M/s. Swastik Sales Agencies, Indore V. The ACIT, Indore

ITA 519/IND/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2828 (ITAT-INDORE)
• Duration Of Justice: 6 month(s) 20 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-06-2010
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: DB
• Assessment Year: 2006-2007
• Appeal Filed On: 12-11-2009
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: APARNA KARAN
• Assessee Lawyers: MUKUL SHASTRI
• Keywords: Depreciation
• Section: 142(1); 32

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, INDORE BENCH, INDORE BEFORE SHRI JOGINDER SINGH, JUDICIAL MEMBER AND SHRI V.K. GUPTA, ACCOUNTANT MEMBER ITA NO.519/IND/09 A.YS. 2006-07 M/S SWASTIK SALES AGENCIES INDORE PAN AAQFS-7764M APPELLANT VS ASSTT. COMMISSIONER OF INCOME TAX 5(1), INDORE RESPONDENT APPELLANT BY : SHRI MUKUL SHASTRI, CA RESPONDENT BY : SMT. APARNA KARAN, SR. DR O R D E R PER JOGINDER SINGH, JM THIS APPEAL IS BY THE ASSESSEES AGAINST THE ORDER O F THE LEARNED CIT(A) DATED 28.8.2009 WHEREIN THE FIRST GROUND RAI SED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEA RNED COMMISSIONER OF INCOME-TAX (APPEALS) ERRED IN CONFIRMING THE DISALL OWANCE OF DEPRECIATION AT THE HIGHER RATE OF 30% (RESTRICTING THE ALLOWANCE OF DEPRECIATION AT THE RATE OF 15%). 2 2. DURING HEARING OF THIS APPEAL WE HAVE HEARD THE RIVAL SUBMISSIONS OF THE PARTIES AND HAVE GONE THROUGH TH E MATERIAL AVAILABLE ON THE FILE. THE CRUX OF ARGUMENTS ON BEHALF OF TH E ASSESSEE IS THAT FOR THE ASSESSMENT YEAR 2005-06 THE TRIBUNAL VIDE ORDER DATED 23.10.2009 IN ITA NO. 138/IND/2009 HAS ALREADY DISPOSED OF THE ISSUE. THIS ASSERTION OF THE ASSESSEE WAS NOT CONTROVERTED BY T HE REVENUE, THEREFORE, WE ARE REPRODUCING HEREUNDER THE RELEVAN T PORTION OF THE SAID ORDER :- THIS AP PEAL IS BY THE ASSESSEE AGAINST THE ORDER OF LD. CIT(A)-II, INDORE, DATED 3.12.2008 FOR THE AY 2005-06. THE FIRST GROUND RAISED IS THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE FIRST APPELLATE AUTHORITY IS UNJUSTIFIED IN RESTRICTING THE DISALLOWANCE OF DEPRECIATION @25% IN PLACE OF 40% CLAIMED BY THE ASSESSEE. 2. DURING HEARING OF THIS APPEAL, WE HAVE HEARD LD. REPRESENTATIVES OF BOTH SIDES AND CONSIDERED THE ARGUMENTS ADVANCED BY THEM. THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT NO DISALLOWANCE WAS MADE IN EARLIER YEARS AND THE ASSESSEE IS ALSO PLYING THE VEHICLE ON HIRE, CONSEQUENTLY, THE HIRE RATE OF DEPRECIATION I S ALLOWABLE TO THE ASSESSEE. ON THE OTHER HAND, THE LD. SR. DR STRONGLY DEFENDED THE IMPUGNED ORDER BY CONTENDING THAT NECESSARY EVIDENCE WAS NOT BROUGHT ON RECORD BY THE ASSESSEE JUSTIFYING ITS CLAIM. 3. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS OF LD. REPRESENTATIVES OF BOTH SIDES AND PERUSED THE MATERIAL AVAILABLE ON THE FILE. BRIEF FACTS ARE THAT THE ASSESSEE FIRM IS ENGAGED IN TRADING OF TOBACCO, MATCHES, TENDU LEAVES AND AGARBATTI ETC. DECLARED INCOME OF RS.14,83,970/- IN ITS RETURN FILED ON 31.10.2005. THE CASE WAS 3 SELECTED FOR SCRUTINY, THEREFORE, NOTICES U/S 143(2) AND 142(1) OF THE ACT WERE ISSUED TO THE ASSESSEE TO WHICH THE ASSESSEE ATTENDED THE PROCEEDINGS FROM TIME TO TIME, PREFERRED WRITTEN SUBMISSIONS AND PRODUCED BOOKS OF ACCOUNTS WHICH WERE TEST-CHECKED BY ASSESSING OFFICER. THE ASSESSEE IS THE OWNER OF TRUCK NO.MP-09-KC- 6151 AND CLAIMED DEPRECIATION @40% (RS.1,07,381/-). HOWEVER, THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DEPRECIATION ALLOWABLE ON THE TRUCK IS @25%, CONSEQUENTLY, THE EXCESS CLAIM OF RS.40,268/- WAS DISALLOWED AND THE REMAINING AMOUNT OF RS.67,113/- WAS ADDED TO THE TOTAL INCOME OF THE ASSESSEE. ON APPEAL, THE STAND OF THE LD. ASSESSING OFFICER WAS AFFIRMED, WHICH IS UNDER CHALLENGE BEFORE THIS TRIBUNAL. IF THE ARGUMENTS ADVANCED BY THE RESPECTIVE LD. COUNSEL AND THE MATERIAL ON RECORD ARE ANALYSED, THERE IS NO DISPUTE THAT THE ASSESSEE IS TRADING IN TOBACCO, AGARBATTI, TENDU LEAVES AND MATCHES ETC. THE STAND OF THE REVENUE IS THAT THE ASSESSEE AS SUCH IS NOT IN THE BUSINESS OF PLYING TRUCKS ON HIRE. THERE IS A FURTHER MENTIONED IN THE APPELLATE ORDER THAT INFERENCE CAN BE DRAWN THAT THE TRUCK MIGHT HAVE LET OUT ON HIRE OCCASIONALLY. THE LD. FIRST APPELLATE AUTHORITY PLACED RELIANCE ON THE DECISION IN CIT VS. GUPTA GLOBAL EXIM PVT. LTD. (305 ITR 132) (SC) AND AFFIRMED THE ASSESSMENT ORDER. HOWEVER, THE ASSESSEE HAS FILED AN AFFIDAVIT STATING THAT FOR AY 2004-05, THE HIGHER RATE OF DEPRECIATION U/S 32 WAS ALLOWED TO THE ASSESSEE. THE ASSESSEE ALSO FILED STATEMENT OF FREIGHT RECEIVED AND DEPRECIATION CLAIMED AND ALLOWED FOR AY 2004-05 AND 2005-06, WHEREIN, THE CLAIMED DEPRECIATION @40% WAS ALLOWED. ASSESSEE ALSO PRODUCED THE COPY OF ASSESSMENT ORDER DATED 29.12.2006 (AY 2004-05), WHEREIN, NO SUCH DISALLOWANCE WAS MADE. THE ASSESSEE ALSO PRODUCED THE COPY OF AUDIT REPORT FILED BEFORE THE REVENUE. THE ASSESSEE ALSO FILED PAPER BOOK RUNNING INTO 1 TO 12 PAGES IN THE FORM OF ADDL. EVIDENCE, TO THE FACT THAT THESE DOCUMENTS WERE NOT FILED BEFORE THE ASSESSING OFFICER. HOWEVER, THE LD. SR. DR OBJECTED TO THE ADMISSION 4 OF ADDL. EVIDENCE CONTAINED IN THE PAPER BOOK. WE HAVE FOUND THAT IN THE PAPER BOOK, THE ASSESSEE HAS FURNISHED AN AFFIDAVIT IN SUPPORT OF THESE DOCUMENT I.E. STATEMENT OF FREIGHT RECEIVED AND CLAIMED DEPRECIATION ALLOWED FOR AY 2004-05, 2005-06, COPY OF ASSESSMENT ORDER, COPY OF ACKNOWLEDGMENT EVIDENCING FILING OF RETURN OF INCOME, COPY OF COMPUTATION OF INCOME AND STATEMENT OF DEPRECIATION. KEEPING IN VIEW THE NATURE OF THESE DOCUMENTS, THESE ARE ADMITTED. IT IS ALSO SEEN THAT THE ASSESSEE HAS SHOWN HIRING CHARGES AS INCOME FROM THE IMPUGNED TRUCK, THEREFORE, ONE CLEAR FACT IS OOZING OUT THAT THE TRUCK WAS USED FOR HIRING PURPOSES ALSO THOUGH MAY NOT BE FULL TIME. WE ARE OF THE VIEW THAT DEPRECIATION ALLOWANCE IS A CONCESSION GRANTED BY THE STATE WHILE COMPUTING INCOME BASED ON MANY FACTORS RELEVANT TO WHOLESOME FISCAL ADMINISTRATION. DEPRECIATION IS DIMINUTION IN VALUE OF AN ASSET WHEN APPLIED FOR THE PURPOSES OF MAKING PROFIT OR GAIN. DEPRECIATION IS THUS RELATED TO AN NOTIONAL LOSS OF THE ASSET AGAINST ACTUAL LOS S IN THE SENSE OF OUTGOING OF BUSINESS BY REASON OF WEAR & TEAR. EVEN OTHERWISE, DEPRECIATION IS A ALLOWABLE DEDUCTION BOTH ACCORDING TO ACCOUNTING PRINCIPLE AND ALSO AS PER THE ACT. WE ARE AWARE THAT DEDUCTION U/S 32(1) CANNOT BE CLAIMED BY SOMEONE WITHOUT REAL CONNECTION WITH THE ASSET AND CLAIMANT MUST BE ONE WHO HAS REAL CONNECTION WITH THE ASSET. THE HONBLE BOMBAY HIGH COURT EVEN WENT TO THE EXTENT THAT EVEN THE VEHICLES UNDER REPAIR ARE ELIGIBLE FOR DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE TRUCKS. THE WORD USED IN SEC. DENOTES ACTUALLY USED FOR THE PURPOSES OF THE BUSINESS. HOWEVER, THE QUESTION BEFORE US PERTAINS TO RATE OF DEPRECIATION. THE WORD HIRE USED IN THE ENTRY RELATING TO MOTOR LORRY/TRUCK ETC. IS ONLY MEAN TO DENOTE THAT THE USE OF THE VEHICLE IS NOT BY THE OWNER HIMSELF FOR HIS OWN PURPOSES BUT IT IS GIVEN TO ANOTHER FOR USE OF LIMITED PERIOD FOR HIRE CONSIDERATION. FOR THE PURPOSE OF THIS ENTRY, THERE IS NO QUALITATIVE DIFFERENCE BETWEEN THE VEHICLES USED FOR A SPECIFIED PERIOD FOR CONSIDERATION AND LETTING THE 5 VEHICLES ON HIRE FOR SHORT DURATION ON PAYMENT OF HIRE CHARGES. SINCE THE ASSESSEE RECEIVED HIRE RENTAL CHARGES, WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO HIGHER RATE OF DEPRECIATION BY TREATING THE VEHICLE USED IN THE BUSINESS OF RUNNING THEM ON HIRE AND OWN BUSINESS OF THE ASSESSEE. FOR THIS PROPOSITION, WE ARE FORTIFIED BY THE DECISION IN CIT VS. MADAN & CO. (254 ITR 445) (MAD) AND CIT VS. BANSAL CREDIT LTD. (126 TAXMAN 149)(DEL). THE HONBLE MADHYA PRADESH HIGH COURT IN CIT VS. SHARMA MOTOR SERVICE (148 CTR 75) HELD THAT VEHICLE USED FOR TRANSPORTING PASSENGERS/GOODS AS A REGULAR BUSINESS ARE ENTITLED TO HIGHER RATE. WE ARE AWARE THAT THE HONBLE RAJASTHAN HIGH COURT IN CIT VS. SARDAR STONES (215 ITR 350) (RAJ) WAS OF THE VIEW THAT THE TRUCKS PRIMARILY SELF USE BUT OCCASIONALLY HIRE D OUT ARE NOT ELIGIBLE FOR HIGHER RATE. HOWEVER, RESPECTFULLY FOLLOWING THE DECISION FROM HONBLE JURISDICTIONAL HIGH COURT, HONBLE MADRAS & DELHI HIGH COURTS (SUPRA), WE ARE OF THE VIEW THAT THE ASSESSEE IS ENTITLED TO HIGHER RATE OF DEPRECIATION . OUR VIEW FURTHER FINDS STRENGTH FROM THE FACT THAT IN THE CASE OF THE ASSESSEE FOR EARLIER YEARS, HIGHER RATE OF DEPRECIATION WAS ALLOWED BY THE DEPARTMENT, THEREFORE, WITHOUT BRINGING INTO ANY CONTRARY EVIDENCE, EVEN FOR THE SAKE OF THE CONSISTENCY, THE DEPARTMENT IS NOT PERMITTED TO DEVIATE FROM ITS EARLIER STAND. ON THE ISSUE OF CONSISTENCY, WE ARE FORTIFIED BY THE DECISIONS FROM THE HONBLE APEX COURT IN UNION OF INDIA VS. SATISH PANNALAL SHAH (249 ITR 221), UNION OF INDIA & OTHERS VS. KUMUDINI NARAYAN DALAL & OTHERS (249 ITR 219) (SC), BERGER PAINTS INDIA LTD. VS. CIT (266 ITR 99) (SC), CIT VS. ALLIED FINANCE P. LTD (289 ITR 318) (DEL), CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS ALLOWED. EVEN OTHERWISE WHEN TWO VIEW ARE AVAILABLE, WHICH FAVOURS THE ASSESSEE HAS TO BE PREFERRED. IN THE AFORESAID ORDER, THE LD. FIRST APPELLATE AUT HORITY RESTRICTED THE DISALLOWANCE OF DEPRECIATION TO 25% IN PLACE OF 40% CLAIMED BY THE 6 ASSESSEE. THE TRIBUNAL HAS DELIBERATED UPON THE ISS UE AND HAS PLACED RELIANCE ON VARIOUS JUDICIAL PRONOUNCEMENTS AND ULT IMATELY REACHED TO A PARTICULAR CONCLUSION BY HOLDING THAT THE ASSESSEE IS ENTITLED TO HIGHER RATE OF DEPRECIATION ESPECIALLY WHEN IN THE CASE OF THE ASSESSEE FOR EARLIER YEARS HIGHER RATE OF DEPRECIATION WAS ALLOW ED BY THE DEPARTMENT THAT TOO WITHOUT BRINGING ANY CONTRARY MATERIAL ON RECORD. THE ASSESSING OFFICER IS DIRECTED TO FOLLOW THE AFORESAID ORDER, CONSEQUENTLY, THIS GROUND OF THE ASSESSEE IS ALLOWED. 4. THE NEXT GROUND PERTAINS TO CONFIRMATION OF DISA LLOWANCE OF RS.75,000/- ON AD HOC BASIS BY THE LEARNED COMMISS IONER OF INCOME TAX (APPEALS). THE CRUX OF ARGUMENTS ON BEHALF OF THE ASSESSEE IS THAT IT IS TOWARDS HIGHER SIDE WHEREAS THE LEARNED SR. D R DEFENDED THE DISALLOWANCE ON THE PLEA THAT NO EVIDENCE WAS FILED BY THE ASSESSEE. 5. ON PERUSAL OF RECORD AND AFTER HEARING THE RIVAL SUBMISSIONS, IT IS FOUND THAT A LUMP SUM DISALLOWANCE OF RS.75,000/- W AS MADE BY THE ASSESSING OFFICER ON THE PLEA THAT SOME PETTY EXPEN SES WERE NOT PROPERLY VOUCHED AND ADDED TO THE TOTAL INCOME OF T HE ASSESSEE, WHICH WAS AFFIRMED BY THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS). THE LEARNED CIT(A) EXAMINED THE CLAIM OF EXPENSES A ND DISALLOWED ON THE PLEA THAT THE EXPENSES ARE IN LACS OF RUPEES AN D THE MARKETING EXPENSES ITSELF HAVE BEEN CLAIMED AT RS.14.69 LACS. HOWEVER, THE FACT REMAINS THAT IT IS A LUMP SUM DISALLOWANCE AND ALSO THE DETAILS OF SOME 7 EXPENSES WERE NOT FURNISHED BY THE ASSESSEE. TO CU T SHORT THE MATTER AND TO PUT AN END TO THE LITIGATION, THE DISALLOWAN CE OF RESTRICTED TO RS.40,000/- IN PLACE OF RS.75,000/- SUSTAINED BY TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS), THEREFORE, TH IS GROUND IS PARTLY ALLOWED. FINALLY, THE APPEAL OF THE ASSESSEE IS PARTLY ALLO WED. ORDER PRONOUNCED IN OPEN COURT ON 2 ND JUNE, 2010. SD/- SD/- (V.K. GUPTA) (JOGINDER SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER JUNE 2, 2010 COPY TO: APPELLANT, RESPONDENT, CIT, CIT(A), DR, G UARD FILE *DBN/