Depreciation @ 40% on vehicles used for running on hire to various parties without agreement allowable

The case of the assessee is that it was giving its trucks and JCBs on hire to various parties and complete details thereof along with names and addresses of the parties from whom the carting income was earned, and details of the trips made by the vehicles, rate at which the income was earned by the assessee, has been recorded in the account book of the assessee, a copy of which has been filed in the compilation before the Tribunal. We find that the Revenue could not controvert the submission of the assessee that it has, in fact, given its vehicles to various parties during the relevant accounting period on hire, and has declared income thereof. Merely because, there was no separate lease agreement with various parties, is not decisive of the issue. The vehicles were given to various parties on per trip basis, and therefore, separate agreement for carting income for each trip with various parties is not practicable to be executed and produced before the Revenue authorities. In these facts of the case, we are of the view that the assessee was entitled to higher depreciation at the rate of 40%, and accordingly, the grounds of the appeal no.3.1 and 3.2 of the assessee are allowed.

ITAT AHMEDABAD, “B” BENCH

BEFORE S/SHRI G.C. GUPTA, VICE-PRESIDENT AND
ANIL CHATURVEDI, ACCOUNTANT MEMBER)

IT(SS)A No.178 to 182/Ahd/2009

[Asst. Year : 2003-2004, 2004-2005, 2005-2006, 2006-2007 and 2007-2008]

M/s. Tirupati Construction Company vs. ACIT

IT(SS)A No.73 to 75/Ahd/2010

[Asstt.Year : 2004-2005, 2005-2006 and 2006-2007]

ACIT Vs.M/s. Tirupati Construction Company

Date of Pronouncement: 13/11/2013

O R D E R

PER BENCH: This group of appeals, five by the assessee and three by the Revenue for the different assessment years, are directed against the orders of the CIT(A). These are being disposed of with this consolidated order.

IT(SS)A No. 178/Ahd/2009 – Asstt.Year 2003-2004 (Assessee’s Appeal)

2. The ground no.1.1 and 1.2 of the appeal of the assessee are as under:

“1.1 The order passed by CIT(A) on 25.9.2009 for A. Y.2003-04 partly confirming the dis allowance of interest and depreciation made by AO is wholly illegal, unlawful and against the principles of natural justice.

1.2 The ld.CIT(A) has grievously erred in upholding the impugned dis allowances without considering fully and properly the evidence produced as well as explanation offered.”

3. These grounds of the appeal being general in nature, needs no adjudication.

4. The ground no.2.1 is as under:

“2.1 The proceedings initiated u/s.153A(b) by AO for A.Y.2002-03 are wholly illegal, unlawful and without jurisdiction.”

5. This ground of the appeal is not pressed by the learned counsel for the assessee, and is accordingly dismissed.6. The ground no.3.1 and 3.2 of the assessee’ s appeal are as under:

“3.1 The ld. CIT(A) has grievously erred in law and/or on facts in upholding that the vehicle were not used for running them on hire and hence depreciation @ 40% was not admissible.

3.2 That in the facts and circumstances of the case, the ld. CIT(A) ought not to have upheld that the vehicles were not used for running them on hire so that depreciation @ 40% was not admissible”

7. The learned counsel for the assessee submitted that the assessee is entitled to higher rate of depreciation at 40% on its trucks and JCBs, as it was being used for running them on hire also during the dull period of business of road construction of the assessee. He referred to the detailed account of the “carting income” of the assessee, as appearing in its ledger account, wherein the assessee has charged carting income on various trips made by it on behalf of others, and complete details of the parties to whom the vehicles were given on hire has been detailed therein. He submitted that no discrepancy could be pointed out on behalf of the Revenue in the details of carting income account in the ledger of the assessee by the Revenue.

8. The learned DR has opposed the submissions of the learned counsel of the assessee. He submitted that the CIT(A) has passed well reasoned order on this issue. He submitted that although the assessee has earned and declared carting receipt from the said vehicles, but CIT(A) has recorded that the assessee has not specified the vehicles, which were leased out and what were the terms and conditions of the lease agreement. He submitted that in the absence of evidence and details, the AO was justified in refusing to give extra depreciation to the assessee, and normal depreciation was allowed to the assessee. He relied on the decision of the Hon’ble Apex Court in CIT Vs. Gupta Global Exim (P) Ltd., 305 ITR 132 (SC) referred by the CIT(A) in his order.

9. We have considered rival submissions carefully and perused the orders of the AO and the CIT(A) and also the details of account of carting income, as appeared in the ledger account of the assessee. We find that the assessee has declared carting income of Rs.15,66,343/- during the year. The case of the assessee is that it was giving its trucks and JCBs on hire to various parties and complete details thereof along with names and addresses of the parties from whom the carting income was earned, and details of the trips made by the vehicles, rate at which the income was earned by the assessee, has been recorded in the account book of the assessee, a copy of which has been filed in the compilation before the Tribunal. We find that the Revenue could not controvert the submission of the assessee that it has, in fact, given its vehicles to various parties during the relevant accounting period on hire, and has declared income thereof. Merely because, there was no separate lease agreement with various parties, is not decisive of the issue. The vehicles were given to various parties on per trip basis, and therefore, separate agreement for carting income for each trip with various parties is not practicable to be executed and produced before the Revenue authorities. In these facts of the case, we are of the view that the assessee was entitled to higher depreciation at the rate of 40%, and accordingly, the grounds of the appeal no.3.1 and 3.2 of the assessee are allowed.

IT(SS)A No. 179/Ahd/2009 – Asst. Year 2004-2005 (Assessee’s Appeal)

10. The ground no.1.1 and 1.2 of the appeal of the assessee are as under:

“1.1 The order passed by CIT(A) on 25.9.2009 for A.Y.2004-05 partly confirming the dis allowance of bad debts and addition of rs. 19,42,771/- in respect of seized diary as made by the AO is wholly illegal, unlawful and against the principles of natural justice.

1.2 The ld.CIT(A) has grievously erred in upholding the impugned dis allowances/additions without considering fully and properly the evidence produced as well as explanation offered.”

11. These grounds of the appeal being general in nature, needs no adjudication.12. The grounds no.2.1 and 2.2 read as under:

“2.1 The ld.CIT(A) has grievously erred in upholding following additions/dis allowances.

(a) Bad debts dis allowance Rs.13,36,532/-

(b) Undisclosed income (seized Diary Annx – A/1-6) Rs.19,42, 771/-

2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) ought not to have made above said dis allowance/additions.

13. These grounds of the appeal of the assessee consist of two parts. Firstly, the claim of bad debts disallowed by the AO amounting to Rs. 13,36,532/-. The learned counsel for the assessee submitted that the issue is now covered in favour of the assessee with the decision of the Hon’ble Apex Court in the case of T.R.F. Ltd. Vs. CIT, 323 ITR 397 (SC). The learned DR submitted that the assessee has not made this claim at the time of filing of the original return, and has made the claim for the first time after the search was made in the premises of the assessee, and therefore, the claim of the assessee is not entertainable, and rightly rejected by the Revenue authorities.

14. We have considered rival submissions and perused the orders of the AO and the CIT(A). We find that admittedly, this claim was not made by the assessee at the time of original assessment, and therefore, there is no justification for making this claim after the search operation carried out in the business premises of the assessee. Accordingly, the claim of the assessee is rejected, and the ground of the appeal of the assessee on this issue is dismissed.

The other issue is regarding the addition of Rs.19.42 lakhs as undisclosed income on account of seized diary. The learned counsel for the assessee submitted that the peak of credit and debit entries from the seized papers comes to Rs. 14,35,666/- and the CIT(A) has further made addition of net profit at the rate of 5% of the gross receipts in the seized paper, and worked out the addition at Rs. 19,42,771/-. He submitted that there is no justification for addition sustained by the learned CIT(A). The learned DR submitted that whole of the receipts was rightly taxed by the AO, and CIT(A) was not justified in restricting the same to Rs. 19,42,771/-.

15. We have considered rival submissions and perused the orders of the AO and the CIT(A). We find that the peak amount of credit and debit entries on the seized papers amounting to Rs.14,35,666/- could be validity taxed in the hands of the assessee. In our view, there is no justification for further adding net profit at the rate of 5% on the gross receipts on the seized papers of the assessee. There is also no justification for the AO to add the entire receipts side of these seized paper, and not considering the peak of the credit and debit entries. In this view of the matter, we hold that the addition should be sustained to the extent of Rs.14,35,666/- as against Rs.19,42,771/- sustained by the learned CIT(A), and the ground of the appeal of the assessee is partly allowed to this extent.

IT(SS)A No. 180/Ahd/2009 – Asstt.Year 2005-2006 (Assessee’s Appeal)

16. The ground no.1.1 and 1.2 of the appeal of the assessee are as under:“1.1 The order passed by CIT(A) on 25.9.2009 for A.Y.2005-06 partly confirming the dis allowance of depreciation of Rs. 2,14,938/- and addition of Rs.12,43,447/- in respect of seized diary as made by AO is wholly illegal, unlawful and against the principles of natural justice.

1.2 The ld.CIT(A) has grievously erred in upholding the impugned dis-allowances without considering fully and properly the evidence produced as well as explanation offered.”

17. These grounds of the appeal being general in nature, needs no adjudication.18. The grounds no.2.1 and 2.2 read as under:

“2.1 The ld.CIT(A) has grievously erred in upholding following additions/dis allowances.

(a) Depreciation Rs.2,14,938/-

(b) Undisclosed income (seized Diary Annx – A/1-6) Rs.12,43,447/-

2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) ought not to have made above said dis allowance/additions.

19. These grounds of the appeal of the assessee consists of two parts. First part is regarding claim of higher depreciation of Rs.2,14,938/-. Both parties before us submitted that the issue is identical with the issue in the assessee’ s appeal for the earlier assessment year 2003-2004, in IT(SS)A No.178/Ahd/2009. We have considered rival submissions. In view of our decision in the foregoing paras of this order while disposing of the appeal of the asses see IT(S S)A.No.178/Ahd/2009 for the asstt.year 2003-2004, the issue is decided in favor of the assessee and the ground no.2.1 with regard to depreciation claim of Rs.2, 14,938/- is allowed.

20. The second part of this ground of the appeal is regarding the addition of undisclosed income on account of seized diary amounting to Rs. 12,43,447/-. Both the parties before us submitted that the issue in this ground of the appeal is identical with the issue in the ground of the appeal of the assessee for the earlier assessment year 2004-2005 in IT(SS)A.No. 179/Ahd/2009 and peak of debit and credit entries on seized papers comes to Rs.6,70,742/-. We have considered rival submissions. In view of our decision while disposing of this issue in the assessee’ s appeal for earlier asstt.year 2004-2005 in IT(SS)A.No. 179/Ahd/2009, we direct to restrict this addition on this count to the peak amount of the debit and credit entries of the seized papers at Rs.6,70,742/- as against Rs.12,43,447/- sustained by the learned CIT(A), and the ground of the appeal of the assessee is partly allowed.

IT(SS)A No. 181/Ahd/2009 – Asst. Year 2006-2007 (Assessee’s Appeal)

21. The ground no.1.1 and 1.2 of the appeal of the assessee are as under:“1.1 The order passed by CIT(A) on 25.9.2009 for A.Y.2006-07 partly confirming the dis allowance of depreciation of Rs. 1,35,294/- and addition of Rs. 8,51,182/- in respect of seized diary and excess claim of Rs.2,24,982/- as made by AO is wholly illegal, unlawful and against the principles of natural justice.

1.2 The ld.CIT(A) has grievously erred in upholding the impugned dis allowances without considering fully and properly the evidence produced as well as explanation offered.”

22. These grounds of the appeal being general in nature, needs no adjudication.23. The grounds no.2.1 and 2.2 read as under:

“2.1 The ld.CIT(A) has grievously erred in upholding following additions/dis allowances.

(a) Excess claim of Ujjain division	Rs.2,24,982/-
(b) Excess depreciation on vehicles	Rs.1,35,294/-
(c ) Unrecorded receipt (seized Diary Annx – A1/-6)	Rs.8,51,182/-

2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) ought not to have made above said dis allowance/additions.

24. These grounds of the appeal of the assessee consists of three parts. First part is regarding excess claim of Ujjain division of Rs.2,24,982/-. The learned counsel for the assessee submitted that this is the business loss of the assessee, and therefore, allowable. The learned DR has opposed the submissions of the learned counsel for the assessee. He relied on the orders of the AO and the CIT(A). We have considered rival submissions. We find that the assessee has claimed a loss of Rs.13.23 lakhs in its Ujjain division with regard to the work done for road construction, whereas the exact amount of loss determined by the PWD was for Rs.10,98,087/-. The difference was claimed by the assessee as business loss. In our view, the actual loss being Rs.10,98,087/-, the balance loss of Rs.2,24,982/- was rightly disallowed and the issue is accordingly decided against the asses see.

The second issue in this ground is regarding excess depreciation on vehicles. Both parties submitted before us that the issue is identical with the issue in the appeal of the assessee for the earlier assessment year 2003-2004. We have considered rival submissions. In view of our decision in the foregoing paras of this order in IT(SS)A.No. 178/Ahd/2009 for A.Y.2003-2004, the issue is decided in favor of the assessee, and the depreciation on vehicle of Rs.1,35,294/- is allowed.

The third issue is regarding unrecorded receipt found in the seized diaries and the addition made of Rs. 8,51,182/-. Both the parties before us submitted that the issue is identical with the issue in the assessee’ s appeal for the earlier assessment year 2004-2005. We have considered rival submissions. In view of our decision in the foregoing paras of this order, while disposing of assessee’ s appeal for the earlier assessment year 2004-2005 in IT(SS)A.No. 179/ahd/2009, the addition is restricted to the admitted figure of peak of credit and debit entries on the seized papers of Rs.5,76,707/- as against Rs.8,51,182/- sustained by the learned CIT(A), and the ground of the appeal of the assessee with regard to this issue is partly allowed.

IT(SS)A No.182/Ahd/2009 – Asstt.Year 2007-2008 (Assessee’s Appeal)

25. The ground no.1.1 and 1.2 of the appeal of the assessee are as under:

“1.1 The order passed by CIT(A) on 25.9.2009 for A.Y.2007-08 partly confirming the dis allowance of depreciation of Rs.58,033/- and excess claim of Rs.1,25,442/- as made by AO is wholly illegal, unlawful and against the principles of natural justice.

1.2 The ld.CIT(A) has grievously erred in upholding the impugned dis allowances without considering fully and properly the evidence produced as well as explanation offered.”

26. These grounds of the appeal being general in nature, needs no adjudication.

27. The grounds no.2.1 and 2.2 read as under:

“2.1 The ld.CIT(A) has grievously erred in upholding following additions/dis allowances.

(b) Excess depreciation on vehicles Rs.58,033/-

(b) Excess claim of loss Rs.1,25,442/-

2.2 That in the facts and circumstances of the case as well as in law, the ld. CIT(A) ought not to have made above said dis allowance/additions.

28. These grounds of the appeal have two parts. The first is regarding excess claim of depreciation on vehicles of Rs. 58,033/-. Both parties submitted before us that the issue is identical with the issue in the appeal of the assessee for the earlier assessment year 2003-2004. We have considered rival submissions. In view of our decision in the foregoing paras of this order in IT(SS)A.No.178/Ahd/2009 for A.Y. 2003- 2004, the issue is decided in favor of the assessee, and the depreciation on vehicle of Rs. 58,033/- is allowed.