The ITO, Ward-5(1), Baroda V. M/s. Umiya Chemical Industries, Baroda

ITSSA 558/AHD/2010

• Counselvise Citation: [2010] 124 COUNSELVISE.COM (IT) 8938 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 month(s) 15 day(s)
• Appeal Type: Income Tax (Search & Seizure) Appeal
• Pronouncement Date: 01-10-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: D
• Assessment Year: 1998-1999
• Appeal Filed On: 16-06-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: CHANDRA RAM
• Keywords: Depreciation

Judgement Text

- 1 - IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH D AHMEDABAD BEFORE S/SHRI MAHAVIR SINGH, JM AND D.C.AGRAWAL, AM INCOME-TAX OFFICER, WARD 5(1), RACE COURSE CIRCLE, BARODA. VS. M/S UMIYA CHEMICAL INDUSTRIES, NARSINHJI INDUSTRIAL ESTATE, WADI-YAMUNA MILL ROAD, BARODA. (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI CHANDRA RAM, CIT, DR RESPONDENT BY:- SHRI MUKUND BAKSHI, AR O R D E R PER BENCH THESE FIVE APPEALS HAVE BEEN FILED BY THE REVENUE RAISING COMMON GROUND AS UNDER :- [1(I)] ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT(A) ERRED IN DELETING THE DISALLOWANCE OF EXCESS DEPRECIATION OF RS.2,78,297/- ON ACCOUNT OF DEPRECIATION @ 40% CLAI MED ON VEHICLES WHICH WERE NOT USED EXCLUSIVELY FOR RUNNIN G THEM ON HIRE. [1(II)] THE CIT(A) FAILED TO APPRECIATE THAT THE AS SESSEE CLAIMED DEPRECIATION ON HIGHER RATES ON TRUCKS CLAIMING THA T THOSE WERE USED FOR RUNNING THEM ON HIRE. HOWEVER, THERE IS NO DISPUTE ABOUT THE FACTS THAT THE ASSESSEE IS HAVING ITS MAIN BUSI NESS AS DEALING IN CHEMICAL AND ACIDS AND THE TRUCKS OWNED BY THE ASSE SSEE WHICH WERE USED FOR CARRYING THESE MATERIALS WOULD NOT BE ELIGIBLE FOR HIGHER DEPRECIATION. THE ASSESSEE DID NOT PROVIDE A NY DETAILS TO THE ASSESSING OFFICER TO PROVE THAT ALL THE TRUCKS ON W HICH HIGHER IT(SS)A NOS.558 TO 562/AHD/2010 ASST. YEARS :1998-99 TO2002-03 IT(SS) NOS.558 TO 562/AHD/2010 ASST. YEARS 1998-99-99 TO 2002-03 2 DEPRECIATION WAS CLAIMED WERE USED EXCLUSIVELY FOR RUNNING THEM ON HIRE AND NOT FOR ITS OWN BUSINESS. AMOUNTS OF DEPRECIATION FOR OTHER ASST. YEARS ARE A S UNDER :- 1999-00 2000-01 2001-02 2002-03 308,377 141,708 307,877 194,874 2. AT THE OUTSET THE LD. AR FOR THE ASSESSEE POINTE D OUT THAT THE REVENUE EFFECT IN THESE CASES IS LESS THAN RS.2 LAC S AS UNDER :- PARTICULARS ASSESSMENT YEAR 1998-99 1999-00 2000-01 2001-02 2002-03 DETAIL OF ADDITION /ALLOWANCE DEPRECIATION ON TRUCKS AND TANKERS 278,297 308,377 141,708 307,877 194,874 TAX RATE APPLICABLE(INCLUDING SURCHARGE AND CESS) 35.00 35.00 38.50 39.20 35.70 TAX PAYABLE ON THE AMOUNT DISALLOWED 97,404 107,932 54,558 120,688 69,570 THEREFORE, IN VIEW OF THE CIRCULAR OF THE BOARD REV ENUE SHOULD NOT HAVE FILED THE APPEALS. IN ANY CASE APPEALS ARE LIABLE T O BE DISMISSED. 3. ON MERITS WE HAVE HEARD THE PARTIES. WE NOTICE T HAT LD. CIT(A) ALLOWED THE APPEAL AS UNDER :- 2.2 I HAVE CAREFULLY CONSIDERED THE SUBMISSION OF T HE LD. COUNSEL AS WELL AS THE FACTS OF THE CASE. THE FINDING RECORDED BY THE AO THAT THE ASSESSEE IS IN THE BUSINESS OF CHEMICALS IS FACTUAL LY INCORRECT. IT IS NOTICED FROM THE ASSESSMENT ORDERS THAT THE APPELLANT DURIN G THE COURSE OF ASSESSMENT PROCEEDINGS HAD SUBMITTED THAT THE ASSES SEE IS IN THE BUSINESS OF TRANSPORTATION AND DEALERS IN ACID/CHEMICALS AS CAN BE SEEN FROM THE TAX AUDITORS REPORT IN FORM NO.3CD. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE IS SHOWING INCOME FROM TRANSPORT BUSINESS REGULARLY IN THE PROFIT AND LOSS ACCOUNT, THEREFORE, IT IS ELIGIBLE FOR WEIGHTED DEDUCTION @ 40% ON TRUCKS AND TANKERS. WHAT MORE WAS REQUIRED F ROM THE ASSESSEE. IT(SS) NOS.558 TO 562/AHD/2010 ASST. YEARS 1998-99-99 TO 2002-03 3 AS PER THE COPIES OF RELEVANT AUDIT REPORT, IT WAS NOTICED THAT THE ASSESSEE IS IN THE BUSINESS OF TRADING IN CHEMICALS, ACID ET C. AND TRANSPORTATION. REFERENCE MAY BE MADE TO PARA 8(A) OF THE AUDIT REP ORTS IN FORM NO.3CD. THE FREIGHT RECEIPTS ARE SEPARATELY SHOWN I N THE PROFIT AND LOSS ACCOUNT. THE FREIGHT RECEIPTS ARE SUBSTANTIAL SAY I N THE ASST. YEAR 1998- 99 THE FREIGHT RECEIPTS ARE FOR RS.56,15,858/- AS C OMPARED TO SALES OF CHEMICALS ETC. FOR RS.61,48,644/-. LIKEWISE IN ASST . YEAR 2001-02, THE FREIGHT RECEIPTS ARE FOR RS.84,50,635/- AS COMPARED TO SALES OF CHEMICALS ETC. FOR RS.1,64,78,478/-. THE ISSUE HAS NOW BEEN S ETTLED. THE DETAILS OF YEARWISE SALE OF CHEMICALS ETC. AND FREIGHT RECEIPT S ARE AVAILABLE IN PARA 2.1 ABOVE. THE HON. SUPREME COURT IN THE CASE OF CI T VS. GUPTA GLOBAL EXIM (P) LTD. 305 ITR 132 (SC) HAD HELD THAT HIGHER DEPRECIATION IS ADMISSIBLE ON MOTOR TRUCKS USED IN THE BUSINESS OF RUNNING THEM ON HIRE. THEREFORE, THE USER OF THE SAME IN THE BUSINESS OF TRANSPORTATION OF THE ASSESSEE IS THE TEST. THE BURDEN WAS ON THE ASSESSE E TO ESTABLISH THAT IT WAS THE OWNER OF MOTOR LORRIES AND THAT IT HAD USED THE SAID MOTOR LORRIES/TRUCKS IN THE BUSINESS OF RUNNING THEM ON H IRE. THERE IS NO DISPUTE ON THE OWNERSHIP OF THE MOTOR LORRIES/TRUCKS. THE A SSESSEE IS CARRYING OUT TWO BUSINESS I.E. TRADING IN CHEMICALS AND TRANSPOR TATION. IT IS EVIDENT FROM THE AUDIT REPORTS THAT EITHER SEPARATE PROFIT AND LOSS ACCOUNTS WERE MAINTAINED FOR THE TRANSPORTATION BUSINESS OR THE T RANSPORTATION/FREIGHT RECEIPTS WERE SEPARATELY SHOWN IN THE COMBINED PROF IT AND LOSS ACCOUNT. CONSIDERING THE FACTS OF THE CASE, I AM OF THE OPIN ION THAT THE APPELLANT WAS IN THE SEPARATE BUSINESS OF TRANSPORTATION AND VEHICLES WERE RUNNING ON HIRE AND WAS SHOWING SUBSTANTIAL FREIGHT RECEIPT S. THE AO CANNOT DERIVE SUPPORT FROM THE CASE LAWS RELIED UPON AS TH E FACTS OF THOSE CASES WERE ENTIRELY DIFFERENT. EVEN THOSE DECISIONS ARE N OT RELEVANT AFTER THE DECISION OF THE HON. SUPREME COURT AS REFERRED TO A BOVE. CONSIDERING THE DECISION OF THE HON. SUPREME COURT IN THE CASE OF C IT VS. GUPTA GLOBAL EXIM (P) LTD. 305 ITR 132 (SC) AND THE FACTS OF THE CASES, IT IS HELD THAT THE APPELLANT WAS VERY MUCH RUNNING THE BUSINESS OF TRANSPORTATION AND WAS THUS ELIGIBLE FOR DEPRECIATION AT HIGHER RATE O F 40% ON THE MOTOR LORRIES/TRUCKS. THE AO WAS NOT JUSTIFIED IN DISALLO WING THE DEPRECIATION SO CLAIMED BY THE APPELLANT. THE ADDITIONS MADE IN ALL THESE FIVE YEARS BY DISALLOWING THE HIGHER DEPRECIATION ARE HEREBY DELE TED. THE ONLY GROUND OF ALL THESE FIVE APPEALS IS ACCORDINGLY ALLOWED. THUS THE LD. CIT(A) HELD THAT ASSESSEE HAS A SEPARA TE BUSINESS OF TRANSPORTATION AND VEHICLES, RUNNING ON HIRE AND SU BSTANTIAL FREIGHT RECEIPTS ARE SHOWN. ACCORDINGLY, THE ASSESSEE WAS E LIGIBLE FOR HIGHER DEPRECIATION @ 40%. IT(SS) NOS.558 TO 562/AHD/2010 ASST. YEARS 1998-99-99 TO 2002-03 4 4. THE LD. DR COULD NOT POINT OUT THAT THIS DECISIO N OF LD. CIT(A) IS INCORRECT. 5. IN VIEW OF THE ABOVE, WE CONFIRM THE ORDER OF LD . CIT(A) FOR ALL THE YEARS. THE APPEALS OF THE REVENUE ARE DISMISSED. 6. IN THE RESULT, THE APPEALS FILED BY THE REVENUE ARE DISMISSED. ORDER WAS PRONOUNCED IN OPEN COURT ON 01/10/2010. SD/- SD/- (MAHAVIR SINGH) (D.C. AGRAWAL) JUDICIAL MEMBER ACCOUNTANT ME MBER AHMEDABAD, DATED : 01/10/2010. MAHATA/- COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)- 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD IT(SS) NOS.558 TO 562/AHD/2010 ASST. YEARS 1998-99-99 TO 2002-03 5 1.DATE OF DICTATION 1/10/2010. 2.DATE ON WHICH THE TYPED DRAFT IS PLACED BEFORE TH E DICTATING 7/10/10 MEMBER.OTHER MEMBER. 3.DATE ON WHICH THE APPROVED DRAFT COMES TO THE SR. P.S./P.S. 4.DATE ON WHICH THE FAIR ORDER IS PLACED BEFORE THE DICTATING MEMBER FOR PRONOUNCEMENT.. 5.DATE ON WHICH THE FAIR ORDER COMES BACK TO THE SR .P.S./P.S 6.DATE ON WHICH THE FILE GOES TO THE BENCH CLERK .. 7.DATE ON WHICH THE FILE GOES TO THE HEAD CLERK . 8.THE DATE ON WHICH THE FILE GOES TO THE ASSTT. REG ISTRAR FOR SIGNATURE ON THE ORDER 9.DATE OF DESPATCH OF THE ORDER..