ACIT CIR -1, MUMBAI V. GURUDATTA CONSTRUCTION, MUMBAI

ITA 7912/MUM/2011

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8389 (ITAT-MUMBAI)
• Duration Of Justice: 11 month(s) 16 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-11-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: G
• Assessment Year: 2006-2007
• Appeal Filed On: 23-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AMARD EEP
• Keywords: Depreciation
• Section: 154

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, MUMBAI BENCH G , MUMBAI BEFORE SHRI H.L. KARWA, PRESIDENT AND SHRI RAJENDRA SINGH, ACCOUNTANT MEMBER ITA NO. 7912/MUM/2011 ASSESSMENT YEAR : 2006-07 ASSTT. COMMISSIONER OF INCOME TAX , CIRCLE-1 MIDC VARDAAN BLDG. WAGLE ESTATE LOWER GROUND FLOOR THANE (W) VS. M/S. GURUDATTA CONSTRUCTION 201, RADHA NIWAS OPP., GHANTALI MANDIR THANE (W)-400 602. PAN NO. AABFG 0426 H (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI AMARDEEP RESPONDENT BY : SHRI RAJESH SHAH DATE OF HEARING : 05.11.2012 DATE OF PRONOUNCEMENT : 09.11.2012 O R D E R PER RAJENDRA SINGH, AM: THIS APPEAL BY THE REVENUE IS DIRECTED AGAINST THE ORD ER OF CIT(A) DATED 29.7.2011 FOR THE ASSESSMENT YEAR 2006-07 RELATING TO ORDER UNDER SECTION 154 BY THE AO. THE ONLY DISPUTE RAISED BY THE REVENUE IS REGARDING THE RATE OF DEPRECIATION UPHELD BY CIT(A) IN RESPECT OF DUMPERS, DOZERS, POCKLAIN AND JCBS. 2. THE FACTS IN BRIEF ARE THAT THE ASSESSEE WHO IS A CIVIL CO NTRACTOR HAD CLAIMED DEPRECIATION OF RS.21,66,960/- @ 30% IN R ESPECT OF DUMPERS, DOZERS, POCKLAIN AND JCBS USED IN THE BUSINESS WH ICH HAD BEEN ALLOWED IN THE ASSESSMENT. SUBSEQUENTLY THE AO NOTE D THAT PLANT ITA NO.7912/MUM/2011 A.Y. 06-07 2 AND MACHINERY WHICH INCLUDED COMMERCIAL ASSETS LIKE DUMPERS, POCKLAINS ETC WAS ENTITLED TO DEPRECIATION 15%. THE DEP RECIATION OF 30% WAS AVAILABLE ONLY IN RESPECT OF MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIS USED IN THE BUSINESS OF RUNNING THEM ON HI RE. THE AO FURTHER OBSERVED THAT THE ASSESSEE WAS A CIVIL CONTRACTOR A ND NOT IN THE BUSINESS OF HIRING OF VEHICLES AND THEREFORE COULD NO T BE ALLOWED DEPRECIATION @ 30%. THE AO ACCORDINGLY ISSUED NOTICE UND ER SECTION 154 OF THE ACT AND AFTER HEARING THE ASSESSEE RECTIFIED THE ASSESSMENT ORDER REDUCING THE CLAIM OF DEPRECIATION TO 15% AND AD DED THE EXCESS DEPRECIATION AMOUNTING TO RS.10,83,480/-. 2.1 THE ASSESSEE DISPUTED THE DECISION OF AO AND SUBMITTED BEFORE CIT(A) THAT AO WAS NOT CORRECT IN STATING THAT THE ASSET S LIKE DUMPERS, POCKLAIN, JCBS WERE NOT TRANSPORT VEHICLES AND THAT THE ASSESSEE WAS NOT IN THE BUSINESS OF HIRING OF VEHICLES. IT WAS POIN TED OUT THAT THE VARIOUS ASSETS REFERRED TO BY THE AO WERE REGISTERED UN DER MOTOR VEHICLES ACT AND WERE MOTOR VEHICLES AS PER DEFINITION O F MOTOR VEHICLES GIVEN UNDER THE MOTOR VEHICLES ACT. IT WAS FUR THER SUBMITTED THAT IT WAS NOT CORRECT THAT THE ASSESSEE WAS NOT IN THE B USINESS OF HIRING OF MOTOR VEHICLES. IT WAS POINTED OUT THAT OUT OF THE TOTAL CONTRACT RECEIPTS OF RS.3.70 CRORES, AN AMOUNT OF RS.2.20 CR ORES WAS FROM HIRE CHARGES OF VEHICLES. THE ASSESSEE WAS THUS ENTIT LED TO DEPRECIATION AT THE HIGHER RATE OF 30%. THE ASSESSEE ALSO SUBMITTED ITA NO.7912/MUM/2011 A.Y. 06-07 3 THAT UNDER THE PROVISIONS OF SECTION 154, ONLY OBVIOUS AND PATENT MISTAKES COULD BE RECTIFIED AND DEBATABLE ISSUES COULD NOT BE THE SUBJECT MATTER OF RECTIFICATION. THE ASSESSEE PLACED RELIAN CE ON THE JUDGMENT OF HON'BLE SUPREME COURT IN THE CASE OF T.S. BALARAM VS. VOLKART BROTHERS (82 ITR 50). THE ASSESSEE ALSO REFERRED TO THE JUDGMENT OF HON'BLE HIGH COURT OF GUJARAT IN THE CASE O F CIT VS. SHIV CONSTRUCTIONS (165 ITR 159) IN WHICH IT WAS HELD THAT TH E DUMPERS USED BY THE ASSESSEE ENGAGED IN THE BUSINESS OF CONSTRUCTION OF ROADS AND BUILDINGS WERE NOT MACHINERY BUT ROAD TRANSPORT VE HICLES. THUS THE ISSUE WHETHER THE ASSETS USED BY THE ASSESSEE WERE ROAD T RANSPORT VEHICLES ENTITLED TO HIGH RATE OF DEPRECATION WAS A DEB ATABLE ISSUE ON WHICH NO ACTION COULD BE TAKE UNDER SECTION 154. CIT(A) AGREED WITH THE ASSESSEE THAT THE ISSUE WAS DEBATABLE AND ON WHICH NO ACTION COULD BE TAKEN UNDER SECTION 154. CIT(A) HELD THAT THE AO WAS NOT JUSTIFIED IN TREATING ASSETS AS MACHINERY AND ALLOWING DE PRECIATION ONLY @ 15%. HE HELD THAT THE ASSESSEE WAS ENTITLED TO DEPRECIA TION @ 30%. AGGRIEVED BY THE SAID DECISION, THE REVENUE IS I N APPEAL BEFORE THE TRIBUNAL. 3. BEFORE US THE LD. DR APPEARING FOR THE REVENUE A SSAILED THE ORDER OF CIT(A). IT WAS ARGUED BY HIM THAT THE ASSESSEE WAS A CIVIL CONTRACTOR AND WAS NOT IN THE BUSINESS OF HIRING OF VEHICL ES. IT WAS ALSO SUBMITTED THAT EVEN IF DUMPERS, ETC. WERE GIVEN ON HI RE, THESE WERE ITA NO.7912/MUM/2011 A.Y. 06-07 4 USED IN ASSESSEES OWN BUSINESS OF CIVIL CONSTRUCTION AND, THE REFORE, IN SUCH CASES DEPRECIATION AT HIGHER RATE WAS NOT AVAILABLE AS THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF RUNNING THEM ON H IRE. IT WAS ACCORDINGLY SUBMITTED THAT THE ASSESSEE WAS NOT ENTITLED F OR DEPRECIATION AT HIGHER RATE. 3.1 THE LD. AR FOR THE ASSESSEE ON THE OTHER HAND SUBMI TTED THAT THE ASSESSEE HAD DERIVED SUBSTANTIAL REVENUE FROM HIRING OF VEHICLES AND THEREFORE, IT COULD NOT BE SAID THAT THE VEHICLES HAD NOT BEEN USED FOR HIRING. IT WAS ALSO SUBMITTED THAT THE VARIOUS ASSETS LIK E DUMPERS ETC. WERE REGISTERED UNDER MOTOR VEHICLES ACT AS PER REGISTRAT ION DOCUMENT PLACED AT PAGE 34 OF THE PAPER BOOK AND THEREFORE, T HESE WERE TRANSPORT VEHICLES WHICH WERE USED IN THE BUSINESS OF HIRI NG AND DEPRECIATION AT HIGHER RATE WAS ALLOWABLE. IN ANY CASE , IT WAS ALSO SUBMITTED THAT THE ISSUE WAS DEBATABLE AND IN SUCH CASES N O ACTION COULD BE TAKEN UNDER SECTION 154 OF THE ACT. THE LD. AR FURTHER POINTED OUT THAT CIT(A) HAD GIVEN A CLEAR FINDING THAT THE I SSUE WAS DEBATABLE ON WHICH NO ACTION COULD BE TAKEN UNDER SECTION 154 OF T HE ACT AND ON THIS FINDING, NO DISPUTE HAS BEEN RAISED BY THE REVENU E WHO CHALLENGED THE ORDER ONLY ON THE MERIT OF THE CASE. THUS APPEAL OF THE REVENUE DESERVED TO BE DISMISSED. ITA NO.7912/MUM/2011 A.Y. 06-07 5 4. WE HAVE PERUSED THE RECORDS AND CONSIDERED THE MATTER CAREFULLY. THE DISPUTE IS REGARDING THE LEGAL VALIDITY OF THE ORDER PASSED BY AO UNDER SECTION 154 OF THE ACT AND ALLOWABILITY OF DEPRECIATION AT A HIGHER RATE OF 30% IN CASE OF DUMPERS, JCBS, ETC. USED B Y THE ASSESSEE IN THE BUSINESS. IN RESPECT OF THESE ASSETS, ASSESSEE HAD CLAIMED DEPRECIATION AT HIGHER RATE OF 30% AS PROVIDED IN THE ENTRY NO. III(3)(II) OF PART-A OF APPENDIX-I TO I.T. RULE S WHICH IS AVAILABLE IN RESPECT OF MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIS USE D FOR RUNNING THEM ON HIRE. THE CLAIM HAD BEEN ALLOWED BY THE AO I N THE ASSESSMENT. SUBSEQUENTLY THE ASSESSMENT HAS BEEN RECTIFIED UN DER SECTION 154 AND RATE OF DEPRECIATION HAS BEEN REDUCED TO 15%. THE ISSUE IS WHETHER THE AO HAD THE JURISDICTION TO RECTIFY T HE ASSESSMENT UNDER SECTION 154 OF THE ACT. 4.1 IT IS A SETTLED LEGAL POSITION THAT UNDER THE PROV ISIONS OF SECTION 154, ONLY PATENT AND OBVIOUS MISTAKES COULD BE RECTIFIE D AND DEBATABLE ISSUES CAN NOT FORM SUBJECT MATTER OF RECTIFICAT ION. THE DUMPERS, JCBS, ETC. USED BY THE ASSESSEE IN THE BUSINESS ARE REGISTERED AS TRANSPORT VEHICLES UNDER MOTOR VEHICLES ACT . ASSESSEE IS IN THE BUSINESS OF CIVIL CONSTRUCTION AND HAS ALSO EARNED SUBSTANTIAL REVENUE FROM HIRING OF VEHICLES TO OTHER PERSONS. SUCH M OTOR VEHICLES USED IN THE BUSINESS OF RUNNING THEM ON HIRE ARE ELIGI BLE FOR DEPRECIATION AT HIGHER RATE. NOWHERE, IT IS PROVIDED THAT VEHICLES ITA NO.7912/MUM/2011 A.Y. 06-07 6 SHOULD BE EXCLUSIVELY USED IN THE BUSINESS OF HIRE. THEREF ORE, WHETHER DEPRECIATION AT HIGHER RATE WOULD BE AVAILABLE IN RE SPECT OF TRANSPORT VEHICLES USED BOTH IN OWN BUSINESS AS WELL AS IN THE BUSINE SS OF HIRING, IS A HIGHLY DEBATABLE ISSUE. MOREOVER WHETHER THE DUMP ERS ETC. WHICH HAD BEEN REGISTERED AS MOTOR VEHICLE UNDER MOTOR VEHI CLE ACT WILL FALL IN THE CATEGORY OF MOTOR LORRY OR NOT IS ALSO A DEBATA BLE ISSUE. THEREFORE IN RESPECT OF SUCH ISSUES, THE AO HAD NO JURISDI CTION TO TAKE ACTION UNDER SECTION 154 OF THE ACT FOR DISALLOWING ANY CLAIM. WE, THEREFORE AGREE WITH THE CIT(A) THAT EXERCISE OF JURI SDICTION UNDER SECTION 154 OF THE ACT BY THE AO IS NOT CORRECT. REVENUE HAS ALSO NOT SPECIFICALLY CHALLENGED THE ORDER OF CIT(A) ON THIS ASPECT . THEREFORE, WE HOLD THAT AO HAD NO JURISDICTION TO TAKE ACTION UND ER SECTION 154 OF THE ACT AND ACCORDINGLY CONFIRM THE ORDER OF CIT(A) DEL ETING THE ADDITION MADE BY AO. AS WE HAVE DELETED THE ADDITION MADE ON THE LEGAL GROUND, WE DO NOT CONSIDER IT NECESSARY TO GO INTO THE MERIT OF THE CLAIM. 5. IN THE RESULT APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 09.11.2012. SD/- SD/- (H.L. KARWA ) PRESIDENT (RAJENDRA SINGH) ACCOUNTANT MEMBER MUMBAI, DATED: 09.11.2012. JV. ITA NO.7912/MUM/2011 A.Y. 06-07 7 COPY TO: THE APPELLANT THE RESPONDENT THE CIT, CONCERNED, MUMBAI THE CIT(A) CONCERNED, MUMBAI THE DR BENCH TRUE COPY BY ORDER DY/ASSTT. REGISTRAR, ITAT, MUMBAI.