The ACIT, Bhopal V. M/s. Ankur Construction, Betul

ITA 450/IND/2009

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 9517 (ITAT-INDORE)
• Duration Of Justice: 1 year(s) 6 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-12-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 10-09-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PRADEEP KUMAR MITRA
• Assessee Lawyers: SAND EEP AGRAWAL CAS
• Keywords: Depreciation
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI R.C. SHARMA, ACCOUNTANT MEMBER ITA NOS.449 TO 451/IND/2009 A.YS. 2004-05 TO 2006-07 ACIT-2(1), BHOPAL APPELLANT VS M/S. ANKUR CONSTRUCTION, KOTHI BAZAR, BETUL PAN AAIFA 6103 A RESPONDENT AND, CO NO.74/IND/2009 ARIUSING OUT OF ITA NO.450/IND/2009 A.Y. 2005-06 M/S. ANKUR CONSTRUCTION, KOTHI BAZAR, BETUL PAN AAIFA 6103 A APPELLANT VS ACIT-2(1), BHOPAL RESPONDENT DEPARTMENT BY : SH. PRADEEP KUMAR MITRA, SR. DR ASSESSEE BY : SHRI RAJEEV KHANDELWAL & SHRI SAND EEP AGRAWAL, CAS 2 O R D E R PER JOGINDER SINGH, JUDICIAL MEMBER THESE APPEALS ARE BY THE REVENUE FOR DIFFERENT ASSE SSMENT YEARS AND CROSS-OBJECTION IS BY THE ASSESSEE FOR ASSESSME NT YEAR 2005-06 (IN ITA NO.450/IND/2009) AGAINST THE COMMON ORDER OF TH E LEARNED CIT(A)-I, BHOPAL, DATED 8.7.2009. THE REVENUE HAS RAISED THE COMMON GROUND THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE C ASE, THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN DELET ING THE ADDITION ON ACCOUNT OF EXCESS DISALLOWANCE OF DEPRECIATION. 2. DURING HEARING OF THESE APPEALS, THE LD. SR. DR SHRI PRADEEP KUMAR MITRA STRONGLY SUPPORTED THE ASSESSMENT ORDER S BY CONTENDING THAT THE OTHER ASSETS LIKE TRUCK, ROAD ROLLER AND J CB MACHINES WERE USED BY THE ASSESSEE IN ITS OWN BUSINESS, THEREFORE, THE DEPRECIATION IS ALLOWABLE @25% AGAINST THE CLAIM OF 40% BY THE ASSE SSEE WHEREAS THE LD. COUNSEL FOR THE ASSESSEE DEFENDED THE IMPUGNED ORDER BY SUBMITTING THAT THE ASSESSEE ALSO DERIVED INCOME FROM HIRE OF ITS VEHICLES AND THE DEPRECIATION @40% WAS RIGHTLY CLAIMED AS NECESSARY EVIDENCE WAS DULY FURNISHED BY THE ASSESSEE BEFORE THE LD. CIT(A). 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATER IAL AVAILABLE ON RECORD. BRIEF FACTS ARE THAT THE ASSESSEE IS A PART NERSHIP FIRM ENGAGED IN 3 CIVIL CONSTRUCTION WORK AND DURING THE RELEVANT PER IOD, CONSTRUCTION OF ROAD AND RENTING OUT OF MACHINERY LIKE JCB AND TRUC KS WERE DONE. THE ASSESSEE DISCLOSED AN INCOME OF RS.7,26,280/-. THE ACCOUNTS OF THE ASSESSEE WERE DULY AUDITED AND NO DISCREPANCY WAS R ECORDED IN THE TAX AUDIT REPORT. THE ADDITION OF RS.6,27,677/- ON ACCO UNT OF DIFFERENCE IN DEPRECIATION, CLAIMED BY THE ASSESSEE, WAS DISALLOW ED. ON APPEALS, THE LD. CIT(A) HELD THAT THE DEPRECIATION IS ALLOWABLE @40% ON MOTOR LORRIES/VEHICLES USED FOR BUSINESS PURPOSES AND ALS O TRANSPORTATION OF GOODS ON HIRE. FROM THE ASSESSMENT STAGE ITSELF, TH E ASSESSEE DULY FILED THE REGISTRATION PAPERS FROM THE OFFICE OF THE REGI STERING AUTHORITY THAT THE VEHICLES WERE USED FOR COMMERCIAL PURPOSES. EVEN TH E JCB WAS REGISTERED AS A COMMERCIAL VEHICLE. ADMITTEDLY, THE ASSESSEE DISCLOSED SUBSTANTIAL RECEIPT BY WAY OF HIRE CHARGES OF MACHI NERY WHICH WAS NOT PRACTICALLY POSSIBLE IF THE SAME WERE NOT COMMERCIA LLY EXPLOITED IN ITS OWN BUSINESS AS WELL AS IN RENTING OUT. THE LD. CIT (A), ON THE BASIS OF PAST HISTORY, RESTRICTED THE DISALLOWANCE TO RS.75, 000/- AND THE BALANCE WAS DELETED. THE ASSESSEE DECLARED RS.55,69,493/- A S RENT RECEIPT FROM TRUCKS, JCBS AND ROAD ROLLERS FOR ASSESSMENT YEAR 2 004-05 AND THE SAME WAS ACCEPTED IN ORDERS PASSED U/S 143(3) OF TH E ACT. EVEN AS PER THE PROVISIONS OF THE ACT, UNDER THE FACTS PRESENT BEFORE US, DEPRECIATION IS ALLOWABLE @40%. EVEN THE CBDT CIRCULAR CLEARLY S PECIFIES THAT THE DEPRECIATION IS ALLOWABLE @40% ON MOTOR LORRIES IN THE BUSINESS OF THE 4 ASSESSEE AND TRANSPORTATION OF GOODS ON HIRE. DEPRE CIATION ALLOWANCE IS A CONCESSION GRANTED BY THE STATE IN THE COMPUTATIO N OF INCOME BASED ON MANY FACTORS RELEVANT TO A WHOLESOME FISCAL ADMI NISTRATION. DEPRECIATION REPRESENTS THE DIMINUTION IN THE VALUE OF AN ASSET WHEN USED FOR THE PURPOSES OF MAKING PROFIT AND GAIN, TH EREFORE, DEPRECIATION ALLOWANCE, U/S 32, IS A STATUTORY ALLOWANCE. UNDER SUB-ITEM 2(II) OF ITEM (III), HIGHER RATE OF DEPRECIATION IS ADMISSIBLE ON MOTOR TRUCKS USED IN A BUSINESS OF RUNNING THEM ON HIRE, THEREFORE, USER O F THE SAME IN THE BUSINESS OF TRANSPORTATION IS THE TEST. OUR VIEW IS SUPPORTED BY THE DECISION FROM HONBLE APEX COURT IN CIT VS. GUPTA G LOBAL EXIM (P) LTD. (305 ITR 132). THE HONBLE HONBLE JURISDICTIONAL H IGH COURT IN CIT VS. SHARMA MOTOR SERVICE (148 CTR 75) (MP) HELD THAT VE HICLES USED FOR TRANSPORTING PASSENGERS/GOODS AS A REGULAR BUSINESS ARE ENTITLED TO HIGHER RATE OF DEPRECIATION. THE WORD HIRE USED I N THE ENTRY RELATING TO MOTOR LORRIES ETC. IS ONLY MEAN TO DENOTE THAT THE USE OF THE VEHICLE IS NOT BY THE OWNER HIMSELF FOR HIS OWN PURPOSES BUT I S IT GIVEN TO ANOTHER FOR USE FOR A LIMITED PERIOD, THEREFORE, THERE IS N O QUALITATIVE DIFFERENCE BETWEEN LEASE OF THE VEHICLES FOR A SPECIFIED PERIO D FOR CONSIDERATION AND LETTING THE VEHICLES FOR HIRE CHARGES. THUS, AN ASSESSEE LEASING OUT MOTOR LORRIES OWNED BY HIM AND RECEIVING LEASE RENT AL WOULD BE ENTITLED TO HIGHER RATE OF DEPRECIATION BY TREATING THE VEHI CLES AS USED IN THE BUSINESS FOR RUNNING THEM ON HIRE. FOR AVAILING HIG HER RATE OF 5 DEPRECIATION, IT IS NOT MANDATORY THAT VEHICLES ARE NOT ONLY USED IN BUSINESS OF RUNNING ON HIRE BUT ASSESSEE SHOULD ALS O USE THE VEHICLES HIMSELF FOR SAME PURPOSE. THIS VIEW IS SUPPORTED BY THE DECISION IN CIT VS. MADAN & CO. (254 ITR 445) (MAD) AND CIT VS. BAN SAL CREDITS LTD. (126 TAXMAN 149) (DEL). IN VIEW OF THESE FACTS, WE FIND NO INFIRMITY IN THE STAND OF THE LD. CIT(A), CONSEQUENTLY, APPEALS OF T HE REVENUE ARE DISMISSED. 4. IN ITS CROSS-OBJECTION (CO NO.74/IND/2009 ARISIN G OUT OF ITA NO.450/IND/2009), IT HAS BEEN CONTENDED THAT THE TO TAL DISALLOWANCE OF EXPENSES IS MADE WITHOUT ANY BASIS AND THE OBJECTIO NS WERE NOT CONSIDERED PROPERLY. HOWEVER, WE FIND THAT THE LD. ASSESSING OFFICER HAS SPECIFICALLY OBSERVED THAT CERTAIN BILLS, VOUCHERS, EXPENSES AND THE EXPENDITURE DEBITED BY THE ASSESSEE WAS NOT FULLY V ERIFIABLE AND FURTHER THE ASSESSEE DID NOT PRODUCE STOCK REGISTER, CONSUM PTION REGISTER FOR MATERIAL AND THE ASSETS WERE ALSO USED FOR PERSONAL USE. THIS FACTUAL FINDING WAS NOT CONTROVERTED BY THE ASSESSEE, THERE FORE, THE CONCLUSION DRAWN IN THE IMPUGNED ORDER IS FULLY JUSTIFIED, CON SEQUENTLY, THERE IS NO JUSTIFICATION IN THE CROSS-OBJECTION OF THE ASSESSE E. FINALLY, THESE APPEALS OF THE REVENUE AND CROSS-OBJ ECTION OF THE ASSESSEE ARE DISMISSED. 6 ORDER PRONOUNCED IN THE OPEN COURT IN THE PRESENCE OF LD. REPRESENTATIVES OF BOTH THE SIDES AT THE CONCLUSION OF THE HEARING ON 16 TH MARCH, 2011. (R.C.SHARMA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER DATED: 16.3.2011 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE !VYAS!