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Income Tax Appellate Tribunal, “C” BENCH, AHMEDABAD
Before: JUSTICE SHRI P. P. BHATT & SHRI PRADIP KUMAR KEDIA
आदेश/O R D E R
PER PRADIP KUMAR KEDIA - AM:
The captioned appeals have been filed at the instance of the Assessee against the respective orders of the Commissioner of Income Tax (Appeals)-2, Ahmedabad (‘CIT(A)’ in short), dated 21.09.2015 & 14.10.2015 arising in the respective assessment orders both dated 21.02.2015 passed by the Assessing Officer (AO) under s. 147 r.w.s. 143(3) of the Income Tax Act, 1961 (the Act) in AY 2011-12 and under s. 143(3) of the Act in AY 2012-2013.
ITA Nos. 3425 & 3426/Ahd/15 [M/s. Innovative Infrastructure P. Ltd. vs. DCIT] A.Ys. 2011-12 & 2012-13 - 2 - 2. As claimed on behalf of the assessee, the facts are similar and common issues are involved in both assessment years and therefore both the appeals were heard together and disposed of by common order.
ITA No. 3425/Ahd/2015 - AY 2011-12
The grounds of appeal raised by the assessee read as under:
“1. The Ld. CIT(A) has erred law as well as on facts in restricting the depreciation allowance at 15% in place of 30% and thereby confirming the disallowance of Rs.41,25,205/-. 2. The Ld. CIT(A) has also erred in not granting the additional depreciation on Transit Mixtures which is mounted on chasis. (Alternate Ground to Ground No # 1) 3. The Ld. CIT(A) erred in making addition of Rs.429645/- on account of difference noted by him in the amount reflected as per 26AS and as reflected in books of accounts.”
When the matter was called for hearing, the learned AR for the assessee pointed out that Ground No.1 of its appeal concerns eligibility of depreciation allowance at higher rate on transit mixture whereas Ground No.2 is alternative claim of the assessee where case made out in Ground No.1 is not endorsed.
Adverting to Ground No.1, the learned AR pointed out that the assessee is engaged in the business of manufacturing of Ready Mix Concrete (‘RMC’) which is primarily required in construction business. For manufacture of RMC, the raw materials such as cement, kapchi, sand and fly ash and chemicals are mixed to produce RMC. The manufacturing of the RMC is done at batching plant and thus, RMC comes into existence at the factory. Thereafter, an ancillary process is done at transit mixer i.e. mixture on transit from factory to site is kept in a wet form which could be utilized at construction plant. The movement of RMC is done in Road Transport Vehicle on which a transit mixer is suitably mounted. It was contended that the
ITA Nos. 3425 & 3426/Ahd/15 [M/s. Innovative Infrastructure P. Ltd. vs. DCIT] A.Ys. 2011-12 & 2012-13 - 3 - supply of RMC are agreed to be delivered at construction site and therefore rate is fixed after factoring transportation costs from factory to the destinations. The rates of RMC are thus composite in nature comprising of mixture and transportation thereon. This being so, sales revenue also includes the transportation charges of transit mixture and consequently, the vehicle used for transit should be taken as vehicles used for ‘hire’. Consequently, the higher rate of depreciation allowance @ 30% is eligible to the assessee as per the depreciation schedule and the Revenue authorities are not justified in not granting accelerated depreciation on the vehicle used for hire. The learned AR, in alternative, contended that even when the vehicle is not treated to be used in a business of running it on hire, the assessee would be entitled for additional depreciation on transit mixer which is mounted on the truck chassis.
A specific query was posed by the bench to the learned AR for the assessee to prima facie demonstrate the case made out for composite contract which include utilization of vehicle for revenue generation. In response, the assessee submitted that the rates fixed for supply of mixture is composite but cannot be bifurcated. The learned AR however submitted in the same vain that the transit mixtures which are mounted on the chassis are purchased separately and the costs thereafter can be separately deduced and therefore, there is no impediment for allowability of additional depreciation on transit mixtures so mounted as per the claim of the assessee by way of additional grounds.
The learned DR, on the other hand, relied upon the order of the authorities below.
We have carefully considered the rival submissions.
ITA Nos. 3425 & 3426/Ahd/15 [M/s. Innovative Infrastructure P. Ltd. vs. DCIT] A.Ys. 2011-12 & 2012-13 - 4 - 8.1 On careful consideration of grievance raised as per Ground Nos. 1 & 2, we notice that the assessee primarily seeks accelerated depreciation on truck/chassis on which mixers is mounted equivalent to what is available to vehicles used for hire. It is the case of the assessee that chassis truck should be treated akin to being used in the business of running it on hire owing to composite nature of contract and consequently higher rate on depreciation at 30% should be allowed to the assessee instead of allowance at 15%. We do not find merit in the aforesaid plea of the assessee on the ground that the assessee could not demonstrate such narrative on facts as to whether the assessee has earned any receipt towards hire of vehicle in the so called composite contract. No evidence has been produced to justify the presence of element of receipt on account of hire of vehicle. Therefore, the contention of the assessee is abstract and cannot be endorsed. Therefore, we decline to interfere with the action of the AO on this score. Ground No.1 is accordingly dismissed.
8.2 However, we find substantial force in the alternative claim raised by the assessee for allowability of additional depreciation on mixer mounted on the vehicle as eligible under s.32(1)(iia) of the Act. Section 32(1)(iia) of the Act provides for entitlement of additional depreciation in the case of new plant and machinery installed after specified date by an assessee engaged in the business of manufacturing or production of any article or thing. The transit mixer is stated to be mounted on the chassis to enable the RMC manufactured/produced at site to be kept in the wet form for its utilization at construction plant. Therefore, transit mixer mounted on the vehicle is nothing but a plant and machinery where ancillary process is done as a continuation of manufacture/production contemplated under s.32(1)(iia) of the Act. Therefore, we wholly agree with the alternative contention of the assessee for allowability of additional depreciation mounted mixer on first principles.
ITA Nos. 3425 & 3426/Ahd/15 [M/s. Innovative Infrastructure P. Ltd. vs. DCIT] A.Ys. 2011-12 & 2012-13 - 5 - However, the cost of purchase of mixer during the year requires factual examination. Consequently, the issue is remitted back to the file of the AO for examining the factual aspect and for determination of additional depreciation on mounted mixer. Needless to say, the assessee shall provide factual details and documentary evidence to assert its claim of additional depreciation before AO. Ground No.2 is accordingly allowed for statistical purposes.
Ground No.3 concerns addition on account of difference between income reflected in the books of accounts qua the annual tax statement under s.26AS maintained by the Income Tax department.
The assessee contended before us that 26AS stood revised by the Income Tax department after taking note of the discrepancies and difference between the books and the tax statement has been scaled down considerably. The learned AR pleaded that the AO should take note of the revised and corrected 26AS statement for determination of the true income of the assessee. The learned DR also fairly agreed on such contention. We find the plea of the assessee to be reasonable and fair. The issue is accordingly set aside and remitted back to the file of the AO for re-determining the income escaped assessment on this score, if any, after taking note of the revised figures embedded in the 26AS statement. The issue is accordingly restored to the file of the AO for its determination in accordance with law. Ground No.3 of the assessee’s appeal is allowed for statistical purposes.
In the result, appeal of the assessee is partly allowed.
ITA No. 3426/Ahd/2015 - AY 2012-13
The grounds of appeal raised by the assessee read as under:
ITA Nos. 3425 & 3426/Ahd/15 [M/s. Innovative Infrastructure P. Ltd. vs. DCIT] A.Ys. 2011-12 & 2012-13 - 6 - “1. The Ld. CIT(A) has erred in law as well as on facts in restricting the depreciation allowance at 15% in place of 30% and thereby confirming the disallowance of Rs.80,64,631/-. 2. The Ld. CIT(A) has also erred in not granting the additional depreciation on Transit Mixtures which is mounted on chasis. (Alternate to Ground No # 1)” 13. In parity with the observations made in ITA No. 3425/Ahd/2015, Ground No.1 of the assessee’s appeal is dismissed and alternative ground as per Ground No.2 is allowed for statistical purposes. The AO shall determine the quantum of additional depreciation eligible to the assessee and shall allow the same under s. 32(1)(iia) of the Act in terms of our observations noted in the preceding paras and in accordance with law.
In the result, appeal of the assessee is partly allowed.
In the combined result, both appeal of the assessee are partly allowed.
This Order pronounced in Open Court on 12/03/2019
Sd/- Sd/- (JUSTICE P. P. BHATT) (PRADIP KUMAR KEDIA) ACCOUNTANT MEMBER PRESIDENT Ahmedabad: Dated 12/03/2019 True Copy S. K. SINHA आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. राज�व / Revenue 2. आवेदक / Assessee 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त- अपील / CIT (A) 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड� फाइल / Guard file. By order/आदेश से,
उप/सहायक पंजीकार आयकर अपील�य अ�धकरण, अहमदाबाद ।