M/S NARAYANI CRANES, Jaipur V. DCIT, Jaipur

ITA 783/JPR/2011

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 74803 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-01-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 05-09-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D C SHARMA
• Assessee Lawyers: WRITTEN SUBMISSION
• Keywords: Depreciation; Notional interest
• Section: 143(3)

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH, JAIPUR (BEFORE SHRI HARI OM MARATHA AND SHRI N.K. SAI NI) ITA NO. 783/JP/2011 ASSESSMENT YEAR : 2008-09 PAN: AAGFN 1060 R M/S. NARAYANI CRANES VS. THE DCIT 43, KISHAN NAGAR, JANPATH CIRCLE- 2 SHYAM NAGAR, JAIPUR JAIPUR (APPELLANT) (RESPONDENT) ITA NO. 766/JP/2011 ASSESSMENT YEAR : 2008-09 PAN: AAGFN 1060 R THE DCIT VS. M/S. NARAYANI CRANES CIRCLE- 2 43, KISHAN NAGAR, JANPATH JAIPUR SHYAM NAGAR, JAIPUR (APPELLANT) (RESPONDENT) ASSESSEE BY : WRITTEN SUBMISSION DEPARTMENT BY: SHRI D.C. SHARMA DATE OF HEARING: 22-01-2014 DATE OF PRONOUNCEMENT: 30-01-2014 ORDER PER HARI OM MARATHA, JM:- THESE ARE THE CROSS APPEALS PERTAINING TO ASSESSM ENT YEAR 2008-09 DIRECTED AGAINST THE ORDER OF THE LD. CIT(A)-I, JA IPUR DATED 21-06-201. 2 2.1 THE ASSESSEE HAS RAISED THE FOLLOWING GROUNDS:- 1. THE LD. CIT(A) HAS WRONGLY CONFIRMED LUMPSUM DISALLOWANCE OF RS. 4.50 LACS IN CRANE OPER ATING EXPENSES IN SPITE OF COMPLETE DETAILS BY SIMPLY STA TING THAT DISALLOWANCE IS MERELY 8.89% OF TOTAL OPERATING EXP ENSES CLAIMED. 2. THE LD. CIT(A) HAS WRONGLY CONFIRMED DISALLOWANCE OF INTEREST RS. 1,04,741/- U/S 36(I)(I II) WHILE ASSESSEE HAS CATEGORICALLY STATED THAT NO NOTIONAL INCOME CAN BE TAXED. 2.2 THE REVENUE HAS RAISED THE SOLITARY GROUND AS U NDER:- WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) IS JUSTIFIED IN DELETING THE ADDITION OF RS. 18,70,723/- MADE BY THE AO ON ACCOU NT OF EXCESS DEPRECIATION CLAIMED BY THE ASSESSEE ON HYDR AULIC CRANE MACHINE. 3.1 BRIEFLY STATED, THE FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM DERIVES ITS INCOME FROM PLYING AND HIRING OF CRANES. FOR AS SESSMENT YEAR 2008-09, IT FILED ITS RETURN OF INCOME ON 30-092008 DECLARING I TS TOTAL INCOME OF RS. 29,31,830/- AND AGAINST WHICH ASSESSMENT WAS COMPLE TED AT RS. 53,57,294/- U/S 143(3) OF THE I.T. ACT, 1961 (THE ACT FOR SHO RT). IN DOING THE, AO HAS COMPUTED TOTAL INCOME OF THE ASSESSEE AS UNDER:- TOTAL INCOME DECLARED BY THE ASSESSEE 29,31,830 /- ADD:- 3 1. DISALLOWANCE ON ACCOUNT OF EXCESS = 18,70,723/ - DEPRECIATION. 2. DISALLOWANCE ON ACCOUNT OF CRANE OPERATING EXPENSES = 4,50,000/- 3. DISALLOWANCE ON ACCOUNT OF INTEREST EXPENDITURE = 1,04,741/- TOTAL = 24,25,461/- ASSESSED INCOME = 53,57,294/- 3.2 AGGRIEVED, THE ASSESSEE HAS PREFERRED AN APPEAL BEFORE US AS THE LD. CIT(A) HAS GIVEN PART RELIEF TO THE ASSESSEE. THAT IS WHY BOTH THE PARTIES ARE AGGRIEVED AND HAVE FILED THEIR RESPECTIVE APPEAL. 3.3 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORD. 4.1 THE FIRST GROUND IN ASSESSEE'S APPEAL IS REGARD ING LUMPSUM DISALLOWANCE OF RS. 4.50 LACS OUT OF TOTAL CRANE OP ERATING EXPENSES. 4.2 THE FACTS OF THIS ISSUE AS PER THE AO ARE THAT THE ASSESSEE HAS NOT BEEN MAINTAINING PROPER RECORDS FOR WAGE PAYMENTS AND T HESE WERE PETTY CASH PAYMENTS. IT IS ALSO OBSERVED THAT THE ASSESSEE HAS NOT MAINTAINED WAGE REGISTER. THEREFORE, HE DISALLOWED A LUMPSUM AMOUN T OF RS. 4.50 LACS. THIS ADDITION HAS BEEN CONFIRMED BY THE LD. CIT(A). 4.3 BEFORE US, BOTH THE PARTIES HAVE ADVANCED THEIR ARGUMENTS WHICH WERE TAKEN BEFORE THE AUTHORITIES BELOW. IT WAS ARGUED B Y THE LD. AR THAT ALL THE 4 EXPENSES UNDER THIS HEAD AMOUNTING TO RS. 50,57,571 /- IS AGAINST CRANE HIRE CHARGES OF RS. 1,53,15,932/- WHERE THE ASSESSEE HAS DISCLOSED NET PROFIT RATE OF 19.14% AS AGAINST 1.54% FOR THE ASSESSMENT YEAR 2007-08 AND THESE EXPENSES ARE FULLY VOUCHED AND JUSTIFIED. IT WAS AR GUED THAT CRANE OPERATING CHARGES INCLUDES THE PAYMENT OF WAGES (I.E SALARY O F DRIVES/ HELPERS), FUEL EXPENSES, TRANSPORTATION EXPENSES, REPAIRING EXPENS ES, TYRE EXPENSE, MISC. EXPENSES ETC. THE SUBMISSION OF THE LD. DR IS THAT THIS IS A SMALL DISALLOWANCE ON ACCOUNT OF SELF MADE VOUCHERS AND IT DESERVES TO BE UPHELD. 4.4 AFTER CONSIDERING THE RIVAL SUBMISSIONS, IT IS FOUND THAT THE NET PROFIT RATE DECLARED BY THE ASSESSEE COMPANY IS ON VERY VE RY HIGHER SIDE IN THIS YEAR AND THE EXPENSES ARE FULLY VOUCHED AND IN SOM E CASES SELF MADE VOUCHERS ARE WHERE PROPER VOUCHES ARE NOT POSSIBLE. IN OUR CONSIDERED OPINION, SUCH ADHOC DISALLOWANCE IS NOT JUSTIFIED. THE ASSESSEE HAS DISCLOSED BETTER NET PROFIT RATE AS COMPANY TO ASSESSMENT YEA R 2007-08. IN THIS REGARD, THE DECISION OF THIS VERY BENCH IN THE CASE OF ITO, SWAI MADHOUR VS. BAJRANG TRADING CO. GANGAPUR (XLV TW ) IS RELEVANT. WHEN NET PROFIT RATE HAS INCREASED IN THIS YEAR, THE TALLYING OF PERCENT AGE WISE EXPENDITURE IN TWO YEARS IS ALSO NOT JUSTIFIED. FROM THE RECORDS, IT I S NOTICED THAT THE AO HAS NOT BEEN ABLE TO PINPOINT ANY BOGUS OR FAKE VOUCHERS OR IT DOES NOT RELATED TO THE ASSESSEE BUSINESS. ACCORDINGLY, THESE EXPENSES HAVE TO BE ALLOWED AND AS A 5 RESULT, WE ORDER TO DELETE THE IMPUGNED ADDITION OF GROUND NO. 1 OF THE ASSESSEE'S APPEAL. 5.1 THE GROUND NO. 2 OF THE ASSESSEE APPEAL IS REGA RDING DISALLOWANCE OF AMOUNT OF RS. 1,04,741/- U/S 36(I)(III) OF THE ACT. 5.2 THE FACTS OF THIS ISSUE ARE THAT THE AO PROPOSE D TO DISALLOW INTEREST ON PROPORTIONATE BASIS. THE ASSESSEE OBJECTED TO THIS ACTION THAT THE ASSESSEE FIRM HAS NEITHER BORROWED ANY CAPITAL NOR HAS GIVEN ANY INTEREST ON THE CAPITAL INTRODUCED BY THE PARTNERS. THE ASSESSEE HA S NOT CHARGED ANY INTEREST ON THE AMOUNT OF THE ADVANCE TO FAMILY MEMBERS OF T HE PARTNERS TO THE EXTENT OF RS. 1,04,741/- CALCULATED @ 12% ON THE AMOUNT AD VANCED. 5.3 THE ASSESSEE REITERATED ITS ARGUMENTS PLACED BE FORE THE LOWER AUTHORITIES AND ALSO FILED THE WRITTEN SUBMISSION W HILE LD. DR HAS SUPPORTED THE ACTION OF THE LOWER AUTHORITIES. 5.4 AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE ARE OF THE CONSIDERED OPINION THAT WHEN THE ASSESSEE HAS NOT PAID ANY INT EREST EITHER ON BORROWED FUNDS OR ON THE CAPITAL OF THE PARTNERS THEN ANY SU M ADVANCED TO THE FAMILY MEMBERS OF THE PARTNERS WITHOUT INTEREST CANNOT TER MINATE IN CHARGING NOTIONAL INTEREST AND MAKING THE ADDITION. IN THIS REGARD, THIS ADVANCE HAS BEEN MADE ON ACCOUNT OF BUSINESS EXPEDIENCY. THERE FORE, THE DECISION OF HON'BLE SUPREME COURT OF INDIA IN THE CASE OF S.A. BUILDERS LTD. VS CIT 288 6 ITR 1 (SC) WOULD GIVE RESCUE TO THE ASSESSEE. THE H ON'BLE RAJASTHAN HIGH COURT HAS REPEATEDLY HELD THAT ONLY REAL INCOME IS TO BE TAXED. ONE SUCH DECISION BY THE HON'BLE JURISDICTIONAL HIGH COURT I N THE CASE OF CIT VS. VTC LEASING & FINANCE CO. 30 TW 211 (RAJ.) IS RELEV ANT. WHEN INTEREST BEARING FUNDS HAVE NOT BEEN DIVERTED THEN SUCH NOTI ONAL DISALLOWANCE IS NOT JUSTIFIED. THIS IS THE RATIO OF DECISION OF ITAT JA IPUR BENCH IN THE CASE OF YASH INDUSTRIES IN ITA NO. 14/JP/2007. ACCORDINGLY, THE DISALLOWANCE MADE U/S 36(1)(III) IS NOT JUSTIFIED. HENCE, WE ORDER TO DELETE THE ADDITION. THUS THE GROUND NO. 2 OF THE ASSESSEE IS ALLOWED. 6.1 THE REVENUE HAS RAISED ONLY GROUND PERTAINING T O DELETION OF ADDITION OF RS. 18,70,723/- MADE BY THE AO ON ACCOUNT OF EX CESS DEPRECIATION CLAIMED BY THE ASSESSEE ON HYDRAULIC CRANE MACHINE. 6.2 THE FACTS APROPOS TO THIS GROUND ARE THAT THE A SSESSEE HAS CLAIMED DEPRECIATION ON MOBILE CRANES (COMMERCIAL MOTOR VEH ICLES) @ 30%. THE BOOKS OF THE ASSESSEE ARE AUDITED. AS PER THE AO, T HESE MACHINES ARE SIMPLY MACHINERY WHICH IS ELIGIBLE FOR DEPRECIATION @ 15%. AS A RESULT, THE AO HAS DISALLOWED THE SO CALLED EXCESS DEPRECIATION CLAIME D BY THE ASSESSEE. 6.3 IN APPEAL, THE ASSESSEE WAS SUCCESSFUL IN GETTI NG THE IMPUGNED ADDITION DELETED. NOW THE REVENUE IS IN APPEAL. 7 6.4 WE HAVE HEARD THE RIVAL SUBMISSIONS AND HAVE CA REFULLY PERUSED THE ENTIRE RECORD. THE LD. DR HAS SUBMITTED THAT THE MO BILE CRANES ARE COVERED UNDER THE DEFINITION OF MACHINERY IN THE LIGHT OF T HE DECISIONS OF CIT VS. SHRIRAM TRANSPORT FINANCE CO. LTD. (2002), 254 ITR 558 (MAD.) AND CIT VS. GOTTAN LIME KHANIJ UDYOG, 170 TAXMAN 442 (RAJ.). TH E LD. DR HAS SUPPORTED THE ORDER OF THE AO AND THE LD. AR OF THE ASSESSEE RELIED ON THE ORDER OF THE LD. CIT(A).THE CASE OF THE LD. AR IS T HAT THE AO DID NOT UNDERSTAND THE NATURE OF WORK DONE BY THE ASSESSEE FIRM. HE HAS SUBMITTED THAT THE ABOVE DECISIONS ARE DISTINGUISHABLE ON FAC TS AS BOTH THESE DECISIONS ARE ON SEPARATE ISSUES. AFTER HEARING BOTH THE SIDE S, WE ARE CONVINCED THAT NUMEROUS PIECES OF EVIDENCES HAVE BEEN FILED BY THE ASSESSEE IN SUPPORT OF ITS CLAIM WHICH INCLUDES RTO REGISTRATION WHEREIN T HE CRANES ARE REGISTERED UNDER THE HEAD TRUCK CRANE WHICH SHOWS THAT CRANE IS MOUNTED ON VEHICLE. A CERTIFICATE OF THE DISTT. TRANSPORT OFFICER, STAT ING THE CRANE REGISTERED UNDER VEHICLE NO. FOR WHICH FITNESS IS NOT REQUIRED . THE FACTS OF THE CASES RELIED UPON BY THE LD. DR ARE NOT THE SAME AS THAT OF THIS PARTICULAR IN THIRD MEMBER CASE, THE ITAT, PUNE BENCH WHILE DECIDING TH E CASE OF SANGHVI MOTORS (P) LTD. VS. DCIT, 110 ITD 1 (PUNE) HAS ALL OWED THE HIGHER DEPRECIATION ON SUCH VEHICLES. ACCORDINGLY, WE DO N OT FIND ANY INFIRMITY IN 8 THE ORDER OF THE LD. CIT(A) AND THE SOLITARY GROUND OF THE REVENUE IS DISMISSED. 7.0 IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED AND THAT OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 30-01-2014. SD/- SD/- (.N.K. SAINI) (HARI OM MARATHA) ACCOUNTANT MEMBER JUDICIAL MEMEBR JAIPUR DATED: 30 TH JAN 2014 *MISHRA COPY FORWARDED TO:- BY ORDER 1. M/S. NARAYANI CRANES, JAIPUR 2. THE DCIT, CIRCLE- 2, JAIPUR 3. THE LD. CIT(A) 4. THE LD. CIT 5. THE DR 6. THE GUARD FILE (ITA NO.783/JP/11) A.R., ITAT, JAIPUR 9 10 11