M/s Mahendra & Co., RAJKOT-GUJARAT V. The Income Tax Officer, Ward-2 (1), RAJKOT-GUJARAT

ITA 613/RJT/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 0161 (ITAT-RAJKOT)
• Duration Of Justice: 8 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-09-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 24-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 15-12-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D R CHHATRE
• Assessee Lawyers: UTSAV R DOSHI
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, RAJKOT [CONDUCTED THROUGH E COURT AT AHMEDABAD] BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI AMARJEET SINGH, ACCOUNTANT MEMBER ./ ITA.NO.613/RJT/2015 / ASSTT. YEAR: 2011-2012 M/S.MAHENDRA & CO. SWAMINARAYAN STREET DANAPITH RAJKOT. VS ITO, WARD - 2(1) RAJKOT. / (APPELLANT) / (RESPONDENT) ASSESSEE BY : SHRI UTSAV R. DOSHI, AR REVENUE BY : SHRI D.R. CHHATRE, SR.DR / DATE OF HEARING : 24/08/2016 / DATE OF PRONOUNCEMENT: 09/09/2016 / O R D E R ASSESSEE IS IN APPEAL AGAINST ORDER OF THE LD.CIT(A )-2, RAJKOT DATED 21.10.2015 PASSED FOR THE ASTT.YEAR 2011-12. 2. SHORT ISSUE INVOLVED IN THIS APPEAL IS WHETHER T HE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION AT THE RATE OF 50% ON MARUTI SHIFT CAR PURCHASED BY IT DURING THE ACCOUNTING YEAR RELEVANT TO THE ASSESSME NT YEAR AND USED FOR THE PURPOSE OF THE BUSINESS. 3. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE HA S FILED ITS RETURN OF INCOME ELECTRONICALLY ON 21.9.2011 DECLARING TOTAL INCOME AT RS.6,33,710/-. THE ASSESSEE HAS PURCHASED MARUTI SHIFT CAR ON 27.4.2009. IT HAS CLAIMED DEPRECIATION AT THE RATE OF 50% ON THE COST OF THIS CAR. THE AO DID NOT ALLOW ITA NO.613/RJT/2015 2 THE CLAIM OF THE ASSESSEE. AGAINST THE CLAIM OF R S.1,70,325/-, THE LD.AO HAS ALLOWED DEPRECIATION OF RS.51,097/-. HE DISALLOWED THE CLAIM OF THE ASSESSEE AT RS.1,19,228/-. 4. APPEAL TO THE CIT(A) DID NOT BRING ANY RELIEF. 5. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE IT AT, AHMEDABAD SMC BENCH IN ITA NO.2737/AHD/2013. ITAT HAS RELI ED UPON THE ORDER OF THE ITAT, MUMBAI BENCH IN THE CASE OF DALEEP S. CHA NDNAN VS. ACIT, 14 SOT 0233. ORDER OF THE ITAT READ AS UNDER: 2. SOLE ISSUE INVOLVED IN THIS APPEAL IS, AT WHAT R ATE DEPRECIATION IS ADMISSIBLE TO THE ASSESSEE ON NEW INDUCTION OF MOTO R CAR IN THE BLOCK OF ASSETS. 3. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 2 2.9.2010 DECLARING TOTAL INCOME AT RS.13,19,250/-. IT HAS P URCHASED MERCEDES CAR ON 9.2.2009 FOR RS.29,72,759/- AND MARUTI SHIFT CAR OF RS.6,74,555/- ON 30.3.2009. THE TOTAL INVESTMENT M ADE BY THE ASSESSEE WAS OF RS.36,47,314/- IN THE PREVIOUS YEAR. IT HA S CLAIMED DEPRECIATION AT THE RATE OF 50%/2 I.E. 25%, BECAUSE VEHICLES WERE NOT USED FOR 365 DAYS IN THE PREVIOUS YEAR. THE ASSESS EE IN THIS WAY WORKED OUT WDV AT RS.27,35,485/-. THE AO GRANTED D EPRECIATION AT THE RATE OF 15%. APPEAL TO THE CIT(A) DID NOT BRIN G ANY RELIEF TO THE ASSESSEE. 4. WITH THE ASSISTANCE OF THE LD.REPRESENTATIVES, I HAVE GONE THROUGH THE RECORD CAREFULLY. THE LD.COUNSEL FOR THE ASSES SEE RELIED UPON THE ORDER OF THE ITAT, MUMBAI BENCH IN THE CASE OF DALE EP S. CHANDNANI VS. ACIT, REPORTED IN 14 SOT 0233. THE TRIBUNAL HA S CONSIDERED VERBATIM SAME SITUATION IN THAT CASE. DISCUSSION M ADE BY THE TRIBUNAL READS AS UNDER: 7. WE HAVE CONSIDERED THE SUBMISSIONS MADE BY BOTH THE SIDES, MATERIAL ON RECORD, ORDERS OF AUTHORITIES BELOW AND APPLICAB LE LEGAL PROVISIONS. THE INTERESTING QUESTION WHICH HAS ARISEN BEFORE US IS REGARDING THE RATE OF DEPRECIATION APPLICABLE TO MOTOR CAR ACQUIR ED BETWEEN 2-10- ITA NO.613/RJT/2015 3 1998 AND 31-3-1999 AND IF THE SAME HAS BEEN PUT TO USE BETWEEN THE SAME PERIOD FOR THE PURPOSE OF BUSINESS OF THE ASSE SSEE. AS FAR AS USE OF THE CAR ACQUIRED BY THE ASSESSEE DURING THIS PERIOD FOR THE PURPOSE OF BUSINESS IS CONCERNED, THE SAME IS NOT IN DISPUTE. WE CONSIDER IT PERTINENT TO REPRODUCE THE RELEVANT STATUTORY PROVI SIONS AS UNDER FOR BETTER APPRECIATION OF LEGAL POSITION. 1. THIRD PROVISO TO SECTION 32, AND EXPLANATION THE RETO. PROVIDED ALSO THAT WHERE AN ASSET BEING COMMERCIAL VEHICLE IS ACQUIRED BY THE ASSESSEE ON OR AFTER THE 1ST DAY OF OCTOBER, 1998 BUT BEFORE THE 1ST DAY OF APRIL, 1999 AND IS PUT TO USE BEFORE THE 1ST DAY OF APRIL, 1999 FOR THE PURPOSES OF BUSINESS OF PROFESS ION, THE DEDUCTION IN RESPECT OF SUCH ASSET SHALL BE ALLOWED ON SUCH PERC ENTAGE ON THE WRITTEN DOWN VALUE THEREFORE, AS MAY BE PRESCRIBED. EXPLANATION.' FOR THE PURPOSES OF THIS PROVISO' (A) THE EXPRESSION 'COMMERCIAL VEHICLE' MEANS' 'HEA VY GOODS VEHICLE', 'HEAVY PASSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHIC LE', 'MEDIUM GOODS VEHICLE' AND 'MEDIUM PASSENGER MOTOR VEHICLE', BUT DOES NOT INCLUDE 'MAXI-CAB', 'MOTOR-CAB', 'TRACTOR' AND 'ROAD-ROLLER '. (B) THE EXPRESSION 'HEAVY GOODS VEHICLE', 'HEAVY PA SSENGER MOTOR VEHICLE'. 'LIGHT MOTOR VEHICLE', 'MEDIUM GOODS VEHI CLE', 'MEDIUM PASSENGER MOTOR VEHICLE', 'MAXI-CAB', 'MOTOR-CAB', 'TRACTOR' AND 'ROAD- ROLLER' SHALL HAVE THE MEANINGS RESPECTIVELY AS ASS IGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1988). 2. RELEVANT PROVISIONS OF APPENDIX-I AND NOTE THERE TO. (IIA COMMERCIAL VEHICLE WHICH IS ACQUIRED BY THE AS SESSEE ON OR AFTER THE 1ST DAY OF OCTOBER, 1998, BUT BEFORE THE 1ST DA Y OF APRIL, 1999 AND IS PUT TO USE FOR ANY PERIOD BEFORE THE 1ST DAY OF APRIL, 1999 FOR THE PURPOSE OF BUSINESS OR PROFESSION IN ACCORDANCE WIT H THE THIRD PROVISO TO CLAUSE (II) OF SUB-SECTION (1) OF SECTION 32 (SE E NOTE 3A BELOW THE TABLE) 3A. 'COMMERCIAL VEHICLE' MEANS 'HEAVY GOODS VEHICLE', 'HEAVY PASSENGER MOTOR VEHICLE', 'LIGHT MOTOR VEHICLE', 'M EDIUM GOODS VEHICLE' AND 'MEDIUM PASSENGER MOTOR VEHICLE' BUT D OES NOT INCLUDE 'MAXI-CAB', 'MOTOR-CAB', 'TRACTOR' AND 'ROAD-ROLLER '. THE EXPRESSIONS 'HEAVY GOODS VEHICLE', 'HEAVY PASSENGER MOTOR VEHIC LE', 'LIGHT MOTOR VEHICLE', 'MEDIUM GOODS VEHICLE', 'MEDIUM PASSENGER MOTOR VEHICLE', 'MAXI-CAB', 'MOTOR-CAB', 'TRACTOR' AND 'ROAD-ROLLER ' SHALL HAVE THE ITA NO.613/RJT/2015 4 MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTIO N 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1988)) 3. RELEVANT PROVISIONS OF THE MOTOR VEHICLES ACT, 1 988. 'HEAVY GOODS VEHICLE' MEANS ANY GOODS CARRIAGE THE GROSS VEHICLE WEIGHT OF WHICH, OR A TRACTOR OR A ROAD-ROLLER THE UNLADEN WEIGHT OF EITHER OF WHICH, EXCEEDS 12,000 KILOGRAMS; 'HEAVY PASSENGER MOTOR VEHICLE' MEANS ANY PUBLIC SE RVICE VEHICLE OR PRIVATE SERVICE VEHICLE OR EDUCATIONAL INSTITUTION BUS OR OMNIBUS THE GROSS VEHICLE WEIGHT OF ANY OF WHICH, OR A MOTOR CA R THE UNLADEN WEIGHT OF WHICH, EXCEEDS 12,000 KILOGRAMS; 'LIGHT MOTOR VEHICLE' MEANS A TRANSPORT VEHICLE OR OMNIBUS THE GROSS VEHICLE WEIGHT OF EITHER OF WHICH OR A MOTOR CAR OR TRACTOR OR ROAD- ROLLER THE UNLADEN WEIGHT OF ANY OF WHICH, DOES NOT EXCEED (7,500) KILOGRAMS; 'MAXI-CAB' MEANS ANY MOTOR VEHICLE CONSTRUCTED OR A DAPTED TO CARRY MORE THAN SIX PASSENGERS, BUT NOT MORE THAN TWELVE PASSENGERS, EXCLUDING THE DRIVER, FOR HIRE OR REWARD; 'MEDIUM GOODS VEHICLE' MEANS ANY GOODS CARRIAGE OTH ER THAN A LIGHT MOTOR VEHICLE OR A HEAVY GOODS VEHICLE; 'MEDIUM PASSENGER MOTOR VEHICLE' MEANS ANY PUBLIC S ERVICE VEHICLE OR PRIVATE SERVICE VEHICLE, OR EDUCATIONAL INSTITUTION BUS OTHER THAN A MOTOR CYCLE, INVALID CARRIAGE, LIGHT MOTOR VEHICLE OR HEAVY PASSENGER MOTOR VEHICLE; 'MOTOR CAB' MEANS ANY MOTOR VEHICLE CONSTRUCTED OR ADAPTED TO CARRY NOT MORE THAN SIX PASSENGERS EXCLUDING THE DRIVER F OR HIRE OR REWARD; 8. AS PER THE THIRD PROVISO TO SECTION 32 OF THE AC T, 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 SUCH PE RCENTAGE ON THE WRITTEN DOWN VALUE THEREOF AS MAY BE PRESCRIBED. AS PER THE PROVISIONS OF SECTION 43(6)(C)(II). W.D.V. MEANS THE WRITTEN D OWN VALUE OF THAT BLOCK OF ASSET AS INCREASED BY THE ACTUAL COST OF A NY ASSET FALLING WITHIN THAT BLOCK ACQUIRED DURING THE PREVIOUS YEAR AND AS REDUCED BY THE MONIES PAYABLE TOGETHER WITH SCRAP VALUE IF ANY IN RESPECT OF THE ASSETS FALLING WITHIN THAT BLOCK WHICH ARE SOLD OR DISCARD ED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR. HOWEVER, FOR O UR PURPOSE THE ITA NO.613/RJT/2015 5 MATERIAL PROVISION IS THAT THE ACTUAL COST OF THE A SSET SO ACQUIRED WOULD FALL WITHIN THAT BLOCK IN THE YEAR OF ACQUISITION A ND THEREAFTER THE W.D.V., I.E., THE ACTUAL COST LESS DEPRECIATION ALL OWED THEREON WOULD BE MATERIAL FOR COMPUTING DEPRECIATION IN SUBSEQUENT Y EARS. THUS THE COST OF CAR IS TO BE TREATED AS W.D.V. FOR COMPUTING DEP RECIATION THEREON AT THE SPECIFIED PERCENTAGE. FURTHER THE EXPLANATION T O THIS PROVISO DEFINES THAT THE EXPRESSION 'COMMERCIAL VEHICLE' WO ULD MEAN... 'LIGHT MOTOR VEHICLE' AND THE 'LIGHT MOTOR VEHICLE' AS DEF INED IN THE MOTOR VEHICLES ACT, 1988, MEANS ANY TRANSPORT VEHICLE OR OMNI BUS, THE GROSS PHYSICAL WEIGHT OF EITHER OF WHICH OR A MOTOR CAR O R A TRACTOR OR ROAD ROLLER THE UNLADEN WEIGHT OF WHICH DOES NOT EXCEED 75,00 KGS. THUS A MOTOR CAR NOT EXCEEDING THE SPECIFIED WEIGHT IS COV ERED UNDER THE DEFINITION OF 'LIGHT MOTOR VEHICLE'. IT IS FURTHER PROVIDED THAT COMMERCIAL VEHICLE WOULD NOT INCLUDE 'MAXI-CAB' AND 'MOTOR-CAB'. THE MAXI-CAB AS PER PROVISIONS OF MOTOR VEHICLES AC T MEANS ANY MOTOR VEHICLE CONSTRUCTED OR ADAPTED TO CARRY MORE THAN S IX PASSENGERS BUT NOT MORE THAN TWELVE PASSENGERS EXCLUDING THE DRIVE R FOR HIRE OR REWARD. SIMILARLY THE TERM 'MOTOR C JO' ALSO EXCLUD ES ANY MOTOR VEHICLE FOR HIRE OR REWARD. IF THE PROVISIONS OF EX PLANATION TO THIS PROVISO AND THE DEFINITION OF MAXI-CAB AND MOTOR CA B AS GIVEN IN MOTOR VEHICLES ACT, 1988 ARE READ TOGETHER THEN MOTOR VEH ICLES USED FOR HIRE OR REWARD WOULD NOT BE COVERED UNDER THIS PROVISO T O SECTION 32 OF THE ACT, AND SUCH MOTOR VEHICLES WOULD BE COVERED UNDER ENTRY (2)(II) OF ITEM-3 OF PART-A OF APPENDIX-I TO RULE 5 OF THE RUL ES. THIS CONCLUSION FURTHER LEADS TO AN INTERFERENCE THAT THE LEGISLATU RE HAS GIVEN BENEFIT OF HIGHER DEPRECIATION TO THE ASSESSEES NOT ENGAGED IN THE BUSINESS OF MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIES ON HIRE AND DEFINING SUCH LIGHT MOTOR VEHICLES AS COMMERCIAL VEHICLES TH OUGH INTENTIONALLY EXCLUDING VEHICLES COMMERCIALLY EXPLOITED FOR YIELD ING INCOME FROM THE DEFINITION OF COMMERCIAL VEHICLE FURTHER SUPPORTS T HE CASE OF THE ASSESSEE. WE ALSO FIND SUFFICIENT FORCE IN THE CONT ENTION OF THE ASSESSEE THAT DIFFERENT ENTRIES EXIST IN APPENDIX-I FOR DIFF ERENT CATEGORIES OF MOTOR VEHICLES FOR PROVIDING DEPRECIATION AT A SPEC IFIED RATE DEPENDING UPON THE PERIOD OF ACQUISITION AND THE PURPOSE FOR WHICH THEY ARE DEPLOYED. THEREFORE, NOMENCLATURE OF COMMERCIAL VEH ICLE SHOULD NOT BE SO CONSTRUED TO DEPRIVE THE ASSESSEE OF HIGHER DEPR ECIATION WHEN ALL THE CONDITIONS SPECIFIED IN THE ACT AND THE RULES HAVE BEEN MET BY THE ASSESSEE. WE ALSO HOLD THAT, TILL SUCH CAR IS USED BY THE ASSESSEE FOR ITS BUSINESS PURPOSE THE ASSESSEE WOULD GET THE DEPRECI ATION AT THE RATE OF 40 PER CENT AS PER THE THIRD PROVISO TO SECTION 32 OF THE ACT. THUS, GROUND NOS. 1 TO 3 OF THE ASSESSEE STAND ACCEPTED. ITA NO.613/RJT/2015 6 5. IN THE PRESENT CASE, THE LD.AO HAS GRANTED DEPRE CIATION AT THE RATE OF 15% WITHOUT EXAMINING RELEVANT PROVISIONS. IT APPEARS THAT HIS FINDING IS BASED UPON HIS EXPERIENCE AND PAST IMPRE SSION. HE WAS OF THE OPINION THAT ONCE BOARD HAS NOT GRANTED HIGHER RATE OF DEPRECIATION TO CARS, WHICH ARE PUT IN THE BUSINESS OF HIRING, O R IN PUBLIC TRANSPORTATION, THEN HOW A PARTNER, WHO USED MOTOR CAR FOR THE PURPOSE OF BUSINESS CAN BE GRANTED AT A SUCH RATE. IN THE CASE HE HAD AN IMPRESSION, HIGHER RATE OF DEPRECIATION AT THE MOST COULD BE GRANTED TO THE CAR USED FOR THE PUBLIC TRANSPORTATION FOR THE PEOPLE. ON APPEAL, THE LD.CIT(A) HAS OBSERVED THAT CBDT HAS AMENDED I .T. RULES BY INCOME TAX (THIRD AMENDMENT) RULES, 2009 AND NEW AP PENDIX HAS BEEN INTRODUCED. THE LD.CIT(A) MADE REFERENCE TO N OTIFICATION NO.10/2009 DATED 19.1.2009 AND ALSO PARA-6 OF THE S AID NOTIFICATION WHICH GIVES DEFINITION OF COMMERCIAL VEHICLE. I HA VE EXAMINED THIS NOTIFICATION AVAILABLE ON PAGE NO.1.426 OF INCOME T AX RULES (3 RD EDITION) OF TAXMANN I.E. 2016 EDITION. PARAGRAPH-6 CONTEMPLATES DEFINITION OF COMMERCIAL VEHICLE. THIS PARAGRAPH IS AVAILABLE AT PAGE NO.1.433 OF THE TAXMANNS INCOME TAX RULES. I FIND IT IS VERBATIM SAME AS CONSIDERED BY THE ITAT, MUMBAI. THERE IS N O SUCH CONDITION THAT VEHICLE WOULD QUALIFY AS COMMERCIAL VEHICLES WHEN LICENSED TO BE USED AS PUBLIC TRANSPORT. FOR FACILITY OF REFER ENCE, I TAKE NOTE OF THIS AS UNDER: 6. COMMERCIAL VEHICLE MEANS HEAVY GOODS VEHICLE , HEAVY PASSENGER MOTOR VEHICLE, LIGHT MOTOR VEHICLE, M EDIUM GOODS VEHICLE AND MEDIUM PASSENGER MOTOR VEHICLE BUT D OES NOT INCLUDE MAXI-CAB, MOTOR-CAB, TRACTOR AND ROAD-ROLLER . THE EXPRESSIONS HEAVY GOODS VEHICLE, HEAVY PASSENGER MOTOR VEHICLE, LIGHT MOTOR VEHICLE, MEDIUM GOODS VEHICLE, MED IUM PASSENGER MOTOR VEHICLE, MAXI-CAB, MOTOR-CAB, TRACTOR AND ROADROLLER SHALL HAVE THE MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1988). 6. IN VIEW OF THE ABOVE, I DO NOT FIND ANY DISPARIT Y ON FACTS. I ALLOW APPEAL OF THE ASSESSEE AND DELETE DISALLOWANCE MADE BY THE AO. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ITA NO.613/RJT/2015 7 4. ON DUE CONSIDERATION OF THE ABOVE ORDER, WE ARE OF THE VIEW THAT THERE IS NO DISPARITY ON FACTS AND CIRCUMSTANCES OF THE C ASE, THEREFORE, WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE DISALLOWANCE. 5. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . SD/- SD/- (AMARJIT SINGH) ACCOUNTANT MEMBER (RAJPAL YADAV) JUDICIAL MEMBER