Mithors Chemicals (P) Lt.d, Hyd, Hyderabad V. DCIT, Circle-16(2), Hyd, Hyderabad

ITA 823/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6469 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-06-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Next Hearing Date: 28-09-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 17-06-2015
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: M JAGDISH BABU
• Assessee Lawyers: S RAMA RAO
• Keywords: Depreciation
• Section: 143(3); 115JB; 10B; 263

Judgement Text

ITA NO 823 OF 2015 MITHROS CHEMICALS P LTD HYDERABA D PAGE 1 OF 6 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI PARTHA SARATHI CHAUDHURI, JUDICIAL MEMBER ITA NO.823/HYD/2015 (ASSESSMENT YEAR: 2010-11) MITHROS CHEMICALS (P) LTD HYDERABAD 500078 PAN:AAECM 0698 M VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERABAD (APPELLANT) (RESPONDENT) FOR ASSESSEE : SHRI S. RAMA RAO FOR REVENUE : SHRI M. JAGDISH BABU, DR DATE OF HEARING : 20.06.2016 DATE OF PRONOUNCEMENT : 24 .06.2016 O R D E R PER SHRI PARTHA SARATHI CHAUDHURI, J.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT U/S 263 OF THE ACT FOR THE RELEVANT A.Y 2010-11. THE GROUNDS RAISED BY THE ASSESSEE IS REPRODUCED BE LOW: I) THE ORDER OF THE LEARNED COMMISSIONER OF INCOME- TAX IS ERRONEOUS BOTH ON FACTS AND IN LAW. II) THE LEARNED COMMISSIONER OF INCOME-TAX ERRED IN HOLDING THAT THERE IS ANY ERROR IN THE ORDER U/S 14 3(3) PASSED BY THE DCIT, CIRC1E-16(2) ON 26.12.2012. III) THE LEARNED COMMISSIONER OF INCOME-TAX ERRED I N DIRECTING THE ASSESSING OFFICER TO CONDUCT ENQUIRIE S INTO THE ISSUE OF GRANT OF ACCELERATED DEPRECIATION WHEN SUCH VERIFICATION WAS ALREADY MADE AT THE TIME OF COMPLETION OF THE ASSESSMENT. ITA NO 823 OF 2015 MITHROS CHEMICALS P LTD HYDERABA D PAGE 2 OF 6 IV) THE LEARNED COMMISSIONER OF INCOME-TAX OUGHT TO HAVE SEEN THAT THE ORDER U/S 143(3) DATED 26.12.201 2 IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTERES T OF THE REVENUE. V) THE LEARNED COMMISSIONER OF INCOME-TAX OUGHT TO HAVE SEEN THAT THE NORMAL DEPRECIATION AND THE ACCELERATED DEPRECIATION WAS PROPERLY ALLOWED BY TH E ASSESSING OFFICER AND THEREFORE, THERE IS NO ERROR IN THE ASSESSMENT MADE. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF PRODUCTION AND EXPORT OF RESEARCH CHEMICALS. IT FILED THE RETURN OF INCOME FOR THE A. Y 2010-11 ON 26.09.2011 ADMITTING TOTAL INCOME OF RS.62,774 AFTE R CLAIMING DEDUCTION OF RS.53,16,801 U/S 10B OF THE I.T. ACT. ASSESSMENT U/S 143(3) OF THE I.T. ACT WAS COMPLETED DETERMININ G THE TOTAL INCOME OF THE ASSESSEE AT RS.2,54,404 AND THE BOOK PROFIT U/S 115JB OF THE ACT WAS WORKED OUT AT RS.67,46,810. SI NCE THE BOOK PROFIT WAS MORE THAN THE TAX UNDER NORMAL PROV ISIONS OF THE ACT, BOOK PROFIT WAS TAKEN FOR TAX PURPOSES. THOUGH THE ASSESSEE HAS PREFERRED MULTIPLE GROUNDS OF APPEAL, THE BASIC GRIEVANCE OF THE ASSESSEE IS WHETHER 263 ORDER PASSED BY THE CIT IS TENABLE AS PER LAW OR NOT. THE LEARNED CIT IN HIS ORDER U/S 263 OF THE ACT OBSERVED THAT THERE IS ONLY ONE ISSUE IN THE CASE T HAT PERTAIN TO THE CLAIM OF DEPRECIATION. AS PER THE DEPRECIATION SCHEDULE IT WAS FOUND THAT THE ASSESSEE CLAIMED AND WAS ALLOWED DEP RECIATION FOR COMMERCIAL VEHICLE @ 50% I.E. 2,55,885. THE ASSESSE E HAD PURCHASED A MOTOR CAR WORTH RS.5,11,769. AO ALLOWED THE DEPRECIATION WHICH IS ALLOWABLE ON COMMERCIAL VEHIC LES ONLY, WHEREAS ON THE ABOVE MENTIONED VEHICLE, CIT WAS OF THE OPINION THAT DEPRECIATION IS ONLY @ 15% I.E. 76,765/- WAS A LLOWABLE. ITA NO 823 OF 2015 MITHROS CHEMICALS P LTD HYDERABA D PAGE 3 OF 6 ASSESSEE STATED BEFORE THE CIT THAT THE DEPRECIATIO N GRANTED WAS CORRECT AND ALLOWABLE. THE CBDT VIDE ITS NOTIFICATI ON 10/2009 DATED 19.01.2009 ANNOUNCED SPECIAL RATE OF DEPRECIA TION ON NEW COMMERCIAL VEHICLES ACQUIRED AND PUT TO USE BETWEEN 1 ST JANUARY, 2009, BUT BEFORE THE 1 ST APRIL, 2009. FURTHER VIDE NOTIFICATION NO.37/2009 DATED 21.04.2009 STATED THA T THE BENEFIT IS EXTENDED UPTO 30 TH SEPTEMBER, 2009. THE EXTRACT OF THE RELEVANT NOTIFICATIONS ARE REPRODUCED BELOW: IN THE INCOME-TAX RULES, 1962, IN THE TABLE TO NEW APPENDIX 1, IN PART-A RELATING TO TANGIBLE ASSETS, UNDER THE HEADI NG III. MACHINERY AND PLANT, IN ITEM (3), AFTER SUB-ITEM (V I) AND ENTRIES RELATING THERETO, THE FOLLOWING SHALL BE IN SERTED, NAMELY: '(VIA) NEW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON OR AFTER THE 1ST DAY OF JANUARY, 2009 BUT BEFORE THE 1ST DAY OF APRI L, 2009 AND IS PUT TO USE BEFORE THE 1ST DAY OF APRIL, 2009 FOR THE PU RPOSES OF BUSINESS OR PROFESSION [SEE PARAGRAPH 6 OF THE NOTES BELOW T HIS TABLE] NOTIFICATION NO.37/2009 DATED 21.04.2009 IN THE INCOME TAX RULES, 1962, IN THE TABLE TO NEW APPENDIX I, IN PART-A RELATING TANGIBLE ASSETS UNDER THE HEADIN G III, MACHINERY & PLANTS, IN SUB ITEM (VIA) OF ITEM (3) F OR THE WORDS AND FIGURES 1 ST DAY OF APRIL, 2009 THE WORDS AND FIGURES 1 ST DAY OF OCTOBER, 2009 SHALL BE SUBSTITUTED AT BOTHT HE PLACED. ACCORDINGLY, THE RATE OF DEPRECIOLION APPLIED FOR M OTOR CAR IS AS PER THE NOTIFICATION ISSUED BY THE CBDT AND ASSESSE E COMPANY IS ELIGIBLE FOR CLAIMING DEPRECIALION @50% U/S 32(1 ) OF THE INCOME TAX ACI, 1961 AT THE RATE SPECIFIED IN THE T ABLE TO NEW APPENDIX-1 IN PART-A RELATILNG 10 TANGIBLE ASSETS, UNDER IHE HEADING III, MACHINERY AND PLANT, IN SUB-ITEM (VIA) OF ITEM (3). FURTHER NOTE NO. 6 OF NEW APPENDIX I DEFINES COMMER CIAL VEHICLE AS FO/LOWS: 'COMMERCIAL VEHICLE' MEANS HEAVY GOODS VEHICLE 'HE AVY PASSENGER MOTOR VEHICLE' ' 'MEDIUM GOODS VEHICLE ' AND 'MEDIUM PASSENGER MOTOR VEHICLE' BUT DOES NOT INCLU DE MAXICAB, MOTORCAB, TRACTOR AND ROAD ROLLER. THE EXPRESSIONS HEAVY GOODS VEHICLE, HEAVY PASSENGER MOTOR VEHICL E, LIGHT MOTOR VEHICLE, MEDIUM GOODS VEHICLE, MEDIUM PASSE NGER MOTOR VEHICLE, MAXICAB, MOTORCAB TRACTOR AND ROADROLLER SHALL HAVE THE MEANININGS RESPECTIVELY AS ASSIGNED TO THEM IN SECTION 2 OF THE MOTOR VEHICLE ACT, 1988 (59 OF 198 8). ITA NO 823 OF 2015 MITHROS CHEMICALS P LTD HYDERABA D PAGE 4 OF 6 3. THE ASSESSEE CAR BEING LIGHT MOTOR VEHICLE AND T HE DEFINITION OF LIGHT MOTOR VEHICLE AS PER SECTION 2 OF THE MOTOR VEHICLE ACT, 1988, THE ASSESSEE CONTENDED THAT LIG HT MOTOR VEHICLE MEANS A TRANSPORT VEHICLE OR OMNIBUS THE G ROSS VEHICLE WEIGHT OF EITHER OF MOTOR CAR OR TRACTOR OR ROAD RO LLER, UNLADEN WEIGHT OF ANY OF WHICH DOES NOT EXCEED (7500) KGS. IN THIS CASE, THE GROSS WEIGHT OF THE VEHICLE AS PER THE REGISTRA TION CERTIFICATE IS 1000 KGS. THE ASSESSEE FURTHER SUBMITTED THE JUDICI AL DECISIONS IN THIS REGARD IN THE CASE OF M/S. BLUE STEEL ENGIN EERS P LTD V. DCIT (ITAT MUMBAI B BENCH IN ITA NO.6411/MUM/2010 ) AND AVALON PHARMA P LTD V. DCIT (ITAT MUMBAI J BENCH IN ITA NO.5702/MUM/2013). IN BOTH THE CASES THE FACTS WERE IDENTICAL AND THE ITAT HAD HELD THAT THE AO HAS DIRECTED TO A LLOW DEPRECIATION @ 50% AS CLAIMED BY THE ASSESSEE. HOWE VER, THE LEARNED CIT IN HIS ORDER STATED THAT THE VEHICLE HA S BEEN REGISTERED AS A NON REGISTERED VEHICLE (DOMESTIC). IN OTHER WORDS THE ASSESSEE CATEGORICALLY STATED ITS INTENT IN THE WAY THE VEHICLE SHOULD BE USED. SECONDLY, WITH RESPECT TO MOTOR CARS ONLY THOSE USED IN THE BUSINESS OF HIRE CAN BE CLAS SIFIED AS COMMERCIAL VEHICLE. IN THE CASE OF THE ASSESSEE THE VEHICLE, IN QUESTION, HAS NOT BEEN USED FOR HIRE AT ALL. THE CI T FURTHER STATED THAT THE AO DID NOT EVEN MAKE THE PRELIMINARY INQUI RY INTO THIS ISSUE EVEN THOUGH THE NAME AND THE MAKE OF THE VEHI CLE WAS ON RECORD BEFORE GRANTING ACCELERATED DEPRECIATION, IT WAS THE DUTY OF THE AO TO LOOK INTO THE NOTIFICATION OF THE CBDT AND RELATED FACTS AND THEREFORE, THE CIT HELD THAT THE ORDER OF THE AO IS PREJUDICIAL TO THE INTERESTS OF THE REVENUE AND ACC ORDINGLY HE SET ASIDE THAT ORDER PASSED BY THE AO. BEING AGGRIEVED, THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. ITA NO 823 OF 2015 MITHROS CHEMICALS P LTD HYDERABA D PAGE 5 OF 6 4. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE ARGUMENTS TAKEN UP BEFORE THE CIT AND THE VARIOUS J UDICIAL PRONOUNCEMENTS WHICH ARE ALREADY IN RECORD AS MENTI ONED EARLIER WHEREAS THE LEARNED DR REITERATED THE ORDER OF THE CIT. 5. WE HAVE PERUSED THE RECORDS IN THIS CASE AND EVE N THE ORDERS OF THE STATUTORY AUTHORITIES AND WE ARRIVE A T OUR CONSIDERED VIEW THAT THE ASSESSEE PURCHASED THE MOT OR CAR FOR THE PURPOSE OF BUSINESS AND HAD CLAIMED DEPRECIATIO N U/S 32(1) OF THE ACT @ 50% AS PER THE NOTIFICATION NO.37/2007 DATED 21.04.2009 ISSUED BY THE CBDT.AS PER THE NOTIFICATI ON ISSUED BY THE CBDT, IF ANY COMMERCIAL VEHICLE WHICH IS USED B ETWEEN 1.4.2009 AND 1.10.2009 FOR THE PURPOSE OF THE BUSIN ESS, THE ASSESSEE IS ELIGIBLE FOR DEPRECIATION @ RATES SPECI FIED THEREIN. THE MOTOR VEHICLE OF THE ASSESSEE WAS IN THE CATEGORY O F LMV AND AS PER THE DEFINITION IN THE MOTOR VEHICLE ACT U/S 2(2 1), ANY VEHICLE MEANT FOR TRANSPORT OR OMNIBUS OR MOTOR CAR OR TRAC TOR, THE WEIGHT OF WHICH DOES NOT EXCEED 7500KGS SHALL COME WITHIN THE DEFINITION OF THE LMV AND IN THIS CASE, THE REGISTR ATION CERTIFICATE SHOWS THAT THE GROSS WEIGHT OF THE VEHICLE OF THE A SSESSEE WAS 1000KG AND THEREFORE, IT FALLS WITHIN THE CATEGORY OF LMV. THE LMV ALSO COMES WITHIN THE MEANING OF COMMERCIAL VEH ICLE. WE OBSERVE IN THIS CASE THE HIGHER DEPRECIATION GRANTE D TO THE ASSESSEE BY THE AO IS SANCTIONED THROUGH THE BOARD S NOTIFICATION AND FOR THE MATTER OF FACT THAT WITHIN THE DEFINITION OF COMMERCIAL VEHICLE INCLUDE LMV. THAT GRANTING WHAT IS LEGALLY ELIGIBLE TO THE ASSESSEE CANNOT BE TERMED AS ERRONE OUS AND ITA NO 823 OF 2015 MITHROS CHEMICALS P LTD HYDERABA D PAGE 6 OF 6 PREJUDICIAL TO THE INTERESTS OF THE REVENUE SO AS T O INVOKE SECTION 263 OF THE ACT. WE ALSO FIND SIMILAR ISSUE HAS BEEN CONSIDERED BY THE ITAT MUMBAI BENCHES IN THE CASES REFERRED (SUPR A). RESPECTFULLY FOLLOWING THE DECISIONS OF THE COORDIN ATE BENCHES, WE FEEL THAT THE CLAIM OF THE ASSESSEE FOR HIGHER D EPRECIATION IS CORRECT AND TENABLE. IT IS ALSO SEEN THAT THE TOTAL INCOME WAS DETERMINED INVOKING THE PROVISION OF SECTION 115JB, SO THAT WAY NO PREJUDICE IS CAUSED BY ALLOWING DEPRECIATION AT 50%. THE TWIN CONDITIONS TO BE SATISFIED FOR INVOKING THE JURISDI CTION WERE NOT FULFILLED. THEREFORE, THE CITS ORDER IS HEREBY RE VERSED AND THE ASSESSEES CLAIM FOR DEPRECIATION IS UPHELD. 6. IN THE RESULT, ASSESSEES APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 24 TH JUNE, 2016. S D/ - S D/ - (B. RAMAKOTAIAH) (PARTH SARATHI CHAUDHURI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 24 TH JUNE, 2016. VNODAN/SPS COPY TO: 1. SHRI S. RAMA RAO, ADVOCATE, FLAT NO.102, SHRIYAS EL EGANCE, 3-6-643, STREET NO.9, HIMAYATNAGAR, HYDERABAD 50002 9 2. DY.COMMISSIONER OF INCOME TAX, CIRCLE 16(2) HYDERAB AD 3. PRINCIPAL CIT-4 HYDERABAD 4. ADD.CIT RANGE 16 HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER