE LOADER, IF USED FOR HIRING PU RPOSE, IS ENTITLED FOR DEPRECIATION @ 30%. THIS FINDINGS HAD ALSO BEEN UPHELD BY THE ITA T, CUTTACK IN ITA NO.386/CTK/2012 AND ITA NO.559/CT/2013, RESPECTIVEL Y VIDE ORDER DATED 27.3.2012. THE LD CIT(A) FOLLOWING THE CASE OF PARADEEP EARTH MOVERS (SUPRA), DELETED THE ADDITION MADE BY THE AO ON ACCOUNT OF EXCESS DEPREC IATION. IN THE IMPUGNED ORDER, THE LD CIT(A) REFERRED TO THE OPERATING PARA OF THE TRIBUNAL, WHEREIN, IT HAS BEEN HELD AS UNDER: 5.3 IN CIT VS. TEJBALI SINGH TRANSPORT CO.(1996) 2 20 ITR 408, IT WAS HELD THAT PAY LOADER USED FOR LIFTING COAL TO DUMPE R IS EARTH MOVING MACHINERY COVERED BY CLAUSE III(D)8) OF APPENDIX I TO INCOME TAX RLES AND IS ENTITLED TO 30% DEPRECIATION.. IN BOTHRA SH IPPING SERVICE VS CIT(2011) 37 (II) ITCL, 56 (KOL.C TRIB) IT WAS HE LD THAT THE TATA JCB AND 400V WHEEL LOADERS ARE COVERED WITHIN THE EXPRE SSION MOTOR LORRIES WHICH ARE USED IN BUSINESS OF RUNNING THEM ON HIRE AND THE AO HAD CORRECTLY ALLOWED THE CLAIM OF DEPRECIATION U/S.32 IN THE SUM OF RS.78,05,251/- APPLYING THE RATE OF 30% ASSIGNED TO ENTRY NO.III(3)(II) OF PART A OF APPENDIX 1 OF THE I.T.RULES, 1962 APPL ICABLE FOR AS MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIS USED IN A BUSI NESS OF RUNNING THEM ITA NO. 383/CTK/2014 C.O.46/CTK/2014 ASSESSMENT YEAR :2007-08 4 ON HIRE. HAVING REGARD TO THE ABOVE DECISIONS, THE DISALLOWANCE OF EXCESS DEPRECIATION OF RS.215,33,766/- MADE BY THE AO U/S.32 IS DELETED. 5. BEING AGGRIEVED, THE REVENUE HAS PREFERRED APPEA L BEFORE THE TRIBUNAL ON THIS GROUND. 6. LD D.R. RELIED ON THE ORDER OF THE AO WHEREAS TH E LD A.R. REITERATED THE SUBMISSIONS MADE BEFORE THE LD CIT(A) AND ALSO RELI ED ON THE ORDER OF THE LD CIT(A) AND VARIOUS CASE LAWS AS WELL AS THE DECISION OF TH E TRIBUNAL IN THE CASE OF PARADEEP EARTHMOVERS (SUPRA). 7. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AND PER USED THE RELEVANT MATERIAL ON RECORD. THE SUBMISSION OF THE ASSESSEE AS IS OBSER VED FROM THE ORDER OF THE LD CIT(A) IS QUITE EXHAUSTIVE AND TRUE TO THE POINT, WHEREIN, THE ASSESSEE HAS BROUGHT IN VARIOUS JUDICIAL PRONOUNCEMENTS, SPECIFICALLY THE ORDER OF THE TRIBUNAL IN THE CASE OF PARADEEP EARTHMOVERS (SUPRA). WE NOTED THAT THIS ISSUE IS S QUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE ABOVE STATED DECISION OF THE TRIBUN AL. RESPECTFULLY FOLLOWING THE SAME, WE DISMISS THE GROUND OF APPEAL RAISED BY THE REVEN UE ON ACCOUNT OF DELETION OF ADDITION OF EXCESS DEPRECIATION. 8. THE NEXT GROUND RELATES TO DISALLOWANCE OF REPAI RS AND MAINTENANCE. THE ORIGINAL ASSESSMENT ORDER U/S.143(3) OF THE ACT PAS SED ON 7.12.2009, CLEARLY INDICATES THAT IN RESPECT OF REPAIR AND MAINTENANCE CHARGES O F RS.18,20,368/-, WHILE THE PAYMENTS WERE LEDGERIZED AND THE LEDGER WAS PRODUCE D, THE BILLS AND VOUCHERS IN SUPPORT OF THE EXPENSES WERE NOT PRODUCED BEFORE TH E AO. THE AO ACCORDINGLY, DISALLOWED AN AMOUNT OF RS.10,000/- ON ESTIMATE BAS IS. IN THE REASSESSMENT ORDER ITA NO. 383/CTK/2014 C.O.46/CTK/2014 ASSESSMENT YEAR :2007-08 5 DATED 29.10.2012, THE AO ON SIMILAR FACTS CHOSE TO DISALLOW THE ENTIRE AMOUNT. WHEN THE MATTER WAS CARRIED ON BEFORE THE LD CIT(A), THE LD CIT(A) IN HIS ORDER OBSERVED THAT IT IS A SETTLED PRINCIPLE OF LAW THAT THE AO CANNOT REVIEW HIS ACTION OR CANNOT CHANGE OPINION IN REASSESSMENT PROCEEDINGS AS HELD BY THE HONBLE APEX COURT IN THE CASE OF CIT VS. KELVINATOR OF INDIA LTD., 294 ITR 370(SC). IN THE INSTANT CASE, DURING THE ORIGINAL SCRUTINY PROCEEDINGS, BECAUSE OF NON-PRODU CTION OF BILLS AND VOUCHERS, THE AO DISALLOWED RS.10,000/-. HAVING DONE SO, THE AO CAN NOT, IN A REASSESSMENT PROCEEDINGS, REVISIT HIS DECISION AND CHOSE TO DISA LLOW THE ENTIRE CLAIM WITHOUT BRINGING ANY ADDITIONAL MATERIAL ON RECORD THAT THE SAID CLA IM IS EITHER WRONG OR FALSE. LD CIT(A) FURTHER STATED THAT IN ANY CASE, EVEN ON MERITS, IT IS NOT POSSIBLE TO SUSTAIN A DISALLOWANCE WHICH IS EQUAL TO 100% OF A CLAIM UNDE R THE HEAD LIKE REPAIR & MAINTENANCE WHEN ADMITTEDLY THE ASSESSEE HAVING MAC HINERY, WHICH ARE BEING RENTED OUT AND SUCH RENTAL INCOME BEING BROUGHT TO TAX WIL L DEFINITELY HAVE REPAIR & MAINTENANCE EXPENSES IN RESPECT OF SUCH MACHINERY. THE LD CIT(A) TAKING THE GUIDANCE FROM THE LEGAL PRINCIPLES LAID DOWN BY THE HONBLE SUPREME COURT IN THE CASE OF KELVINATOR OF INDIA LTD., (SUPRA) HELD THAT THE AO CANNOT MAKE FURTHER DISALLOWANCE IN THE REASSESSMENT PROCEEDINGS IN RESPECT OF A HEA D LIKE REPAIR & MAINTENANCE WHEN HE HIMSELF HAS DECIDED TO DISALLOW ONLY PART OF IT IN THE EARLIER SCRUTINY PROCEEDINGS WITHOUT BRINGING ON RECORD ANY ADDITIONAL MATERIAL IN SUPPORT OF HIS DECISION. ACCORDINGLY, THE LD CIT(A) DELETED THE DISALLOWANCE OF RS.18,10,368/-. BEING AGGRIEVED BY THE DECISION OF THE LD CIT(A), THE REVENUE HAS P REFERRED APPEAL ON THIS ISSUE. 9. LD D.R. RELIED ON THE ORDER OF THE AO WHEREAS TH E LD A.R. RELIED ON THE ORDER OF THE LD CIT(A). ITA NO. 383/CTK/2014 C.O.46/CTK/2014 ASSESSMENT YEAR :2007-08 6 10. UPON CONSIDERATION OF THE SUBMISSIONS AND CONTE NTIONS OF BOTH THE SIDES, WE OBSERVE THAT THE LAW LAID DOWN BY THE HONBLE SUPRE ME COURT IN THE CASE OF KELVINATOR OF INDIA LTD. (SUPRA) IS CLEAR AND WE HOLD THAT WHE N IN A PARTICULAR ASSESSMENT THE AO DECIDED TO DISALLOW A CERTAIN PART OF EXPENSES THEN IN REASSESSMENT PROCEEDINGS, HE CANNOT DISALLOW THE ENTIRE EXPENSES WITHOUT BRINGIN G ON RECORD ANY ADDITIONAL MATERIAL IN SUPPORT TO HIS DECISION. THE REVENUE AUTHORITIE S HAVE ACCEPTED THE BUSINESS OF THE ASSESSEE AND THEY HAVE ACCEPTED THAT THE ASSESSEE E ARNS RENTAL INCOME BY LETTING OUT THE MACHINERIES. THE ASSESSEE IS SUBJECT TO TAX ON THAT BASIS. IT IS ALSO COMMON THAT SUCH INCOME ALSO ATTRIBUTE REPAIRS AND MAINTENANCE CHARGES AND DISALLOWING SUCH CHARGES IN ITS ENTIRETY IS NOTHING BUT AN ARBITRARY DECISION PROVIDING INJUSTICE TO THE ASSESSEE. THEREFORE, IN ALL FAIRNESS AND IN THE IN TEREST OF JUSTICE, WE CONFIRM THE ORDER OF THE LD CIT(A) ON THIS ISSUE, WHEREBY, HE HAS DEL ETED THE ADDITION OF RS.18,20,368/-. THIS GROUND IS REJECTED. 11. THE CROSS OBJECTION FILED BY THE ASSESSEE IS IN SUPPORT OF THE ORDER OF THE LD CIT(A). SINCE, WE HAVE UPHELD THE ORDER OF THE LD CIT(A) DISMISSING THE APPEAL FILED BY THE REVENUE, THE CROSS OBJECTION FILED BY THE ASSES SEE HAS RENDERED INFRUCTUOUS. HENCE, WE DISMISS THE SAME. 12. IN THE RESULT, APPEAL OF THE REVENUE AS WELL AS CROSS OBJECTION FILED BY THE ASSESSEE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 5 /11/20 15 SD/- SD/- . ,/B.RAMAKOTAIAH , PARTHA SARATHI CHAUDHURY /ACCOUNTANT MEMBER / JUDICIAL MEMBER ITA NO. 383/CTK/2014 C.O.46/CTK/2014 ASSESSMENT YEAR :2007-08 7 CUTTACK; '! DATED 5 /11 /2015 B.K.PARIDA, SPS 2 22 2 0 0 0 0 (+ (+ (+ (+ 4$+ 4$+ 4$+ 4$+ / COPY OF THE ORDER FORWARDED TO : 0' 0' 0' 0' / BY ORDER, SR. PRIVATE SECRETARY, , / ITAT, CUTTACK 1. THE ASSESSEE : M/S. ADITYA EARTH MOVERS, BIJAYCHANDRAPUR, ATHARBANKI, PARADEEP 2. THE REVENUE: ITO, WARD - 1, PARADEEP 3. 5 ( ) / THE CIT(A), CUTTACK 4. 5 / CIT , CUTTACK 5. #6 (+' , / DR, ITAT, CUTTACK 6. 8 9. / GUARD FILE. )+ (+ //TRUE COPY//