M/s Deccan Enterprises Limited, Hyderabad V. ACIT, Circle 1(2), Hyderabad

ITA 788/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6676 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 11 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2016
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 05-04-2016
• Assessment Year: 2009-2010
• Appeal Filed On: 01-05-2014
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Keywords: Depreciation; Difference of opinion; Revenue expenditure
• Section: 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH ES A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER I.T.A. NO. 788 /H YD /201 4 ASSESSMENT YEAR: 20 0 9 - 1 0 M/S. DECCAN ENTERPRISES LTD., HYDERA BAD [PAN: AA ACD6744K ] VS THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(2), HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI Y. RA TNAKAR , AR FOR REVENUE : SHRI P. SOMASEKHAR REDDY, DR DATE OF HEARING : 0 5 - 0 4 - 201 6 DATE OF PRONOUNCE MENT : 13 - 0 4 - 201 6 O R D E R PER B. RAMAKOTAIAH, A.M. : TH I S IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX - I , HYDERABAD DATED 0 3 - 03 - 201 4 U/S. 263 OF THE INCOME TAX ACT [ACT] . ASSESSEE HAS RAISED AS MANY AS 12 GROUND S IN THIS APPEAL . IN THE COURSE OF ARGUMENT IT WAS SUBMITTED THAT ASSESSING OFFICER (AO) HAS NOT GIVEN ANY ADVERSE FINDING ON SOME OF THE ISSUES AND ONE ISSUE OF CLAIM OF REVENUE EXPENDITURE ON ACCOUNT OF REPAIRS AND MODIFICATIONS IS ALSO PENDING I N APPEAL NO. 19/HYD/2016 , WHICH WILL BE CONSIDERED THEREIN. LD. COUNSEL RESTRICTED HIS ARGUMENTS ONLY TO THE EXTE NT I.T.A. NO. 788 / HYD / 20 1 4 M/S. DECCAN ENTERPRISES LTD., : - 2 - : OF GROUND NO.7 WHICH IS ON THE DIRECTION OF CIT ABOUT DEPRECIATION OF MOTOR - CAR. 2. GROUND NO. 7, MATERIAL FOR CONSIDERATION ON THIS APPEAL IS AS UNDER: 7. THE HON'BLE COMMISSIONER OF INCOME TAX IS INCORRECT IN DIRECTING THE ASSESSING OFFICER TO ALLOW DEPRECIATION ON MOTOR CAR @ 15%. HE SHOULD HAVE APPRECIATED THAT THE MOTOR CAR WAS PURCHASED WITHIN THE SPECIFIED PERIOD AS PER CLA USE - 6(A) OF NEW APPENDIX - I ANNEXED TO THE INCOME TAX RULES AND THEREFORE, IS ENTITLED TO DEPRECIATION AT THE SPECIFIED RATE OF 50% AS SPECIFIED UNDER THE SAID CLAUSE 3 . IT WAS SUBMITTED THAT ASSESSEE HAS PURCHASED A MOTOR - CAR ON 31 - 03 - 2009 AND CLAIMED DEPRECIATION AT 50% OF THE ELIGIBLE 40% I.E., AT 20% WHICH WAS ALLOWED BY THE AO IN THE SCRUTINY ASSESSMENT. IT WAS SUBMITTED THAT LD. CIT HAS DIRECTED THE AO TO RESTRICT THAT DEPRECIATION TO 7.5% (I.E., 50% OF 15%). HE REFERRED TO PARA 4 OF THE CITS OR DER WHEREIN THE CIT TREATED THE CAR PURCHASED AS MOTOR - CAR AND NOT AS COMMERCIAL VEHICLE AND WAS OF THE OPINION THAT DEPRECIATION ON MOTOR - CARS OTHER THAN THOSE USED IN THE BUSINESS OF RUNNING THEM ON HIRE SHOULD BE ALLOWED AT 15% ONLY. IT WAS THE SUBMISS ION THAT MOTOR - CARS WERE GENERALLY ALLOWED AT 15% BUT AS CAN BE SEEN FROM THE DEPRECIATION SCHEDULE, ITEM NO. PART A (III) (3)(III), THE ENTRY IS AS UNDER: III. COMMERCIAL VEHICLE WHICH IS ACQUIRED BY THE ASSESSEE ON OR AFTER THE 1 ST DAY OF OCTOBER, 1998 , BUT BEFORE THE 1 ST DAY OF APRIL, 1999 AND IS PUT TO USE FOR ANY PERIOD BEFORE THE 1 ST DAY OF APRIL, 1999 FOR THE PURPOSES OF BUSINESS OR PROFESSION IN ACCORDANCE WITH THE THIRD PROVISO TO CLAUSE (II) OF SUB - SECTION (1) OF SECTION 32 I.T.A. NO. 788 / HYD / 20 1 4 M/S. DECCAN ENTERPRISES LTD., : - 3 - : 3 .1. THEREFORE, A SSESSEE HAS CLAIMED DEPRECIATION UNDER THIS HEAD AND NOT EITHER UNDER ITEM NO. III(2) OR UNDER III(3)(II), WHEREIN DIFFERENT RATES ARE GIVEN. IT WAS FURTHER SUBMITTED THAT DEFINITION OF COMMERCIAL VEHICLE AS DEFINED IN NOTE 6 IS AS UNDER: 6. COMMERCIA L VEHICLE MEANS HEAVY GOODS VEHICLE , HEAVY PASSENGER MOTOR VEHICLE, LIGHT MOTOR VEHICLE, MEDIUM GOODS VEHICLE AND MEDIUM PASSENGER MOTOR VEHICLE BUT DOES NOT INCLUDE MAXI - CAB, MOTOR - CAB, TRACTOR AND ROAD - ROLLER. THE EXPRESSION HEAVY GOO DS VEHICLE, HEAVY PASSENGER MOTOR VEHICLE, MAXI - CAB, MOTOR - CAB, TRACTOR AND ROAD - ROLLER SHALL HAVE THE MEANINGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLES ACT, 1988 (59 OF 1988) 3 .2. LD. COUNSEL ALSO PLACED ON RECOR D THE MOTOR VEHICLE ACT, 1988 REFERRED TO IN THE NOTE TO SUBMIT THAT A LIGHT MOTOR VEHICLE IS A COMMERCIAL VEHICLE A ND A CAR PURCHASED BY ASSESSEE WA S REGISTERED AS LIGHT MOTOR - VEHICLE UNDER THE MOTOR VEHICLES ACT AND ACCORDINGLY, IT HAS CORRECTLY CLAIMED THE DEPRECIATION AND WAS ALLOWED BY THE AO. IT WAS FURTHER SUBMITTED THAT CIT CAN NOT SUBSTITUTE HIS OPINION AGAINST THE AOS OPINION UNDER THE PROVISIONS OF SECTION 263 . IT WILL COME UNDER THE CATEGORY OF DIFFERENCE OF OPINION WHICH IS NOT PERMITTED U/S. 263 OF THE ACT. FURTHER, IT WAS SUBMITTED THAT THERE IS NO PREJUDICE CAUSED BY THE REVENUE AS THE DEPRECIATION DISALLOWED IN THIS YEAR WILL BE ALLOWED IN THE LATER YEAR (S) AND THEREFORE, THE ORDER CANNOT BE CONSIDERED AS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE , THE TWIN CONDITIONS WHICH ARE TO BE SATISFIED FOR INVOKING THE JURISDICTION U/S. 263. 4 . LD. DR HOWEVER, RELIED ON THE ORDERS OF CIT AND EXPLAINED THE PROVISIONS. I.T.A. NO. 788 / HYD / 20 1 4 M/S. DECCAN ENTERPRISES LTD., : - 4 - : 5 . WE HAVE CONSIDERED THE RIVAL CONTENTIONS. AS BRIEFLY STATED BY T HE LD. COUNSEL , EVEN THOUGH THERE ARE MANY GROUNDS, THE ARGUMENTS ARE RESTRICTED TO ONLY ONE ISSUE I.E., CLAIM OF DEPRECIATION AND ALL OTHER ISSUES ARE TO BE ADJUDICATED IF NECESSARY IN THE CONSEQUENTIAL PROCEEDINGS. THEREFORE, SIN CE THERE IS NO OBJECTION TO THE JURISDICTION U/S. 263, WE ARE NOT ADJUDICATING THE ISSUE OF JURISDICTION U/S. 263. THE ONLY ISSUE TO BE CONSIDERED IS WHETHER CIT IS CORRECT IN DIRECTING THE AO TO RESTRICT DEPRECIATION TO 15 % AS AGAINST 40% CLAIMED BY ASSESSEE AND WAS ALLOWED BY THE AO. 5 .1. AS SEEN FROM THE DEPRECIATION SCHEDULE RELEVANT FOR THE ASSESSMENT YEAR, THERE ARE DIFFERENT RATE OF DEPRECIATION FOR THE VEHICLES. UNDER PART A - III UNDER THE HEAD M A CHIN E RY AND PLANT MOTOR - CARS OTHER THAN THOSE RUNNING ON HIRE IS SHOWN AT ITEM NO. 2 AND RATE OF DEPRECIATION ALLOWABLE IS AT 15%. UNDER THE SUB - HEADING 3(II) CONTAINS MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIES USED IN A BUSINESS OF RUNNING THEM ON HIRE WAS ALLOWED DEPRECIATION @ 30%. NEXT ENTRIES FROM 3(III) TO 3(VIA) AR E ABOUT NEW COMMERCIAL VEHICLES. THE FIRST ENTRY IS COMMERCIAL VEHICLES WHICH ARE PURCHASED BETWEEN FIRST DAY OF OCTOBER 1998 BUT BEFORE FI RST DAY OF APRIL 1999 AL L OWING DEPRECIATION @ 40%. SIMILAR VEHICLES FOR THE SIMILAR PERIOD , BUT IF THEY ARE PURCHAS ED IN REPLACEMENT OF CONDEMNED VEHICLES, IT IS TERMED AS NEW MOTOR VEHICLE AND WAS ALLOWED DEPRECATION @ 60%. SIMILARLY, NEW COMMERCIAL VEHICLE ACQUIRED AFTER 1 ST APRIL 2001 BUT BEFORE 1 ST APRIL 2002 WAS ALLOWED D EPRECIATION @ 50%. ITEM 3(VIA), NEW COM MERCIAL VEHICLE ACQUIRED ON OR AFTER 01 - 01 - 2009 BUT BEFORE 01 - 10 - 2009 AND IS PUT TO USE BEFORE THE 01 - 10 - 2009 IS ELIGIBLE FOR DEPRECIATION @ 50%. ASSESSEES PURCHASE OF C AR COMES UNDER THIS I.T.A. NO. 788 / HYD / 20 1 4 M/S. DECCAN ENTERPRISES LTD., : - 5 - : CATEGORY AS IT WAS PURCHASED ON 31 - 03 - 2009. WE WERE NOT INFORMED WHETHER ASSESSEE HAS CLAIMED 50% DEPRECIATION OR NOT AS ELIGIBLE BUT ORDER OF CIT INDICATES THAT ASSESSEE HAS CLAIMED DEPRECIATION @ 40% , WHICH IS APPLICABLE FOR THE VEHICLES PURCHASED BEFORE 1 ST DAY OF APRIL, 1999. THERE SEEMS TO BE SOME MISTAKE IN THE ORDER OF THE LD. CIT OR MAY BE THE CLAIM ITSELF WAS AT 40% AS AGAINST 50% ELIGIBLE . BE THAT AS IT MAY , AS PER THE DEFINITION OF COMMERCIAL VEHICLES, LIGHT MOTOR - VEHICLE PURCHASED BY ASSESSEE DO FALL UNDER THE TERM COMM ERCIAL VEHICLE AND CERTAINLY ALLO WABLE DEPRECIATION WAS UNDER 3(VIA). THE OBSERVATION OF THE CIT THAT ONLY MOTOR - CARS , OTHER THAN THOSE USED IN A BUSINESS OF RUNNING THEM ON HIRE ARE ELIGIBLE FOR DEPRECIATION AT 15% HAS NO BASIS , AS THE CATEGORIZATION ENDS . THE CONDITION THAT THEY ARE TO BE USED IN THE BUSINESS OF RUNNING THEM ON HIRE IS NOT SPECIFICALLY MENTIONED EXCEPT FOR MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIES. SINCE NEW COMMERCIA L VEHICLES ARE ACQUIRED DURING THE PARTICULAR PERIOD ARE ALLOWED DEPRECIATION AT A HIGHER RATE, WE DO NOT SEE ANY REASON TO RESTRICT THE DEPRECATION TO 15%. 5 .2. THE AO IN THE COURSE OF SCRUTINY ASSESSMENT HAS CONSIDERED AND ALLOWED THE DEPRECIATION AS CLAIMED, AS THERE IS NO DISALLOWANCE MADE ON THIS ISSUE. MOREOVER, WHEN THERE AR E TWO DIFFERENT OP INIONS AND AO HAS TAKEN ONE POSSIBLE OPINION AS PER THE LAW, THE CIT CANNOT SUBSTITUTE HIS OPINION IN THE GUISE OF PROCEEDINGS U/S. 263. EVEN OTHERWISE, THERE IS NO PREJUDICE CAUSED TO REVENUE AS THE ASSET IS ELIGIBLE FOR DEPRECIATION IF NOT IN THIS YEAR, IT WILL BE ALLOWED IN THE LATER YEAR. FOR THE REASONS STATED ABOVE, WE ARE OF THE OPINION THAT THE ORDER OF THE AO ON I.T.A. NO. 788 / HYD / 20 1 4 M/S. DECCAN ENTERPRISES LTD., : - 6 - : THIS ISSUE IS NOT ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. CONSEQUENTLY, GROUND NO. 7 IS ALLOWED. 6 . IN THE RESULT, APPEAL OF ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 13 T H APRIL, 2016 SD/ - SD/ - (P. MADHAVI DEVI) (B. RAMAKOTAIAH) JUDICIAL MEMBER ACCOUNTANT MEMBER HYDERABAD, DATED 13 TH APRIL , 2 016 TNMM COPY TO : 1. M/S. DECCAN ENTERPRISES LTD., B/58, 59 & 60, APIE, BALANAGAR, HYDERABAD. C/O. Y. RA TNAKAR , ADVOCATE, 4 - 1 - 889/16/4, TILAK ROAD, HYDERABAD. 2 . THE ASST. COMMISSIONER OF INCOME TAX, CIRCLE - 1(2), HYDERABAD . 3 . C OMMISS IONER OF I NCOME T AX - I , HYDERABAD. 4. D.R. ITAT, HYDERABAD. 5. GUARD FILE.