AVALON PHARMA P. LTD, MUMBAI V. DCIT 4(1), MUMBAI

ITA 5702/MUM/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 71559 (ITAT-MUMBAI)
• Duration Of Justice: 1 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-10-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: J
• Assessment Year: 2010-2011
• Appeal Filed On: 12-09-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: MA YUR KISHNADWALA
• Keywords: Depreciation
• Section: 32; 148; 15

Judgement Text

` `` ` , IN THE INCOME TAX APPELLATE TRIBUNAL J B ENCH, MUMBAI , ! ' ' ' ' , #$ %&'( , ) ! * BEFORE SHRI VIJAY PAL RAO, JM AND SHRI N.K. BILLA IYA, AM ./ I.T.A. NO.5702/MUM/2013 ( # # # # + + + + / ASSESSMENT YEAR : 2010-11 M/S. AVALON PHARMA PVT. LTD., SETHNA BLDG., 216, S.G. MARG, MUMBAI-400 003 THE DCIT -4(1), AAYAKAR BHAVAN, MUMBAI-400 020 !, ) ./ - ./PAN/GIR NO. : AABCA 8813F ( ,. /APPELLANT ) .. ( /0,. / RESPONDENT ) ,. 1 / APPELLANT BY : ` SHRI MAYUR KISHNADWALA /0,. 2 1 /RESPONDENT BY : SHRI SANJEEV JAIN # 2 3 ) / DATE OF HEARING :17.10.2013 45+ 2 3 ) / DATE OF PRONOUNCEMENT :23.10.2013 6 / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE LD. CIT(A)-8, MUMBAI DT.11.07.2013 PERTAINING TO A.Y. 2010-11. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE L D. CIT(A) ERRED IN CONFIRMING THE A.OS STAND OF RESTRICTING THE DEPR ECIATION ON MOTOR CAR USED FOR THE PURPOSE OF BUSINESS AT THE RATE OF 15% AS AGAINST 50% AS APPLICABLE DURING THE RELEVANT PERIOD. ITA NO.5702/M/2013 2 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE ASSESSING OFFICER NOTICED THAT THE ASSESSEE HAS DEB ITED AN AMOUNT OF RS. 44,05,980/- TOWARDS DEPRECIATION ON MOTOR CAR (MER CEDES BENZ). THE ASSESSING OFFICER FURTHER NOTICED THAT THE ASSESSEE HAS CLAIMED DEPRECIATION AT THE RATE OF 50%. THE ASSESSEE WAS ASKED TO JUSTIFY ITS CLAIM OF HIGHER RATE OF DEPRECIATION. THE ASSESSEE FILED A DETAILED REPLY VIDE LETTER DT. 1.11.2012 AND EXPLAINED ITS CLAIM F OR HIGHER RATE OF DEPRECIATION. THE AO OBSERVED THAT THE ASSESSEE IS NOT ENTITLED FOR HIGHER RATE OF DEPRECIATION BECAUSE MERCEDES BENZ CAR IS A LUXURY VEHICLE AND NOT A COMMERCIAL VEHICLE AND THE HIGHER RATE OF D EPRECIATION IS ALLOWED ONLY ON COMMERCIAL VEHICLE. THE AO WENT ON TO ALLO W THE NORMAL RATE OF DEPRECIATION AT THE RATE OF 15%. 4. THE ASSESSEE STRONGLY AGITATED THIS ISSUE BEFOR E THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE DREW OUR ATTENTION TO THE TABLE OF RATES AT WHICH DEPRECIATION IS ADMISSI BLE AND POINTED OUT THAT HIGHER RATE OF DEPRECIATION AT THE RATE OF 50% WAS ALLOWABLE ON NEW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON OR AFTER 1 ST DAY OF JANUARY, 2009 BUT BEFORE THE 1 ST DAY OF OCTOBER 2009 AND IS PUT TO USE BEFORE THE 1 ST DAY OF OCTOBER, 2009 FOR THE PURPOSE OF BUSINESS OR PRO FESSION. IT IS THE SAY OF THE LD. COUNSEL THAT SINCE THE ASSESSEE HAS FULF ILLED ALL THE REQUISITE CONDITIONS FOR THE CLAIM OF HIGHER RATE OF DEPRECIA TION, THE SAME SHOULD BE ALLOWED. 6. THE LD. DEPARTMENTAL REPRESENTATIVE RELIED UPON THE FINDINGS OF THE LOWER AUTHORITIES. 7. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES. AN IDENTICAL ISSUE CAME UP FOR CONSIDERATION BEFORE TH E CO-ORDINATE BENCH IN ITA NO.5702/M/2013 3 ITA NO. 7488/M/2011 DT. 16.9.2013, WHEREIN ONE OF U S I.E. AM IS THE PARTY TO THAT DECISION, WHEREIN THE CO-ORDINATE BEN CH HAS FOLLOWED THE DECISION OF THE TRIBUNAL IN ITA NO. 7307/M/2003 AND 4059/M/04. LET US FIRST DISCUSS THE FACTS OF THE CASE RELIED UPON BY THE TRIBUNAL IN ITA NO. 7488/M/2011. THE FACTS IN BRIEF ARE THAT THE ASSESSEE PURCHASED A MOTOR CAR BETWEEN THE PERIOD FROM 1-10-1998 TO 31-3-1999. THI S CAR WAS USED BY THE ASSESSEE FOR HIS BUSINESS OF CIVIL CONS TRUCTION. THE ASSESSEE CLAIMED THE DEPRECIATION ON THE SAME AT TH E RATE OF 40 PER CENT WHICH WAS ALLOWED UNDER SECTION 143(L)(A). THE ASSESSING OFFICER SOUGHT TO RECTIFY THE SAME UNDER SECTION 15 4, HOWEVER THE PROCEEDINGS UNDER THAT SECTION WERE DROPPED AND NOT ICE UNDER SECTION 148 WAS ISSUED AND THE ASSESSMENT WAS REOPE NED. THE ASSESSEE CLARIFIED THAT THE DEPRECIATION AT THE RAT E OF 40 PER CENT WAS CLAIMED IN VIEW OF NEW ENTRY (IIA) INSERTED UND ER ITEM III IN APPENDIX-I TO RULE 5 OF IT RULES, 1962 WITH EFFECT FROM 1-4-1999. THE ASSESSING OFFICER STATED THAT THE DEPRECIATION CLAIMED BY THE ASSESSEE AT THE HIGHER RATE OF 40 PER CENT FOR ASSE SSMENT YEAR 2001 -02 HAD TO BE RESTRICTED TO 20 PER CENT BECAUSE MAR UTI ZEN WAS NOT A COMMERCIAL VEHICLE AS CONFIRMED BY THE RTO AUTHOR ITIES. THE ASSESSING OFFICER, ACCORDINGLY, RESTRICTED THE DEPR ECIATION TO 20 PER CENT AND MADE AN ADDITION OF RS. 72,959 TO THE TOTA L INCOME OF THE ASSESSEE. AGGRIEVED BY THIS THE ASSESSEE CARRIED TH E MATTER INTO APPEAL BEFORE THE LD. COMMISSIONER (APPEALS) WHO AL SO CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOLLOWING THE A PPELLATE ORDER OF COMMISSIONER (APPEALS) FOR ASSESSMENT YEAR 2001-02. AGGRIEVED BY THIS, THE ASSESSEE IS IN APPEAL BEFORE US. THE LD. COUNSEL APPEARING ON BEHALF OF THE ASSESS EE FIRSTLY NARRATED THE FACTUAL MATRIX OF THE CASE AND THEREAF TER MADE LEGAL ARGUMENTS. THE FIRST ARGUMENT RAISED BY THE ASSESSE E'S COUNSEL WAS THAT THE WORDS 'COMMERCIAL VEHICLE' WAS USED ONLY I N THE INCOME TAX ACT, 1961 AND INCOME-TAX RULES, 1962, HENCE, TH E MEANING ASSIGNED TO THE SAME IN THE INCOME TAX ACT WAS RELE VANT AND ONLY TO BE CONSIDERED. IT WAS ALSO POINTED OUT THAT THE WORDS 'COMMERCIAL VEHICLE' WAS NOT DEFINED IN THE MOTOR V EHICLES ACT 1988, NOR IN ANY REGISTRATION CERTIFICATE ISSUED BY THE RTO THESE WORDS WERE USED, HENCE THE REPORT OF THE RTO TO THI S EFFECT WAS NOT RELEVANT AND CONSEQUENTLY RELIANCE PLACED BY THE RE VENUE ITA NO.5702/M/2013 4 AUTHORITIES THEREON WAS ALSO MISPLACED. THE LD. COU NSEL ALSO STATED THAT IN THE REPORT OF THE RTO NO SUCH SPECIFIC CERT IFICATE WAS GIVEN THOUGH THE SAME WAS NOT AVAILABLE WITH HIM AT THAT TIME. THE LD. COUNSEL THEN REFERRED TO THE RELEVANT CLAUSE OF APP ENDIX-I AND ALSO NOTE THERETO DEFINING THE TERM 'COMMERCIAL VEHICLE' . THE LD. COUNSEL ALSO REFERRED TO THE EXPLANATION TO THIRD P ROVISO OF SECTION 32 OF THE ACT. THE LD. COUNSEL ALSO REFERRED TO THE DEFINITIONS OF VARIOUS TERMS USED IN APPENDIX-I AND SECTION 32 AND THEIR MEANINGS AS ASSIGNED TO THEM IN THE RELEVANT PROVIS IONS OF MOTOR VEHICLES ACT, 1988. BASED UPON THESE PROVISIONS THE LD. COUNSEL CONTENDED THAT THE MARUTI ZEN CAR WAS A LIGHT MOTOR VEHICLE HENCE, THE SAME FELL WITHIN THE MEANING OF DEFINITION OF ' COMMERCIAL VEHICLE' AS PER PROVISIONS OF SECTION 32, APPENDIX- I TO RULE 5 OF THE INCOME-TAX RULES, 1962. IT WAS ALSO CONTENDED B Y THE LD. COUNSEL THAT IN ITEM-ILL OF PART A OF APPENDIX I, C LAUSE (1A) WAS ON STATUTE WITH EFFECT FROM 23-8-1990, CLAUSE (2)(I I) WAS ALSO ON STATUTE HOWEVER CLAUSE (2)(IIA) WAS BROUGHT ON STAT UTE WITH EFFECT FROM 1-4-1999, WHICH PROVIDED FOR DEPRECIATION AT T HE RATE OF 40 PER CENT ON ANY 'COMMERCIAL VEHICLE' ACQUIRED BY TH E ASSESSEE AFTER FIRST DAY OF OCTOBER, 1998 BUT BEFORE THE FIR ST DAY OF APRIL, 1999 AND WHICH WAS PUT TO USE BEFORE THE FIRST DAY OF APRIL, 1999 FOR THE PURPOSE OF BUSINESS AND PROFESSION OF THE A SSESSEE AND THE ASSESSEE COMPLIED WITH ALL THESE CONDITIONS, HENCE ASSESSEE WAS ENTITLED FOR THE DEPRECIATION THEREON AT THE RATE O F 40 PER CENT. IT WAS ALSO CONTENDED THAT THIS NEW ENTRY WAS INSERTED WITH THE INTENTION TO GIVE BOOST TO AUTOMOBILE SECTOR BY PRO VIDING ENHANCED RATE OF DEPRECIATION ON VEHICLES PURCHASED DURING P ARTICULAR PERIOD OF TIME. IT WAS ALSO CONTENDED THAT ONCE A S EPARATE ENTRY WAS CREATED AND A PARTICULAR ASSET FELL WITHIN THAT ENTRY THEN THE SAME WAS TO REMAIN UNDER THE SAME ENTRY TILL IT WAS USED FOR THE PURPOSE OF BUSINESS AND FOR THAT DURATION THE ASSES SEE WAS ENTITLED TO DEPRECIATION AT THE RATE SPECIFIED FOR THAT ENTR Y ONLY. 7. THE TRIBUNAL ON ABOVE FACTS GAVE ITS FINDING AS UNDER:- AS PER THE THIRD PROVISO TO SECTION 32 OF THE ACT, IN RESPECT OF THE ASSET BEING COMMERCIAL VEHICLE ACQUIRED BETWEEN 2-1 0-1998 AND 31-3-1999, THE DEPRECIATION HAS TO BE ALLOWED ON SU CH PERCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRI BED. AS PER THE PROVISIONS OF SECTION 43(6)(C)(II). W.D.V. MEANS TH E WRITTEN DOWN VALUE OF THAT BLOCK OF ASSET AS INCREASED BY THE AC TUAL COST OF ANY ASSET FALLING WITHIN THAT BLOCK ACQUIRED DURING THE PREVIOUS YEAR AND AS REDUCED BY THE MONIES PAYABLE TOGETHER WITH SCRAP VALUE IF ITA NO.5702/M/2013 5 ANY IN RESPECT OF THE ASSETS FALLING WITHIN THAT BL OCK WHICH ARE SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR. HOWEVER, FOR OUR PURPOSE THE MATERIAL PROVISION IS THAT THE ACTUAL COST OF THE ASSET SO ACQUIRED WOULD FALL WITHIN THA T BLOCK IN THE YEAR OF ACQUISITION AND THEREAFTER THE W.D.V., I.E., THE ACTUAL COST LESS DEPRECIATION ALLOWED THEREON WOULD BE MATERIAL FOR COMPUTING DEPRECIATION IN SUBSEQUENT YEARS. THUS THE COST OF CAR IS TO BE TREATED AS W.D.V. FOR COMPUTING DEPRECIATION THEREO N AT THE SPECIFIED PERCENTAGE. FURTHER THE EXPLANATION TO TH IS PROVISO DEFINES THAT THE EXPRESSION 'COMMERCIAL VEHICLE' WO ULD MEAN... 'LIGHT MOTOR VEHICLE' AND THE 'LIGHT MOTOR VEHICLE' AS DEFINED IN THE MOTOR VEHICLES ACT, 1988, MEANS ANY TRANSPORT VEHIC LE OR OMNI BUS, THE GROSS PHYSICAL WEIGHT OF EITHER OF WHICH O R A MOTOR CAR OR A TRACTOR OR ROAD ROLLER THE UNLADEN WEIGHT OF WHIC H DOES NOT EXCEED 75,00 KGS. THUS A MOTOR CAR NOT EXCEEDING TH E SPECIFIED WEIGHT IS COVERED UNDER THE DEFINITION OF 'LIGHT MO TOR VEHICLE'. IT IS FURTHER PROVIDED THAT COMMERCIAL VEHICLE WOULD NOT INCLUDE 'MAXI- CAB' AND 'MOTOR-CAB'. THE MAXI-CAB AS PER PROVISION S OF MOTOR VEHICLES ACT MEANS ANY MOTOR VEHICLE CONSTRUCTED OR ADAPTED TO CARRY MORE THAN SIX PASSENGERS BUT NOT MORE THAN TW ELVE PASSENGERS EXCLUDING THE DRIVER FOR HIRE OR REWARD. SIMILARLY THE TERM 'MOTOR C JO' ALSO EXCLUDES ANY MOTOR VEHICLE F OR HIRE OR REWARD. IF THE PROVISIONS OF EXPLANATION TO THIS PR OVISO AND THE DEFINITION OF MAXI-CAB AND MOTOR CAB AS GIVEN IN MO TOR VEHICLES ACT, 1988 ARE READ TOGETHER THEN MOTOR VEHICLES USE D FOR HIRE OR REWARD WOULD NOT BE COVERED UNDER THIS PROVISO TO S ECTION 32 OF THE ACT, AND SUCH MOTOR VEHICLES WOULD BE COVERED U NDER ENTRY (2)(II) OF ITEM-3 OF PART-A OF APPENDIX-I TO RULE 5 OF THE RULES. THIS CONCLUSION FURTHER LEADS TO AN INTERFERENCE THAT TH E LEGISLATURE HAS GIVEN BENEFIT OF HIGHER DEPRECIATION TO THE ASSESSE ES NOT ENGAGED IN THE BUSINESS OF MOTOR BUSES, MOTOR LORRIES AND MOTO R TAXIES ON HIRE AND DEFINING SUCH LIGHT MOTOR VEHICLES AS COMM ERCIAL VEHICLES THOUGH INTENTIONALLY EXCLUDING VEHICLES COMMERCIALL Y EXPLOITED FOR YIELDING INCOME FROM THE DEFINITION OF COMMERCIAL V EHICLE FURTHER SUPPORTS THE CASE OF THE ASSESSEE. WE ALSO FIND SUF FICIENT FORCE IN THE CONTENTION OF THE ASSESSEE THAT DIFFERENT ENTRI ES EXIST IN APPENDIX-I FOR DIFFERENT CATEGORIES OF MOTOR VEHICL ES FOR PROVIDING DEPRECIATION AT A SPECIFIED RATE DEPENDING UPON THE PERIOD OF ACQUISITION AND THE PURPOSE FOR WHICH THEY ARE DEPL OYED. THEREFORE, NOMENCLATURE OF COMMERCIAL VEHICLE SHOUL D NOT BE SO CONSTRUED TO DEPRIVE THE ASSESSEE OF HIGHER DEPRECI ATION WHEN ALL THE CONDITIONS SPECIFIED IN THE ACT AND THE RULES H AVE BEEN MET BY THE ASSESSEE. WE ALSO HOLD THAT, TILL SUCH CAR IS U SED BY THE ASSESSEE ITA NO.5702/M/2013 6 FOR ITS BUSINESS PURPOSE THE ASSESSEE WOULD GET THE DEPRECIATION AT THE RATE OF 40 PER CENT AS PER THE IIIRD PROVISO TO SECTION 32 OF THE ACT. THUS, GROUND NOS. 1 TO 3 OF THE ASSESSEE STAND ACCEPTED. 8. AS STATED HEREINABOVE, THE FACTS ARE BEING IDENT ICAL. RESPECTFULLY FOLLOWING THE DECISION OF THE COORDINATE BENCH, FIN DINGS OF THE CIT(A) ARE REVERSED. THE AO IS DIRECTED TO ALLOW THE DEPR ECIATION AT THE RATE OF 50% AS CLAIMED BY THE ASSESSEE. 9. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 23.10.2013 . 6 2 5+ ) 7 #8 9 23.10.2013 5 2 ? SD/- SD/- ( VIJAY PAL RAO ) ( N.K. BILLAIYA ) ! /JUDICIAL MEMBER ) ! / ACCOUNTANT MEMBER MUMBAI; 7 # DATED 23/10 /2013 . # . ./ RJ , SR. PS 6 2 /3@ A+3 6 2 /3@ A+3 6 2 /3@ A+3 6 2 /3@ A+3 / COPY OF THE ORDER FORWARDED TO : 1. ,. / THE APPELLANT 2. /0,. / THE RESPONDENT. 3. B ( ) / THE CIT(A)- 4. B / CIT 5. C? /3# , , / DR, ITAT, MUMBAI 6. ?D E / GUARD FILE. 6# 6# 6# 6# / BY ORDER, 03 /3 //TRUE COPY// F FF F / G G G G (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI