BIPIN VIMALCHAND JAIN HUF, MUMBAI V. D.C.I.T. CENTRAL CIRCLE 8, MUMBAI

ITA 7488/MUM/2011

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4952 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 10 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-09-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 26-03-2013
• Assessment Year: 2009-2010
• Appeal Filed On: 08-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: D B SANGHVI
• Keywords: Depreciation
• Section: 32; 148

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH, MUMBAI BEFORE SRI H.L. KARWA, PRESIDENT, AND SHRI N.K.BILL AIYA, AM ./ I.T.A. NO. 7488/MUM/2011 ( / ASSESSMENT YEAR : 2009-10) BIPIN VIMALCHAND JAIN HUF, 118/120, SHEIKH MEMON STREET, MUMBAI-400002 / VS. D.C.I.T. CENTRAL CIRCLE-8, ROOM NO.806, 8 TH FLOOR, OLD C.GO ANNEXE BLDG, MUMBAI-400020 !' $ ./ PAN : AADHB5842A ( '% / APPELLANT ) .. ( &''% / RESPON DENT ) '% ( ) / APPELLANT BY : SHRI D.B.SANGHVI &''% ( ) / RESPONDENT BY : SHRI AARSI PRASAD ( *$ / DATE OF HEARING : 16-09-2013 +, ( *$ / DATE OF PRONOUNCEMENT : 16-09-2013 -. / O R D E R PER N.K. BILLAIYA, AM: THIS APPEAL BY THE ASSESSEE IS PREFERRED AGAINST TH E ORDER OF THE CIT(A)-37, MUMBAI, DATED 17/08/2011 PERTAINING TO A .Y.2009-10. 2. THE SOLE GRIEVANCE OF THE ASSESSEE IS THAT THE C IT(A) ERRED IN CONFIRMING THE ADDITION OF RS.8,86,797/- BY RESTRIC TING DEPRECIATION TO 15% AS AGAINST 50% CLAIMED BY THE ASSESSEE. 3. DURING THE COURSE OF THE SCRUTINY ASSESSMENT PRO CEEDINGS, THE AO OBSERVED THAT THE ASSESSEE HAS PURCHASED A MOTOR CAR BMW FOR 2 ITA NO.7488MUM/2011 BIPIN VIMALCHAND JAIN RS.50,67,412/-, WHICH WAS PUT TO USE IN JANUARY, 20 09. THE AO FURTHER OBSERVED THAT THE ASSESSEE HAS CLAIMED DEPR ECIATION AT THE RATE OF 50% FOR THE HALF YEAR AT RS.12,66,853/-. TH E AO WAS OF THE FIRM BELIEF THAT THE APPLICABLE RATE OF DEPRECIATIO N IS 15% AND ACCORDINGLY ASKED THE ASSESSEE TO JUSTIFY HIS CLAIM OF 50%. THE ASSESSEE FILED A DETAILED REPLY TO SUBSTANTIATE HIS CLAIM OF 50% RELYING UPON THE AMENDMENT BROUGHT IN THE RATES OF DEPRECIA TION ON NEW COMMERCIAL VEHICLE ACQUIRED ON OR AFTER FIRST DAY O F JANUARY 2009 BUT BEFORE THE FIRST DAY OF OCTOBER 2009 AND SUBMITTED THAT SINCE THE ASSESSEE HAD PURCHASED VEHICLE AFTER THE CUT OF DAT E, THEREFORE, ELIGIBLE FOR DEPRECIATION AT THE RATE OF 50%. THE AO WAS OF THE FIRM BELIEF THAT THE SAID AMENDMENT APPLIED ONLY TO COMMERCIAL VEHIC LE AND THEREFORE NOT APPLICABLE IN THE CASE OF THE ASSESSEE AND ALLO WED DEPRECIATION AT THE RATE OF 15%. SINCE, THE VEHICLE WAS PUT TO USE FOR LESS THAN 180 DAYS, THE EFFECTIVE RATE WHICH WAS ALLOWED WAS AT T HE RATE OF 7.5% ONLY AND DISALLOWED RS.8,86,797/-. 4. THE ASSESSEE CARRIED THE MATTER BEFORE THE CIT(A ) AND REITERATED WHAT HAS BEEN SUBMITTED BEFORE THE AO. THE CIT(A) WAS OF THE FIRM BELIEF THAT THE HIGHER RATE OF DEPRECIATION IS APPL ICABLE ONLY ON MOTOR CARS WHICH ARE USE IN THE BUSINESS OF RUNNING THEM ON HIRE OR AS TAXI AND CONFIRMED THE DISALLOWANCE MADE BY THE AO. 5. AGGRIEVED BY THIS THE ASSESSEE IS BEFORE US. CO UNSEL FOR THE ASSESSEE, RELYING UPON THE SUBMISSIONS MADE BEFORE THE LOWER AUTHORITIES, REITERATED THAT THE REVENUE AUTHORITIE S HAVE NOT APPRECIATED THE AMENDMENT BROUGHT IN THE RATE OF DE PRECIATION FOR VEHICLES PURCHASED AFTER 1 ST JANUARY 2009 BUT BEFORE 1 ST OCTOBER 2009. THE COUNSEL DREW OUR ATTENTION TO THE DECISI ON OF THE MUMBAI BENCH IN ITA NO.7307/MUM/2003 AND 4059/MUM/2004 DAT ED 3 ITA NO.7488MUM/2011 BIPIN VIMALCHAND JAIN 12.10.2007. THE DR STRONGLY SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 6. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE DECISION RELIED UPON BY THE COUNSEL, WE FIN D THAT THE ONLY DISTINGUISHING FACT FROM THE DECISION RELIED UPON B Y THE COUNSEL IS THAT IN THAT CASE THE TRIBUNAL HAD TO CONSIDER TH E DEPRECIATION APPLICABLE TO MOTOR CAR ACQUIRED BETWEEN 2 ND OCTOBER 1998 AND 31 ST MARCH 1999. WHEREAS IN CASE UNDER CONSIDERATION, T HE DISPUTE RELATES TO THE RATE OF DEPRECIATION APPLICABLE TO M OTOR CAR ACQUIRED BETWEEN 1 ST JANUARY 2009 AND 1 ST OCTOBER 2009, OTHERWISE FACTS ARE IDENTICAL. LET US FIRST DISCUSS THE FACTS OF THE C ASE RELIED UPON BY THE COUNSEL WHICH ARE AS UNDER:- THE FACTS IN BRIEF ARE THAT THE ASSESSEE PURCHASED A MOTOR CAR BETWEEN THE PERIOD FROM 1-10-1998 TO 31-3-1999. THIS CAR WAS USED BY T HE ASSESSEE FOR HIS BUSINESS OF CIVIL CONSTRUCTION. THE ASSESSEE CLAIMED THE DEPREC IATION ON THE SAME AT THE RATE OF 40 PER CENT WHICH WAS ALLOWED UNDER SECTION 143(L)( A). THE ASSESSING OFFICER SOUGHT TO RECTIFY THE SAME UNDER SECTION 154, HOWEVER THE PROCEEDINGS UNDER THAT SECTION WERE DROPPED AND NOTICE UNDER SECTION 148 WAS ISSUE D AND THE ASSESSMENT WAS REOPENED. THE ASSESSEE CLARIFIED THAT THE DEPRECIAT ION AT THE RATE OF 40 PER CENT WAS CLAIMED IN VIEW OF NEW ENTRY (IIA) INSERTED UNDER I TEM III IN APPENDIX-I TO RULE 5 OF IT RULES, 1962 WITH EFFECT FROM 1-4-1999. THE ASSES SING OFFICER STATED THAT THE DEPRECIATION CLAIMED BY THE ASSESSEE AT THE HIGHER RATE OF 40 PER CENT FOR ASSESSMENT YEAR 2001 -02 HAD TO BE RESTRICTED TO 20 PER CENT BECAUSE MARUTI ZEN WAS NOT A COMMERCIAL VEHICLE AS CONFIRMED BY THE RT O AUTHORITIES. THE ASSESSING OFFICER, ACCORDINGLY, RESTRICTED THE DEPRECIATION T O 20 PER CENT AND MADE AN ADDITION OF RS. 72,959 TO THE TOTAL INCOME OF THE A SSESSEE. AGGRIEVED BY THIS THE ASSESSEE CARRIED THE MATTER INTO APPEAL BEFORE THE LD. COMMISSIONER (APPEALS) WHO ALSO CONFIRMED THE ACTION OF THE ASSESSING OFFICER FOLLOWING THE APPELLATE 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 THEREAFTER MADE LEGA L ARGUMENTS. THE FIRST ARGUMENT RAISED BY THE ASSESSEE'S COUNSEL WAS THAT THE WORDS 'COMMERCIAL VEHICLE' WAS USED ONLY IN THE INCOME TAX ACT, 1961 AND INCOME-TAX RUL ES, 1962, HENCE, THE 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 VEHICLES ACT 1988, NOR IN ANY REGISTRATION CE RTIFICATE 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 REVENUE AUTHORI TIES THEREON WAS ALSO MISPLACED. THE LD. COUNSEL ALSO STATED THAT IN THE REPORT OF THE RTO NO SUCH SPECIFIC CERTIFICATE WAS GIVEN THOUGH THE SAME WAS NOT AVAIL ABLE WITH HIM AT THAT TIME. THE 4 ITA NO.7488MUM/2011 BIPIN VIMALCHAND JAIN LD. COUNSEL THEN REFERRED TO THE RELEVANT CLAUSE OF APPENDIX-I AND ALSO NOTE THERETO DEFINING THE TERM 'COMMERCIAL VEHICLE'. THE LD. COU NSEL ALSO REFERRED TO THE EXPLANATION TO THIRD PROVISO OF SECTION 32 OF THE A CT. 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 C ONTENDED 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 SECTIO N 32, APPENDIX-I TO RULE 5 OF THE INCOME-TAX RULES, 1962. IT WAS ALSO CONTENDED BY TH E LD. COUNSEL THAT IN ITEM-ILL OF PART A OF APPENDIX I, CLAUSE (1A) WAS ON STATUTE WI TH EFFECT FROM 23-8-1990, CLAUSE (2)(II) WAS ALSO ON STATUTE HOWEVER CLAUSE (2)(IIA) WAS BROUGHT ON STATUTE WITH EFFECT FROM 1-4-1999, WHICH PROVIDED FOR DEPRECIATI ON AT THE RATE OF 40 PER CENT ON ANY 'COMMERCIAL VEHICLE' ACQUIRED BY THE ASSESSEE A FTER FIRST DAY OF OCTOBER, 1998 BUT BEFORE THE FIRST DAY OF APRIL, 1999 AND WHICH W AS PUT TO USE BEFORE THE FIRST DAY OF APRIL, 1999 FOR THE PURPOSE OF BUSINESS AND PROF ESSION OF THE ASSESSEE AND THE ASSESSEE COMPLIED WITH ALL THESE CONDITIONS, HENCE ASSESSEE WAS ENTITLED FOR THE DEPRECIATION THEREON AT THE RATE OF 40 PER CENT. IT WAS ALSO CONTENDED THAT THIS NEW ENTRY WAS INSERTED WITH THE INTENTION TO GIVE BOOST TO AUTOMOBILE SECTOR BY PROVIDING ENHANCED RATE OF DEPRECIATION ON VEHICLES PURCHASED DURING PARTICULAR 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 SA ME WAS TO REMAIN UNDER THE SAME ENTRY TILL IT WAS USED FOR THE PURPOSE OF BUSINESS AND FOR THAT DURATION THE ASSESSEE WAS ENTITLED TO DEPRECIATION AT THE RATE SPECIFIED FOR THAT ENTRY 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 2-10-1998 AND 3 1-3-1999, THE DEPRECIATION HAS TO BE ALLOWED ON SUCH PERCENTAGE 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 DOWN VALUE OF THAT BLOCK OF ASSET AS INCREASED BY T HE ACTUAL 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 ANY IN RESPECT OF THE ASSETS FALLING WITHIN THAT BLOCK WHICH ARE SOLD OR DISCARDED OR DEMOLISHED OR DESTROYED DURING THAT PREVIOUS YEAR. HOWEVER, FOR OUR PURPOSE THE MATERIAL PROVISI ON IS THAT THE ACTUAL COST OF THE ASSET SO ACQUIRED WOULD FALL WITHIN THAT BLOCK IN T HE YEAR OF ACQUISITION AND THEREAFTER THE W.D.V., I.E., THE ACTUAL COST LESS D EPRECIATION ALLOWED THEREON WOULD BE MATERIAL FOR COMPUTING DEPRECIATION IN SUBSEQUEN T YEARS. THUS THE COST OF CAR IS TO BE TREATED AS W.D.V. FOR COMPUTING DEPRECIATION THEREON AT THE SPECIFIED PERCENTAGE. FURTHER THE EXPLANATION TO THIS PROVISO DEFINES THAT THE EXPRESSION 'COMMERCIAL VEHICLE' WOULD MEAN... 'LIGHT MOTOR VEH ICLE' AND THE 'LIGHT MOTOR VEHICLE' AS DEFINED IN THE MOTOR VEHICLES ACT, 1988 , MEANS ANY TRANSPORT VEHICLE OR OMNI BUS, THE GROSS PHYSICAL WEIGHT OF EITHER OF WH ICH OR A MOTOR CAR OR 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 COMMERC IAL VEHICLE WOULD NOT INCLUDE 'MAXI-CAB' AND 'MOTOR-CAB'. THE MAXI-CAB AS PER PRO VISIONS OF MOTOR VEHICLES ACT MEANS ANY MOTOR VEHICLE CONSTRUCTED OR ADAPTED TO C ARRY MORE THAN SIX PASSENGERS BUT NOT MORE THAN TWELVE PASSENGERS EXCLUDING THE D RIVER FOR HIRE OR REWARD. SIMILARLY THE TERM 'MOTOR C JO' ALSO EXCLUDES ANY M OTOR VEHICLE FOR HIRE OR REWARD. IF THE PROVISIONS OF EXPLANATION TO THIS PROVISO AN D THE DEFINITION OF MAXI-CAB AND MOTOR CAB AS GIVEN IN MOTOR VEHICLES ACT, 1988 ARE READ TOGETHER THEN MOTOR VEHICLES USED FOR HIRE OR REWARD WOULD NOT BE COVER ED UNDER THIS PROVISO TO SECTION 5 ITA NO.7488MUM/2011 BIPIN VIMALCHAND JAIN 32 OF THE ACT, AND SUCH MOTOR VEHICLES WOULD BE COV ERED UNDER ENTRY (2)(II) OF ITEM- 3 OF PART-A OF APPENDIX-I TO RULE 5 OF THE RULES. T HIS CONCLUSION FURTHER LEADS TO AN INTERFERENCE THAT THE LEGISLATURE HAS GIVEN BENEFIT OF HIGHER DEPRECIATION TO THE ASSESSEES NOT ENGAGED IN THE BUSINESS OF MOTOR BUSE S, MOTOR LORRIES AND MOTOR TAXIES ON HIRE AND DEFINING SUCH LIGHT MOTOR VEHICL ES AS COMMERCIAL VEHICLES THOUGH INTENTIONALLY EXCLUDING VEHICLES COMMERCIALLY EXPLO ITED FOR YIELDING INCOME FROM THE DEFINITION OF COMMERCIAL VEHICLE FURTHER SUPPOR TS THE CASE OF THE ASSESSEE. WE ALSO FIND SUFFICIENT FORCE IN THE CONTENTION OF THE ASSESSEE THAT DIFFERENT ENTRIES EXIST IN APPENDIX-I FOR DIFFERENT CATEGORIES OF MOTOR VEH ICLES FOR PROVIDING DEPRECIATION AT A SPECIFIED RATE DEPENDING UPON THE PERIOD OF AC QUISITION AND THE PURPOSE FOR WHICH THEY ARE DEPLOYED. THEREFORE, NOMENCLATURE OF COMMERCIAL VEHICLE SHOULD NOT BE SO CONSTRUED TO DEPRIVE THE ASSESSEE OF HIGHER D EPRECIATION 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 FO R ITS BUSINESS PURPOSE THE ASSESSEE WOULD GET THE DEPRECIATION AT THE RATE OF 40 PER CE NT 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% [ 25 % AS THE VEHICLE IS PUT TO USE FOR LESS THAN 180 DAYS ] AS CLAIMED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE OPEN COURT ON 16/09 /2013 -. ( +, $ /- 16/09/2013 , , ( 0 SD/- (H.L.KARWA) SD/- (N.K.BILLAIYA) HONBLE PRESIDENT ACCOUNTANT MEMBER MUMBAI; /- /DATED : 16 TH SEPTEMBER, 2013. SHEKHAR. P.S. -. -. -. -. ( (( ( &*12 &*12 &*12 &*12 32 * 32 * 32 * 32 * / COPY OF THE ORDER FORWARDED TO : 1. '% / THE APPELLANT 2. &''% / THE RESPONDENT. 3. 4 ( ) / THE CIT- , MUMBAI. 6 ITA NO.7488MUM/2011 BIPIN VIMALCHAND JAIN 4. 4 / CIT(A)- , MUMBAI 5. 250 &* , , / DR, ITAT, MUMBAI 6. 06 7 / GUARD FILE. -. -. -. -. / BY ORDER, '2* &* //TRUE COPY// 8 88 8 / 9 9 9 9 : : : : (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI