PREMIER POULTRY PRODUCTS PRIVATE LIMITED,HYDERABAD V. DCIT., CIRCLE-5(1), HYDERABAD

ITA 985/HYD/2024

AI Insights

The case involves Premier Poultry Products Private Limited, which appealed against the order of the Commissioner of Income-Tax (Appeals) that upheld the Assessing Officer's decision to restrict the depreciation claim on motor lorries to 15%. The company argued that it was entitled to a higher depreciation rate of 30% as it used the lorries for transporting goods and collected hire charges, thus engaging in a business similar to transportation. However, the Tribunal found that the company's primary business was trading in poultry products and the income from hiring lorries was not a significant part of its business.

• Counselvise Citation: [2025] 140 COUNSELVISE.COM (IT) 708635 (ITAT-HYDERABAD)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 18-07-2025
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Assessment Year: 2015-2016
• Other Referred Cases: Prasad Multi Services (P.) Ltd. Vs. DCIT, CIT Vs. Gupta Global Exim (P.) Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside; Business income; Opportunity of being heard; Depreciation; Search and seizure; Assessment record; Revision of order
• Section: 143(3)

Judgement Text

"आयकर अपीलीय न्यायाधिकरण में, हैदराबाद ‘ए’ बेंच, हैदराबाद IN THE INCOME TAX APPELLATE TRIBUNAL Hyderabad ‘ A ‘ Bench, Hyderabad श्री रवीश सूद, माननीय न्याययक सदस्य एवं श्री मिुसूदन सावडिया, माननीय लेखा सदस्य SHRI RAVISH SOOD, HON’BLE JUDICIAL MEMBER AND SHRI MADHUSUDAN SAWDIA, HON'BLE ACCOUNTANT MEMBER आयकरअपीलसं./I.T.A.No.985/Hyd/2024 (निर्धारण वर्ा/ Assessment Year: 2015-16) Premier Poultry Products Private Limited, Hyderabad. PAN : AACCP0922F Vs. The Deputy Commissioner of Income Tax, Circle – 5(1) Hyderabad. (अपीलार्थी/ Appellant) (प्रत्यर्थी/ Respondent) करदाता का प्रतततितित्व/ Assessee Represented by : Shri S.K. Gupta, Advocate. राजस्व का प्रतततितित्व/ Department Represented by : Shri Gurpreet Singh, Sr.DR सुिवाई समाप्त होिे की ततति/ Date of Conclusion of Hearing : 09.07.2025 घोर्णध की तधरीख/Date of Pronouncement : 18.07.2025 O R D E R प्रनत रवीश सूद, जे.एम./PER RAVISH SOOD, J.M. The present appeal filed by the assessee company is directed against the order passed by the Commissioner of Income-Tax (Appeals), National Faceless Appeal Center (NFAC), Delhi, dated 2 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. 30.07.2024, which in turn arises from the order passed by the Assessing Officer (for short “A.O.”) under Section 143(3) r.w.s. 263 of the Income Tax Act, 1961 (for short “the Act”) dated 30.03.2022 for A.Y. 2015-16. The assessee company has assailed the impugned order on the following grounds of appeal before us: “1. The learned Commissioner of Income Tax (Appeals) erred in facts and law while passing disposing the appeal. 2. The learned Commissioner of Income Tax (Appeals) erred in upholding the action of assessing officer in restricting the claim of depreciation to 15 percent as against 30 percent, ignoring that the lorries are used for the purpose of transportation of goods for which hire charges are also collected and hence it could be construed that assessee is in the business of transportation of goods and accordingly the lorries used for transportation are eligible for higher depreciation. 3. The appellant craves leave to add, alter, delete any of the grounds on or before the case is heard.” 2. Succinctly stated, the assessee company, which is engaged in the business of dealing in poultry produce had filed its return of income for A.Y. 2015-16, declaring an income of Rs. 7,64,910/-. Subsequently, the case of the assessee company was selected for scrutiny assessment u/s 143(2) of the Act. 3. The original assessment was framed by the A.O. vide his order passed u/s 143(3) of the Act, dt.12.11.2018, wherein the income returned by the assessee company was accepted as such. 3 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. 4. The Principal Commissioner of Income Tax (for short “Pr. CIT”) after the culmination of the assessment proceedings called for the assessment record of the assessee company. On a perusal of the record, the Pr. CIT observed that the A.O. while framing the assessment vide his order u/s 143(3) of the Act, dt. 12.11.2018 had allowed the claim of the assessee company for depreciation on motor lorries @ 30% at Rs. 1,32,90,493/-. The Pr. CIT holding a firm conviction that depreciation admissible on motor lorries other than those used in the business of running them on hire was allowable @ 15%, issued a “Show Cause Notice” (“SCN”) u/s 263 of the Act, dated 25.02.2022, and called upon the assessee company to put forth an explanation that as to why its excess claim of depreciation of Rs.83,06,557/- may not be disallowed. 5. As the Pr.CIT did not find favour with the explanation of the assessee company, therefore, he vide his order passed u/s 263 of the Act, dt.25.03.2021 observed that the order passed by the A.O. u/s 143(3) of the Act, dt.12.11.2018 allowing the assessee company’s claim for deduction of higher rate of depreciation on the motor lorries i.e. @ 30% had rendered the order passed by him as erroneous in so far as it was prejudicial to the interest of the 4 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. Revenue, and thus, set aside the same with a direction to him to re-adjudicate the issue after affording a reasonable opportunity of being heard to the assessee company. 6. Thereafter, the A.O. vide his order passed u/s 143(3) r.w.s. 263 of the Act, dt.30.03.2022 restricted the assessee company’s claim for depreciation on motor lorries to 15% and thus, disallowed the excess claim for depreciation of Rs.83,65,917/-. 7. Assessee company, being aggrieved with the order passed by the A.O. giving effect to the directions of Pr.CIT u/s 263 of the Act, dt.25.03.2021 carried the matter in appeal before the CIT(A). 8. The CIT(A) after deliberating on the contentions advanced by the assessee company did not find favour with the same and dismissed the appeal by observing as under : 5 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. 6 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. 7 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. 9. The assessee company, being aggrieved with the order of CIT(A), has carried the matter in appeal before us. 10. We have heard the learned Authorized Representatives of both parties, perused the orders of the lower authorities and the material available on record, as well as considered the judicial 8 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. pronouncements that have been pressed into service by them to drive home their respective contentions. 11. Shri S.K. Gupta, Advocate, the Learned Authorized Representative (for short “Ld.AR”) for the assessee company, at the threshold of hearing of the appeal, submitted that the A.O. had grossly erred in law and on facts of the case in restricting the assessee company’s claim for depreciation on motor lorries to 15%. 12. Elaborating on his contention, the ld.AR submitted that as the assessee company was inter alia providing the motor lorries on hire as an integral part of its business, therefore, it was duly entitled for higher rate of depreciation of 30%. It was, thus, the ld.AR’s claim that there was no justification for the authorities below to restrict the assessee company’s claim for depreciation on motor lorries to 15%. The Ld. AR to support his claim that the assessee company was duly entitled for the higher rate of depreciation on motor lorries, had relied upon the judgment of the Hon'ble High Court of Gujarat in the case of Prasad Multi Services (P.) Ltd. Vs. DCIT (2020) 423 TIR 542 (Guj). The ld.AR submitted that the Hon'ble High Court had held that where the 9 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. assessee company is into the business of hiring of cranes, then, even if such cranes were being used for personal construction business, the same would not disentitle the assessee company from claiming higher depreciation. The ld.AR drawing support from the aforesaid judicial pronouncement, submitted that now when the present assessee company was hiring out the motor lorries, then despite the fact that the same were also used in its poultry business would not disentitle it from claiming higher rate of depreciation on the same. The ld.AR based on his aforesaid contention submitted that as the assessee company’s claim for higher depreciation was in conformity with the settled position of law, therefore, there was no justification for the authorities below to have restricted the same to 15%. 13. Per contra, Shri Gurpreet Singh, the learned senior Departmental Representative (for short “Ld. DR”) relied upon the orders of the lower authorities. The ld. DR submitted that as the assessee company was not in the business of hiring of motor lorries, therefore, the authorities below had rightly declined its claim for higher rate of depreciation on the same. 10 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. 14. We have thoughtfully considered the issue in hand in the backdrop of the contentions advanced by the learned Authorized Representatives of both parties. 15. Controversy involved in the present appeal lies in a narrow compass i.e. as to whether or not the assessee company had rightly raised the claim for higher depreciation on the motor lorries @ 30% ? 16. At the threshold, we may herein observe that a perusal of the financial statements of the assessee company reveals beyond doubt that it is engaged in the poultry business. Also, we find on a perusal of the financial statements that the income received by the assessee company from hiring of motor lorries has been accounted for not as a part of its “Revenue from operations” but separately as “Freight income” under the head “Other operational income” Also, a perusal of the “Note No.1 - Notes forming part of the financial statements of the assessee company” mentioned that it is mainly engaged in the trading of poultry products. 17. Considering the aforesaid facts, we shall now test the claim of the assessee company for higher rate of depreciation on the 11 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. motor lorries on the touchstone of the judgment of the Hon'ble Supreme Court in the case of CIT Vs. Gupta Global Exim (P.) Ltd. (2008) 305 ITR 132 (SC). The Hon'ble Apex Court in its aforesaid judgment had observed that what was relevant for consideration under sub-item 2(ii) of Item III of Appendix I to Income Tax Rules, 1962 for allowing a higher depreciation was whether the assessee company was in the business of hiring out its trucks in addition to its business of trading in timber. It was further observed that mere inclusion of transportation income in total business income was not a determinative factor for deciding whether trucks were used by the assessee company in the relevant period in the business of running them on hire. For the sake of clarity, the observations of the Hon'ble Apex Court are culled out as under : “7. What is relevant for consideration under sub-item 2(ii) of ltem III of Appendix I to the Income-tax Rules, 1962 is whether the assessee was in the business of hiring out his trucks in addition to his business of trading in timber. The order of assessment clearly indicates that the assessee was only in the business of trading in timber. We do not have the returns filed by the assessee before us. We do not have the constitution of the assessee company before us. There is no evidence to indicate that, the assessee was in the business of hiring out motor lorries for running them to earn business income. The entire inference is drawn by CIT(A) only on the footing that the Assessing Officer had treated Rs. 12,59,639 as part of total business income which is not determinative of the above test, viz., whether the trucks were used in the transportation business as claimed by the assessee.” 12 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. (emphasis supplied by us) 18. Ostensibly, the Hon'ble Apex Court, in the aforementioned case, has observed that the assessee company would be entitled for higher rate of depreciation only if it was in the business of hiring of trucks. In so far, the judgment of the Hon'ble High Court of Gujarat in Prasad Multi Services (P) Ltd. Vs. DCIT (supra), as had been relied upon the Ld. AR is concerned, we are afraid that the same will not assist the case of the assessee company. We say so, for he reason that in the case of the present assessee company before us, it is a matter of fact borne from the record i.e. the profit and loss account and “notes” forming part of its financial statements, reveals that the assessee company is engaged in the business of trading of poultry products and had received and accounted for the income from hiring out of the motor lorries, not as an integral part of its business, but as an independent stream of income. Accordingly, as the assessee company during the subject year was not in the business of hiring of motor lorries, therefore, it failed to satisfy the precondition for claiming the higher rate of depreciation i.e., it was not in the business of hiring of motor lorries, not having been satisfied, thus, disentitled it from 13 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. claiming the higher rate of depreciation as envisaged in sub- section 2(ii) of Item III of Appendix I of the Income Tax Rules, 1962. The Hon'ble High Court in its judgment has also emphasized the fact that the assessee company before them was in the business of hiring out cranes, which, as observed by us hereinabove is a pre-condition for claiming a higher rate of depreciation. 19. We, thus, in the backdrop of the aforesaid judgment of Hon'ble Supreme Court in the case of CIT Vs. Gupta Global (supra) find no infirmity in the view taken by the A.O., who had rightly declined the assessee company’s claim for higher depreciation to 15% and thus, uphold the same. 20. Resultantly, the appeal of the assessee company being devoid and bereft of any substance is dismissed. Order pronounced in the Open Court on 18th July, 2025. Sd/- (श्री मिुसूदन सावडिया) (MADHUSUDAN SAWDIA) लेखा सदस्य/ACCOUNTANT MEMBER Sd/- (श्री रवीश सूद) (RAVISH SOOD) न्यायिक सदस्य/JUDICIAL MEMBER Hyderabad, dated 18.07.2025. TYNM/sps 14 ITA No.985/Hyd/2024 Premier Poultry Products Private Ltd. आदेशकी प्रनतनलनप अग्रेनर्त/ Copy of the order forwarded to:- 1. निर्धाररती/The Assessee : Premier Poultry Products Private Limited, 5-5-597, Abhyudaya Nagar, Chintakunt, L.B. Nagar – 500074, Hyderabad, Telangana. 2. रधजस्व/ The Revenue : The Deputy Commissioner of Income Tax, Circle – 5(1), Hyderabad. 3. The Principal Commissioner of Income Tax, Hyderabad. 4. नवभधगीयप्रनतनिनर्, आयकर अपीलीय अनर्करण, हैदरधबधद / DR, ITAT, Hyderabad 5. गधर्ाफ़धईल / Guard file आदेशधिुसधर / BY ORDER Sr. Private Secretary ITAT, Hyderabad "