Dy.Commissioner of Income Tax, Circle-16(2), Hyderabad V. M/s. Manchukonda Prakasham Industries India Private Limited, Hyderabad

ITA 514/HYD/2014

• Counselvise Citation: 51422514 RSA 2014
• Duration Of Justice: 1 year(s) 1 month(s) 17 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 08-05-2015
• Appeal Filed By: Department
• Bench Allotted: A
• Next Hearing Date: 06-05-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 21-03-2014
• Court: TRIBUNAL
• Department Lawyers: RAMAKRISHNA BANDI
• Assessee Lawyers: T CHAITANYA KUMAR
• Keywords: Depreciation; Earning of tax free income
• Section: 143(3); 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A, HYDERABAD BEFORE SHRI P.M. JAGTAP, ACCOUNTANT MEMBER AND SMT. P. MADHAVI DEVI, JUDICIAL MEMBER I.T.A. NO. 514/HYD/2014 ASSESSMENT YEAR: 2010-11 DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(2), HYDERABAD VS M/S. MANCHUKONDA PRAKASHAM INDUSTRIES INDIA PVT. LTD., HYDERABAD [PAN: AAFCM8584K] (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI RAMA KRISHNA, BANDI, DR FOR ASSESSEE : SHRI T. CHAITANYA KUMAR, AR DATE OF HEARING : 0 6 - 0 5 - 201 5 DATE OF PRONOUNCEMENT : 08 - 0 5 - 2015 O R D E R PER SMT. P. MADHAVI DEVI, J.M. : IN THIS APPEAL, THE REVENUE HAS RAISED THE FOLLOWI NG GROUNDS OF APPEAL: ' 1. THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AN D ON FACTS OF THE CASE. 2. THE CIT(A) OUGHT TO HAVE APPRECIATED THE ADDIT ION TOWARDS DEPRECIATION AS THE ASSESSEE COMPANY IS ENTITLED F OR A DEPRECIATION @ 15% WHERE THE TRUCKS WERE USED FOR OWN BUSINESS AND NO T HIRED OUT. 3. THE CIT(A) ERRED IN ALLOWING EXCESS DEPRECIATIO N OF RS. 5,32,630/- ON TRUCKS IN EXCESS OF MAXIMUM ENTITLED DEPRECIATION ON TRUCKS @ OF 50%. I.T.A. NO. 514/HYD/2014 M/S. MANCHUKONDA PRAKASHAM INDUSTRIES INDIA PVT. LT D :- 2 -: 4. THE CIT(A) OUGHT TO HAVE APPRECIATED THE ADDITI ON TOWARDS DISALLOWANCE U/S. 14A. 5. ANY OTHER GROUND(S) THAT MAY BE URGED AT THE TI ME OF HEARING'. 2. GROUND NO.1 IS GENERAL IN NATURE AND NEEDS NO AD JUDICATION. AS REGARDS GROUND NO.2, THE BRIEF FACTS ARE THAT, ASSE SSEE-COMPANY FILED ITS RETURN OF INCOME FOR THE RELEVANT ASSESSMENT YEAR O N 14-10-2010 DECLARING INCOME OF RS. 21,69,37,458/-. DURING THE ASSESSMENT PROCEEDINGS U/S. 143(3) R.W.S. 144A OF INCOME TAX A CT [ACT], ASSESSING OFFICER (AO) OBSERVED THAT THE ASSESSEE-COMPANY HAS CLAIMED DEPRECIATION ON TRUCKS @30%. HE HELD THAT ASSESSEE WOULD BE ELIGIBLE FOR DEPRECIATION @ 30% ONLY IF THE TRUCKS ARE GIVEN ON HIRE AND SINCE THE ASSESSEE WAS USING THE TRUCKS FOR ITS OWN BUSINESS, HE HELD THAT THE DEPRECIATION IS ALLOWABLE ONLY AT 15%. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE THE CIT(A), WHO ALLOWED THE SAME BY F OLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSE SSMENT YEAR (AY) 2007-08. AGGRIEVED, REVENUE IS IN APPEAL BEFORE U S. 3. THE LD. DR SUPPORTED THE ORDER OF AO WHILE LD. C OUNSEL SUPPORTED THE ORDER OF CIT(A) AND HAS FILED A COPY OF THE ORDER OF THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE AY. 2007-08 , WHEREIN AFTER DISCUSSING THE ISSUE AT LENGTH, THE TRIBUNAL HAS HE LD AS UNDER: '17. GROUND NO.11 RELATES TO DISALLOWANCE OF CLAIM OF DEPRECIATION AT THE RATE OF 30% ON TRUCKS. IT WAS CLAIMED BEFORE THE A O IN COURSE OF ASSESSMENT PROCEEDINGS THAT THE ASSESSEE IS USING TRUCKS FOR T RANSPORTATION OF MANUFACTURE POLES FROM THE FACTORY TO VARIOUS CUSTOMERS. THE A SSESSEE IS MAINTAINING A SEPARATE ACCOUNT TOWARDS TRANSPORT CHARGES RECEIVED FROM CUSTOMERS TOWARDS TRANSPORTATION OF GOODS AND HAS ALSO CLAIMED EXPEND ITURE TOWARDS COST OF TRANSPORTATION. THE AO HOWEVER DISALLOWED THE CLAI M OF DEPRECIATION AT 30% ON THE GROUND THAT THE ASSESSEE WAS USING TRUCKS IN HI S OWN BUSINESS AND THEREFORE RESTRICTED DEPRECIATION TO 15%. THE AO HELD THAT A S THE ASSESSEE IS NOT IN THE BUSINESS OF RUNNING TRUCKS ON HIRE, IT IS NOT ELIGI BLE FOR CLAIMING DEPRECIATION AT 30%. BEFORE CIT(A), THE ASSESSEE REITERATED ITS ST AND AS WAS TAKEN BEFORE THE AO. THE CIT(A) FOUND THAT THE ASSESSEE HAD MAINTAI NED A SEPARATE ACCOUNT I.T.A. NO. 514/HYD/2014 M/S. MANCHUKONDA PRAKASHAM INDUSTRIES INDIA PVT. LT D :- 3 -: SHOWING RECEIPTS FROM TRANSPORTATION AND HAS SHOWN RELEVANT EXPENDITURE SEPARATELY. HOWEVER, THE CIT(A) CAME TO CONCLUSION THAT ON THAT BASIS IT CANNOT BE SAID THAT THE TRUCKS WERE BEING USED FOR PROVIDI NG THEM ON HIRE TO OTHERS. THE CIT(A) OBSERVING THAT THE TRANSPORTATION WAS BEING USED BY THE APPELLANT IN HIS OWN BUSINESS OF MANUFACTURING POLES WHICH INCLUDE T RANSPORTATION FROM THE BUSINESS PREMISES TO THE CUSTOMERS, THEREFORE, THE CLAIM OF DEPRECIATION AS PROVIDED FOR TRUCKS RUNNING ON HIRE CANNOT BE ALLOW ED TO THE ASSESSEE. 18. WE HAVE HEARD THE RIVAL CONTENTIONS ON THE ISSU E. THE WORD 'HIRE' HAS NOT BEEN DEFINED IN THE ACT. THE DICTIONARY MEANING OF 'HIRE' MEANS 'COMPENSATION FOR THE USE OF THING OR FOR LABOUR OR SERVICES'. F ROM THE AFORESAID MEANING OF WORD 'HIRE', IT IS QUITE CLEAR THAT EVEN IN CASE OF GOOD S HAVING TRANSPORTED FROM ONE PLACE TO ANOTHER FOR CONSIDERATION, IT HAS TO BE HE LD THAT THE VEHICLE HAS BEEN GIVEN ON HIRE FOR TRANSPORTING GOODS OF THE CUSTOME R. SINCE IN THE PRESENT CASE, IT HAS BEEN FOUND ON RECORD THAT THE TRUCKS WERE EXCLU SIVELY USED FOR TRANSPORTATION OF GOODS OF THE CUSTOMERS ON RECEIPT OF TRANSPORTAT ION CHARGES, IT CAN BE SAID THAT THE TRUCKS HAVE BEEN GIVEN ON HIRE TO THE CUSTOMERS AND AS SUCH IS ELIGIBLE FOR DEPRECIATION AT THE RATE OF 30%. IN VIEW OF THE AB OVE, THIS GROUND OF THE ASSESSEE IS ALLOWED'. SINCE, THE FACTS AND CIRCUMSTANCES ARE SIMILAR FOR THE RELEVANT ASSESSMENT YEAR BEFORE US, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF CIT(A) AND REVENUE'S GROUND IS REJECTE D. 4. AS REGARDS GROUND NO.3, THE BRIEF FACTS ARE THAT , THE ASSESSEE HAD PURCHASED SIX NEW TRUCKS DURING THE AY.2009-10 AND THUS MADE ADDITION OF RS. 1,06,52,614/- AND CLAIMED DEPRECIAT ION @ 15% (HALF OF 30%), SINCE ASSETS WERE USED FOR LESS THAN 180 DAYS AND THE CLOSING WDV WAS SHOWN AT RS. 90,54,722/-. IN THE AY. 2010- 11, THE ASSESSEE- COMPANY HAD CLAIMED DEPRECIATION ON THE BLOCK OF AS SETS AT 50% ON THE OPENING WDV. THE AO HELD THAT THE ASSESSEE WAS ELI GIBLE FOR DEPRECIATION @ 25% (HALF OF 50%) IN THE YEAR OF PUR CHASE AND THEREFORE THE DEPRECIATION TO BE ALLOWED IN AY. 2009-10 WAS R S. 26,63,153/-. HE THEREFORE ADOPTED THE OPENING WDV OF AY. 2010-11 AT RS. 79,89,461/- AND ALLOWED 50% AS DEPRECIATION THEREON. AGGRIEVED , ASSESSEE PREFERRED AN APPEAL BEFORE CIT(A), WHO HELD THAT THE AO CANNO T SUBSTITUTE ANOTHER FIGURE FOR DEPRECIATION ALLOWED FOR THE AY. 2009-10 AND THAT ONLY THE ACTUAL DEPRECIATION ALLOWED WHILE COMPUTING THE TOT AL INCOME FOR THE I.T.A. NO. 514/HYD/2014 M/S. MANCHUKONDA PRAKASHAM INDUSTRIES INDIA PVT. LT D :- 4 -: RELEVANT ASSESSMENT YEAR SHOULD BE CONSIDERED. HE THEREFORE RE-WORKED THE DEPRECIATION BY REDUCING THE ACTUAL DEPRECIATIO N ALLOWED FOR THE AY. 2009-10 FROM THE TOTAL COST OF NEW TRUCKS TO ARRIVE AT THE OPENING WDV AS ON 01-04-2009 AT RS. 90,54,722/- AND ALLOWED DEP RECIATION THEREON AT 50%. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. WHILE THE LD. DR SUPPORTED THE ORDER OF AO, THE LD. COUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). 5. WE FIND THAT THE ASSESSEE HAD CLAIMED DEPRECIATI ON @ 30% INSTEAD OF 50% IN THE AY.2009-10 AND THEREFORE CLOSING WDV WAS WORKED OUT AFTER REDUCING THE SAID DEPRECIATION @ 15% SINCE TH E ASSETS WERE USED FOR LESS THAN 180 DAYS. AS RIGHTLY HELD BY THE CIT (A), ONLY THE ACTUAL DEPRECIATION ALLOWED SHOULD BE CONSIDERED FOR ARRIV ING AT THE CLOSING WDV AND IT CANNOT BE SUBSTITUTED WITH ANOTHER FIGUR E. CLOSING WDV HAS TO BE WORKED OUT AFTER REDUCING THE ACTUAL DEPRECIA TION ALLOWED AND NOT WHAT WAS TO BE ALLOWED. THEREFORE, WE SEE NO REASO N TO INTERFERE WITH THE ORDER OF CIT(A) ON THIS ISSUE. HENCE, THIS GROUND IS REJECTED. 6. AS REGARDS GROUND NO.4, WE FIND THAT THE ASSESSE E HAD EARNED DIVIDEND INCOME DURING THE RELEVANT ASSESSMENT YEAR BUT DID NOT MAKE ANY DISALLOWANCE U/S. 14A R.W.R. 8D OF THE ACT. TH E AO THEREFORE WORKED OUT THE DISALLOWANCE U/S. 14A R.W.RULE 8D OF I.T. R ULES AT RS. 3,77,083/- AND DISALLOWED THE SAME U/S. 14A. AGGRI EVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A), WHO ALLOWED THE SAME HOLDING THAT THE AO HAS NOT GIVEN ANY BASIS FOR COMPUTING THE FI GURE AT RS. 3,77,083/-. AGAINST SUCH RELIEF GIVEN BY CIT(A), T HE REVENUE IS IN APPEAL BEFORE US. 7. WHILE LD. DR SUPPORTED THE ORDER OF AO AND LD. C OUNSEL FOR THE ASSESSEE SUPPORTED THE ORDER OF CIT(A). I.T.A. NO. 514/HYD/2014 M/S. MANCHUKONDA PRAKASHAM INDUSTRIES INDIA PVT. LT D :- 5 -: 8. HAVING REGARD TO THE RIVAL CONTENTIONS, WE FIND THAT ASSESSEE HAD CLAIMED DIVIDEND INCOME AS EXEMPT U/S. 10(34) OF TH E ACT, BUT DID NOT MAKE ANY DISALLOWANCE U/S. 14A OF THE ACT NOR DID I T CLAIM THAT NO EXPENDITURE WAS INCURRED FOR EARNING OF SUCH EXEMPT INCOME. WE AGREE WITH THE FINDINGS OF CIT(A) THAT THE AO HAS NOT GIV EN ANY BASIS FOR COMPUTING THE FIGURE AT RS. 3,77,083/-. HOWEVER, W E ARE OF THE OPINION THAT IN SUCH CIRCUMSTANCES, THE CIT(A) OUGHT TO HAV E DIRECTED THE AO TO FURNISH THE COMPUTATION OF DISALLOWANCE U/S. 14A IN STEAD OF DELETING THE SAID ADDITION IN TOTO. THERE IS NO DISPUTE THA T THE PROVISIONS OF SECTION 14A R.W.R. 8D ARE APPLICABLE TO THE RELEVAN T ASSESSMENT YEAR. IN VIEW OF THE SAME, WE DEEM IT FIT AND PROPER TO REMI T THIS ISSUE TO THE FILE OF AO WITH A DIRECTION TO RE-COMPUTE THE DISALLOWAN CE U/S. 14A IN ACCORDANCE WITH LAW. NEEDLESS TO MENTION THAT ASSE SSEE SHOULD BE GIVEN A FAIR OPPORTUNITY OF HEARING. IN THE RESULT, THIS GROUND IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. 9. IN THE RESULT, THE REVENUE'S APPEAL IS PARTLY AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN OPEN COURT ON 8 TH MAY, 2015 SD/- SD/- (P.M. JAGTAP) (P. MADHAVI D EVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 8 TH MAY, 2015 TNMM I.T.A. NO. 514/HYD/2014 M/S. MANCHUKONDA PRAKASHAM INDUSTRIES INDIA PVT. LT D :- 6 -: COPY TO : 1. DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-16(2), ROOM NO. 611, 6 TH FLOOR, AAYAKAR BHAVAN, BASHEERBAGH, HYDERABAD. 2. M/S. MANCHUKONDA PRAKASHAM INDUSTRIES INDIA PVT. LTD., MANCHUKONDA HOUSE, 6-3-347/12/A/12/3, DWARAKAPURI COLONY, PUNJAGUTTA, HYDERABAD. 3. CIT(APPEALS)-V, HYDERABAD 4. CIT-IV, HYDERABAD 5. D.R. ITAT, HYDERABAD