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Income Tax Appellate Tribunal, HYDERABAD BENCHES “SMC”, HYDERABAD
Before: SMT. P. MADHAVI DEVI
BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER Assessment Year: 2014-15 Veerapaneni Chennakeshava Income Tax Officer, Rao, Vs Ward-9(4), HYDERABAD HYDERABAD [PAN: AGMPC5859M] (Appellant) (Respondent) For Assessee : Shri T.Chaitanya Kumar, AR For Revenue : Shri Sunku Srinivas, DR Date of Hearing : 31-12-2019 Date of Pronouncement : 08-01-2020 O R D E R This appeal filed by the assessee for the AY.2014-15, is directed against the order of the Commissioner of Income Tax (Appeals)–7, Hyderabad, dated 14-03-2018.
At the outset, it is seen that there is a delay of 11 (eleven) days in filing the appeal before the Tribunal. The assessee has filed an application for condonation of delay along with an affidavit, explaining the reasons for the delay. It is stated in the application, that the appeal papers were made ready by the assessee’s counsel on 30-05-2018 and were sent to assessee’s residence for signature and since remittance of appeal fees was also to be made on that day itself, the same could not be done as the assessee was out of station to look after stone crushing plants at Karnataka and hence he could not sign the papers immediately. Thus, there is a delay of 11 days in filing of the appeal.
Ld.DR was also heard and being satisfied with the reasonableness for the delay in filing the appeal, I am inclined to condone the delay.
The Grounds raised by assessee in this appeal are as under:
“1) The learned Commissioner of Income-tax (Appeals) is erroneous, illegal and held contrary to the facts of the instant case.
2) The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the assessing officer without giving any further opportunity.
3) The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the assessing officer in disallowing depreciation of Rs.3,71,831/-.
4) The learned Commissioner of Income-tax (Appeals) erred in confirming the action of the assessing officer in disallowing the chit loss of Rs.11,596/- 5) The learned Commissioner, of Income-tax (Appeals) erred in confirming the action of the assessing officer in taxing the rental income of Rs.7,08,000/- under the head other sources instead of income from house property.
6) The learned Commissioner of Income-tax (Appeals) ought to have considered the fact that the said amount was offered “income from house property”. 7) Any other grounds/ground may be urged at the time of hearing”.
Brief facts of the case are that, the assessee, an individual is engaged in the business of running a petrol pump in the name and style of Chenna Keshava Filling Station at DVK Road, Nalgonda Town. He filed his return of income for the AY.2014-15 on 01-11-2014, declaring income of Rs.7,98,840/-. The case of assessee was selected for scrutiny under CASS.
During the assessment proceedings u/s.143(3) of the of the Income Tax Act [Act], the Assessing Officer (AO) noticed that the assessee has shown gross rent on land under the head ‘income from house property’ of Rs.7,08,000/- and also claimed 30% therefrom as depreciation and balance amount of Rs.4,95,600/- was offered to tax. The AO observed that the depreciation cannot be claimed on vacant land and further that the land on which filling station is functioning was given on lease to Bharat Petroleum Corporation Ltd [BPCL] and since there is no building on the said land, AO held that the gross amount of Rs.7,08,000/- is to be brought to tax, under the head ‘income from other sources’. He also disallowed the claim of depreciation of Rs.2,12,400/- there from. Thereafter, AO also observed that the assessee has claimed depreciation on certain machinery which are as under:
S.No Amount Rs. 1 Depreciation on earth moving 60,012 machinery 2 Depreciation on Lorry Kanta 10,935 3 Machinery I account 1,19,264 4 Machinery II account 26,622 5 Ashok Leyland 1,55,006 Total : 3,71,831 6.1. Since the assessee was into the business of running petrol bunk, he was asked to furnish depreciation claimed on these assets, which are used in the business. The assessee explained that the assets were purchased in the month of March, 2013 and an agreement was entered with BPCL for their use thereafter. However, the AO observed that the operation based on the agreement with BPCL to use the oil tanker commenced only from 01-04-2014 and since the assessee is not into the business of running petrol tankers, he held that the same date is to be taken i.e., 01-04-2014 and depreciation can be allowed thereon only from that date itself. He therefore disallowed deprecation of Rs.3,71,831/-.
6.2. The assessee had also claimed chit loss of Rs.11,596/-. The assessee was asked to furnish information on the funds that were deployed from the chits into the business. Since the assessee did not furnish any information, the chit loss of Rs.11,596/- was disallowed.
6.3. Aggrieved, the assessee preferred an appeal before the CIT(A), who confirmed the order of AO and the assessee is in second appeal before the Tribunal.
Ld.Counsel for the assessee submitted that assessee had given the land on rent to BPCL and the BPCL had set up the petrol bunk on the said land and has been paying lease rent to the assessee. Therefore, the rental income has to be treated as ‘income from house property’ and 30% claimed by the assessee was the standard deduction under the said head, and not the depreciation as observed by the AO. He also drew my attention to the double addition by the AO – one is addition of Rs.4,95,600/- i.e., net rental income offered by the assessee and also rental income from land, without deprecation of Rs.7,08,000/-. He therefore submitted that the double addition may be deleted if the total addition is not deleted.
Ld.DR, however, submitted that since there is no building on the land which is given on lease to the BPCL, the rental income there from has to be treated as ‘income from other sources’ and not as ‘income from house property’, as claimed by the assessee.
Having regard to the rival contentions and material on record, I find that the rental income only from buildings and the land appurtenant thereto can be treated as ‘income from house property’. Admittedly, in this case, rental income is only for the land leased out to BPCL and therefore, it cannot be treated as ‘income from house property’ and AO has rightly treated the same as ‘income from other sources’. However, I direct the AO to delete the addition of Rs.4,95,600/- made in the assessment of income which was already offered by the assessee. Thus, Ground Nos.5 & 6 are dismissed.
9.1. As regards Ground No.4 with regard to disallowance of chit loss of Rs.11,596/-, assessee had not filed any details before the Tribunal and therefore the same is confirmed. Hence Ground No.4 is rejected.
9.2. As regards Ground No.3 with regard to depreciation on machinery and vehicles used for petrol bunk, I find that the petrol bunk had commenced its business from 01-04-2014 but the assessee has already put the machinery to use. The expenditure incurred by the assessee for acquisition of machinery has to be capitalised but the depreciation thereon is to be allowed from the date when the machinery has been put to use. Admittedly, the business of petrol bunk started from 01-04-2014 and therefore, the machinery had to be put to use prior to such date for trial run and other purposes. Therefore, in my opinion, depreciation on the asset as claimed by the assessee is allowable at the applicable rate. Thus, Ground No.3 is allowed.
Since the other Grounds raised by assessee are academic in nature, there is no need for separate adjudication. Hence, the Grounds raised by the assessee are treated as partly allowed.
In the result, the appeal of assessee is partly allowed. Order pronounced in the open court on 8th January, 2020