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Income Tax Appellate Tribunal, INDORE BENCH, INDORE
Before: HON’BLE KUL BHARAT & HON’BLE MANISH BORAD
order u/s 143(3) of the Income Tax Act 1961(In short the ‘Act’) dated 26.10.2015 framed by ACIT-5(1), Indore.
Sanghi Brothers Indore Pvt. Ltd
Briefly stated facts as culled out from the records are that the assessee is a Private Limited Company. Return of income for Assessment Year 2008-09 filed on 16.4.2015 declaring income of Rs. 1,14,27,130/-. The case was selected for scrutiny and assessment order u/s 143(3) was passed on 4.5.2010 assessing total income at Rs.1,16,52,130/-. Subsequently case was re- opened by issuing notice u/s 148 of the Act. During the course of re-assessment proceedings Ld. A.O called for the details from the assessee for its claim of depreciation of trucks and dumpers. After going through the submission of the assessee, Ld.A.O was of the view that during the year NIL income has been reported by the assessee from hire charges from plying of trucks and dumpers and therefore depreciation cannot be allowed @30% of the WDV and accordingly restricted the depreciation claim to 15% of the WDV of truck and dumpers and disallowed depreciation at Rs.2,87,188/- and reassessed income at Rs.1,19,39,318/-.
Appeal of the assessee before Ld. CIT(A) brought no relief as the Ld. CIT(A) dismissed the assessee’s ground challenging the re- opening of assessment u/s 147 of the Act and also confirmed the disallowance. 2 Sanghi Brothers Indore Pvt. Ltd
Now the assessee is in appeal before the Tribunal raising following grounds of appeal;
“1.1] That on the facts and in the circumstances of the case the Ld CIT (A) grossly erred in maintaining the act of A.O. in respect of issuance of notice u/s 148 of the Act and framing assessment on the basis of such notice even when no new fact has came to the knowledge of the A.O. on the basis of which it can be presumed that any income chargeable to tax has escaped assessment. The notice so issued and assessment framed thereon in absence of any tangible material in possession of the assessing officer therefore requires to be quashed.
1.2] That on the facts and in the circumstances of the case the Ld. CIT (A) erred in maintaining the order passed by the Ld. A.O. u/s 148 of the LT. Act after the four years from the end of the relevant assessment year even when the Original Assessment for the year was framed u/s 143(3) of the Act and the entire facts were disclosed before the Assessing officer during the course of original assessment proceeding. The assessment so framed thereon in absence of any tangible material in possession of the assessing officer requires to be quashed.
WITHOUT PREJUDICE TO THE ABOVE
02]. That on the facts and in the circumstances of the case the Ld. CI'T (A) erred in maintaining addition on account of Depreciation on Trucks and Dumpers of Rs. 287188/- by restricting the claim of depreciation at 15% only in place of 30% as claimed by the appellant without properly appreciating the facts of the case and submissions made before him.
03]. The assessee reserve its right to add, alter, modify or amend the grounds of appeal as taken in the resent appeal as and when required.”
At the outset Ld. Counsel for the assessee referring to the decision of Co-ordinate Bench in assessee’s own case for Assessment Year 2009-10 vide order dated 10.11.2014 wherein similar issue raised by the assessee was 3 Sanghi Brothers Indore Pvt. Ltd ITA No.723/Ind/2017 allowed in its favour by the Tribunal. Ld. Counsel for the assessee also submitted that in the preceding year the trucks and dumpers were regularly used for running on hire and they were appearing in the 30% block of assets. During the year under appeal these trucks and dumpers were not hired as the agreement with ONGC came to end but all the trucks and dumpers were ready to use and therefore the depreciation is allowable on assets which are ready to use, immaterial of the fact that they were used in the year or not.
Per contra Ld. Departmental Representative vehemently argued supporting the orders of lower authorities.
We have heard rival contentions and perused the records placed before us. The assessee apart from challenging the re- opening of the assessment by issuance of notice u/s 148 of the Act has also challenged the disallowance of depreciation on trucks and dumpers. As contended by the Ld. Counsel for the assessee, the issue is squarely covered in its favour by the decision of the Tribunal in its own case. We therefore will first adjudicate the issue raised in this appeal on merits. Ld. A.O made disallowance of depreciation of trucks and dumpers to 15% as against 30% applicable to vehicles used in hire business. The Co-ordinate Bench 4 Sanghi Brothers Indore Pvt. Ltd adjudicating similar issue in the appeal of the assessee for Assessment Year 2009-10 order dated 10.11.2014, has held in favour of the assessee had observed as follows;
“4.2 We are of the view that as per the main provision related to the allowance of depreciation, i.e, Section 32 of IT Act in respect of any machinery if owned, wholly or partially by the assessee and used for the purpose of the business then deduction of depreciation is allowed as prescribed. As per one of the provision of Section 32, it is required that the machinery is to be put to use for the purpose of business. As far as the vehicles in question are concerned, they were already put to use for the purpose of the business; hence deserve for the claim of depreciation. But the question before us is that Whether the assets in question are eligible for normal rate of depreciation at 15% as prescribed u/s.32 of IT Act or eligible for higher rate of depreciation. To answer this question we have examined sub Rule(1) and (lA) of Rule 5 of Income Tax Rules, which prescribes a table in Appendix-I for claim of depreciation. As per Appendix 1, Part -IIl the rate of depreciation in respect of Motor, buses, etc. used in the business of running them on hire is prescribed @ 30%. After reading the connected Rule 15 and Appendix-I, we have noted that the requirement is that the vehicle in question is to be used in a business of running them on hire. The expression used in all the places as referred supra do not suggest that the corresponding hiring income should have been shown in assessment year in which the higher rate of depreciation is claimed. Rather peculiar fact of this case is that the hiring receipts have actually been shown in the subsequent assessment year and admittedly not shown in the year under consideration due to lack of information supplied by the said concern using those vehicles for hiring purpose. Therefore, considering the provisions of the law applicable on this issue as also the Sanghi Brothers Indore Pvt. Ltd totality of the facts of the case, we hereby direct the AO to grant higher rate of depreciation of 30% for the year under consideration. Resultantly, the ground raised by the assessee is hereby allowed.”
Considering the facts of the instant case in light of the above decision, we observe that the assessee owns the trucks and dumpers as commercial vehicles and is using them for hiring business since last many years. The claim of depreciation @30% has been allowed in the preceding years, there is no dispute about the assets being put to use and ready to use for hiring business.
This activity continued in the subsequent years also. These assets namely trucks and dumpers are part of the 30% block of the assets as on 1.4.2007 and WDV is shown at Rs.19,48,988/- in the audited statement attached with Form 3CA of the Tax Audit Report.
Hon’ble jurisdictional High Court in the case of Speed Automobiles Pvt. Ltd (2004) 32 ITC 537 has confirmed the proposition that the “depreciation is eligible on assets which are ready for use and which are already used immaterial of the fact that such assets were used in the year or not”.
We, therefore respectfully following the above judgments are of the considered view that the assessee is entitled for 30% 6 Sanghi Brothers Indore Pvt. Ltd depreciation on the WDV of trucks and dumpers which are purchased as commercial vehicle and consistently used in the running of hiring. Thus Ground No.2 of the assessee stands allowed.
As regards Ground No.1 challenging the validity of reopening of the assessment we find that the same is rendered to be academic in nature as we have already deleted the disallowance of depreciation at Rs.2,87,188/- and therefore Ground No.1 is dismissed as academic in nature.
Ground No.3 is general in nature which needs no adjudication.
In the result appeal of the assessee is allowed.