DCIT, New Delhi V. M/s. Jaypee Ventures Pvt. Ltd., New Delhi

ITA 757/DEL/2014

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 3043 (ITAT-DELHI)
• Duration Of Justice: 3 year(s) 3 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-05-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 18-05-2017
• Assessment Year: 2006-2007
• Appeal Filed On: 10-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: UMESH CHAND DUBEY
• Keywords: Depreciation; Assessment record; Tax effect
• Section: 143(3); 14A; 32; 147; 148

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH 'D', NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. NO. 757/DEL/2014 A.Y. 2006-07 DCIT, CIRCLE 4(1), VS. M/S JAYPEE VENTURES PVT. NEW DELHI VS. LTD., 1095, SECTOR-A, POCKET-A, VASANT KUNJ, NEW DELHI (PAN AAACI2356L) (APPELLANT) (RESPONDENT) DEPARTMENT BY : SH. UMESH CHAND DUBEY, SR.DR ASSESSEE BY : NONE ORDER PER H.S. SIDHU, JM : THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORDER OF THE LD. COMMISSIONER OF INCOME TAX (APPEALS)-VIII, NEW DELH I DATED 29.11.2013 PERTAINING TO ASSESSMENT YEAR 2006-07 ON THE FOLLOW ING GROUNDS:- 1. WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CA SE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE ADDITION OF EXCESS DEPRECIATION ON AIRCRAFT AMOUNTING RS. 2,20,40,609/- MADE BY THE AO BY APPLYING DEPRECIATION RATE OF 15% AS AGAINST CLAIM OF 40% MA DE BY THE ASSESSEE? 2 2. THAT THE ORDER OF THE LD. CIT(A) IS ERRONEOUS A ND IS NOT TENABLE ON FACTS AND IN LAW. 3. THAT THE APPELLANT CRAVES LEAVE TO ADD, ALTER, A MEND OR FORGO ANY GROUND(S) OF APPEAL RAISED ABOE AT THE TIME OF HEAR ING. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ORIGIN AL ASSESSMENT IN THIS CASE WAS COMPLETED UNDER SECTION 143(3) OF THE I.T. ACT, 1961 AT AN INCOME OF RS. 14,87,39,273/- ON 30.12.2008. THE ASS ESSMENT WAS RE- OPENED U/S. 148 AFTER RECORDING THE FOLLOWING REASO NS:- 'SCRUTINY OF INCOME TAX ASSESSMENT RECORDS REVEALED THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS. 3,52,64,97 4/- @40% ON AIRCRAFT. AS PER THE PROVISIONS OF SECTION 32 OF THE I.T. ACT, 1961 DEPRECIATION ON AIRCRAFT IS ALLOWABL E @15% WHICH COMES TO RS. 1,32,24,365/-. HENCE, EXCESS DEP RECIATION OF RS. 2,20,40,609/- (RS. 3,52,64,974/- - (MINUS) R S. 1,32,24,365/- WAS ALLOWED. THE MISTAKE RESULTED IN UNDER ASSESSMENT OF INCOME OF RS. 2,20,40,609/- INVOLVING TAX EFFECT OF RS. 98,67,096/-. SCRUTINY OF INCOME TAX A SSESSMENT RECORDS REVEALED THAT THE AO DISALLOWED RS. 1,80,27 ,664/- IN RELATION TO EXPENDITURE UNDER SECTION 14A RELATED T O EXEMPT DIVIDEND INCOME OF RS. 23,09,35,411/- INSTEAD OF CO RRECT FIGURE OF DISALLOWANCE OF RS. 3,17,48,567/-. THE MI STAKE RESULTED IN UNDERASSESSMENT OF INCOME OF RS. 1,37,2 0,903/- INVOLVING TAX EFFECT OF RS. 61,42,546/-. HENCE, THE AO 3 OBSERVED THAT THE INCOME OF RS. 2,20,40,609/- AND R S. 1,37,20,.903/- AGGREGATING TO RS. 3,57,61,512/- CHA RGEABLE TO TAX HAS ESCAPED ASSESSMENT WITHIN THE MEANING OF SECTION 147/148 OF THE INCOME TAX.' 2.1 IN THIS CASE NOTICE U/S. 148 OF THE I.T. ACT, 1961 WAS ISSUED TO THE ASSESSEE ON 18.1.2010 WHICH WAS DULY SERVED UPON TH E ASSESSEE, BUT IN RESPONSE TO THE SAID NOTICE, THE ASSESSEE D ID NOT SUBMIT ANY REPLY/RESPONSE, HOWEVER, ASSESSEE HAS SUBMITTED T HAT THE RETURN FILED ON 30.11.2006 MAY BE TREATED AS RETURN FILED IN RES PONSE TO THE NOTICE UNDER SECTION 148 OF THE ACT AND ALSO REQUESTED FOR THE COPY OF THE REASONS RECORDED UNDER SECTION 147 OF THE I.T. ACT, 1961. THE REASONS RECORDED UNDER SECTION 147 / 148 WAS PROVIDED TO TH E ASSESSEE ON 17.5.2010. THEREAFTER, THE STATUTORY NOTICES UNDER SECTION 143(2) OF THE I.T. ACT, 1961 WERE ISSUED TO THE ASSESSEE AND IN R ESPONSE TO THE SAID NOTICE, THE A.R. OF THE ASSESSEE OF THE ASSESSEE CO MPANY APPEARED FROM TIME TO TIME AND MADE ORAL AS WELL AS WRITTEN SUBMI SSIONS WHICH WERE CONSIDERED BY THE AO. 2.2 THE ASSESSEE COMPANY WAS ENGAGED IN THE BUSINES S OF DESIGN ENGINEERING, SOFTWARE DEVELOPMENT AND CONSULTANCY, CONTRACTING AND MANPOWER SUPPLY. AS PER THE REASONS RECORDED UNDER SECTION 147 OF THE I.T. ACT, 1961 THE ASSESSEE HAD CLAIMED DEPRECIATIO N ON AIRCRAFTS @40% OF THE WDV WHEREAS AS PER PROVISIONS OF SECTION 32 OF THE I.T. ACT, 1961 DEPRECIATION ON AIRCRAFTS IS AVAILABLE @15%. HENCE, EXCESS DEPRECIATION OF 4 RS. 2,2,40,609/- CLAIMED BY THE ASSESSEE WAS PROPOS ED TO BE DISALLOWED AND ADDED BACK TO THE NET TAXABLE INCOME OF THE ASS ESSEE. THE ASSESSEE VIDE ITS LETTER DATED 14.6.2010 HAS SUBMITTED THAT ASSESSEE IS ENTITLED FOR DEPRECIATION ON AIRCRAFTS @40% IN TERMS OF RULE 5(1 ) READ WITH APPENDIX 1 OF THE INCOME TAX RULES, 1962 AS THE AIRCRAFTS WE RE OWNED AND USED FOR BUSINESS. THE CONTENTION OF THE ASSESSEE WAS NOT AC CEPTABLE TO THE AO FOR THE REASON THAT DEPRECIATION @40% IS ALLOWABLE ONLY IN CASE WHERE THE AIRCRAFTS IS USED FOR WHOLLY AND EXCLUSIVELY FOR CO MMERCIAL PURPOSE AND PUT ON HIRE. IN PURPOSES ON SOME OCCASIONS, BUT THE BUSINESS OF THE ASSESSEE IS NOT GIVING AIRCRAFTS OF HIRE OR RUNNING THE AIRCRAFT FOR COMMERCIAL PURPOSES. AO HELD THAT DEPRECIATION @15 % WAS ONLY ALLOWABLE TO THE ASSESSEE AND EXCESS DEPRECIATION OF RS. 2,20,40,609/- WAS DISALLOWED AND ADDED BACK TO THE NET TAXABLE IN COME OF THE ASSESSEE VIDE ORDER DATED 29.11.2010 PASSED U/S. 147/143(3) OF THE I.T. ACT, 1961. AGGRIEVED WITH THE ASSESSMENT ORDER, ASSESSEE FILED THE APPEAL BEFORE THE LD. CIT(A) WHO VIDE HIS IMPUGNED ORDER D ATED 29.11.2013 DELETED THE ADDITION BY PARTLY ALLOWING THE APPEAL OF THE ASSESSEE. 3. AGGRIEVED WITH THE IMPUGNED ORDER OF THE LD. CI T(A), THE REVENUE IS IN APPEAL BEFORE THE TRIBUNAL. 4. LD. DR RELIED UPON THE ORDER OF THE AO AND REIT ERATED THE CONTENTIONS RAISED IN THE GROUNDS OF APPEAL. 5. IN THIS CASE, NOTICE OF HEARING TO THE ASSESSEE WAS SENT BY THE REGISTERED AD POST, IN SPITE OF THE SAME, ASSESSEE, NOR ITS AUTHORIZED 5 REPRESENTATIVE APPEARED TO PROSECUTE THE MATTER IN DISPUTE, NOR FILED ANY APPLICATION FOR ADJOURNMENT. KEEPING IN VIEW THE FA CTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE ISSUE INVOLVED IN THE P RESENT APPEAL, WE ARE OF THE VIEW THAT NO USEFUL PURPOSE WOULD BE SERVED TO ISSUE NOTICE AGAIN AND AGAIN TO THE ASSESSEE, THEREFORE, WE ARE DECIDI NG THE PRESENT APPEAL EXPARTE QUA ASSESSEE, AFTER HEARING THE LD. DR AND PERUSING THE RECORDS. 6. WE HAVE HEARD LD. DR AND PERUSED THE RELEVANT R ECORDS, ESPECIALLY THE ORDER OF THE LD. CTI(A). WE FIND THAT LD. FIRST APPELLATE AUTHORITY HAS ELABORATELY DISCUSSED AND ADJUDICATED THE ISSUE NO. 1 AS UNDER:- 'THE APPELLANT HAD CLAIMED DEPRECIATION ON AIRCRAFT @40% IN TERMS OF ENTRY NO. III(3)(I) OF PART-A OF THE DEPRE CIATION TABLE IN APPENDIX -I, OF THE INCOME TAX RULES, 1962. THE AO HAD GENERALIZED THE AIRCRAFT AS ORDINARY PLANT AND MACH INERY AND ALLOWED DEPRECIATION @15% ON IT. HENCE, THE ABOVE DISALLOWANCE OF RS.2,20,40,609/- WAS MADE BY THE AO . I HAVE VERIFIED THE I.T. RULE BOOK AND FOUND THAT APPELLAN TS CLAIM WAS CORRECT. THE AO SHOULD ALSO UNDERSTAND THAT DEP RECIATION ON AIRCRAFT CANNOT BE EQUATED WITH DEPRECIATION ON MOTOR VEHICLE. THE DEPRECIATION IS GIVEN ON PLANT AND MAC HINERY DEPENDING ON ITS LIFE AND MAINTENANCE COST INVOLVED IN SUCH MACHINERY. THE DEPRECIATION IS ALLOWED BY THE GOVER NMENT TO GIVE PART OF THE PROFIT TO THE BUSINESSMAN AND HE C AN MAKE ANOTHER PLANT AND MACHINERY AT THE END OF OLD MACHI NERY LIFE 6 TO CONTINUE HIS BUSINESS. THEREFORE, THE AO SHOULD UNDERSTAND THE BASIC REQUIREMENT OF LAW AND DISCUSS THE MATTER WITH HIS SUPERVISE OFFICERS BEFORE REOPENING THE CASE. HENCE, THE ADDITION OF DEPRECIATION DISALLOWANCE OF RS. 2,20,40,609/- IS HEREBY DELETED. 7. ON GOING THROUGH THE AFORESAID FINDINGS OF THE LD. CIT(A), WE FIND THAT THE ASSESSEE HAD CLAIMED DEPRECIATION ON AIRCR AFT @40% IN TERMS OF ENTRY NO. III(3)(I) OF PART-A OF THE DEPRECIATION T ABLE IN APPENDIX-I, OF THE INCOME TAX RULES, 1962. HOWEVER, THE AO HAD GENERAL IZED THE AIRCRAFT AS ORDINARY PLANT AND MACHINERY AND ALLOWED DEPRECIATI ON @15% ON IT AND MADE THE DISALLOWANCE OF RS.2,20,40,609/-. WE NOTE THAT AS PER ENTRY NO. III(3)(I) OF PART-A OF THE DEPRECIATION TABLE I N APPENDIX-I, OF THE INCOME TAX RULES, 1962 THE DEPRECIATION AVAILAB LE ON AIRCRAFT IS @40%, HENCE, IT WAS RIGHTLY HELD BY THE LD. CIT(A) THAT THE ASSESSEE'S CLAIM WAS CORRECT AND AO SHOULD ALSO UNDERSTAND THA T DEPRECIATION ON AIRCRAFT CANNOT BE EQUATED WITH DEPRECIATION ON MOT OR VEHICLE. THE DEPRECIATION IS GIVEN ON PLANT AND MACHINERY DEPEND ING ON ITS LIFE AND MAINTENANCE COST INVOLVED IN SUCH MACHINERY. THE D EPRECIATION IS ALLOWED BY THE GOVERNMENT TO GIVE PART OF THE PROFI T TO THE BUSINESSMAN AND HE CAN MAKE ANOTHER PLANT AND MACHINERY AT THE END OF THE OLD MACHINERY LIFE TO CONTINUE HIS BUSINESS. THEREFORE, LD. CIT(A) HAS RIGHTLY OBSERVED THAT THE AO SHOULD UNDERSTAND THE BASIC RE QUIREMENT OF LAW AND DISCUSS THE MATTER WITH HIS SUPERVISE OFFICERS BEFO RE REOPENING THE CASE. 7 HENCE, THE ADDITION OF DEPRECIATION DISALLOWANCE OF RS. 2,20,40,609/- WAS RIGHTLY DELETED BY THE LD. CIT(A), WHICH DOES NOT N EED ANY INTERFERENCE ON OUR PART, HENCE, WE UPHOLD THE ACTION OF THE LD. CIT(A) ON THE ISSUE IN DISPUTE AND DISMISS THE GROUND NO. 1 RAISED BY THE REVENUE. 8. IN THE RESULT, THE APPEAL FILED BY THE REVENUE STANDS DISMISSED. ORDER PRONOUNCED ON 26/05/2017. SD/- SD/- (O.P. KANT) (H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER DATE: 26/05/2017 'SRBHATNAGAR' COPY FORWARDED TO: - 1. APPELLANT - 2. RESPONDENT - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY BY ORDER, ASSISTANT REGISTRAR, ITAT, DELHI BENCHES