THE PR. COMMISSIONER OF INCOME TAX -3 vs. DELHI TRANSPORT CORPORATION

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ITA/1022/2019HC DelhiDLHC01050234201919 January 2024Author: HON'BLE MR. JUSTICE YASHWANT VARMA,HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR KAURAV2 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that the first question of law concerning the addition on account of free of cost replacement of cylinder heads clearly stood concluded by findings of fact and therefore did not give rise to any substantial question of law. Regarding the second question, the High Court upheld the ITAT's finding that the sum of Rs. 120,11,78,279/-, received by the respondent-assessee, was for compensating losses caused by delays in delivery of vehicles, rather than for reducing the cost of the buses. The AO had subtracted this amount from the purchase order value to compute depreciation, leading to the disallowance. The Tribunal's view that this amount was compensatory and not a reduction in the cost of the asset was found to be correct. Consequently, the High Court found no ground to interfere with the impugned order and concluded that no substantial question of law arose in the appeal.

What were the facts?

The appellant, the Principal Commissioner of Income Tax -3, New Delhi, filed an appeal before the High Court of Delhi against an order of the Income Tax Appellate Tribunal (ITAT). The appeal concerned assessment years not specified in the judgment. The core dispute revolved around two additions made by the Assessing Officer (AO): Rs. 3,83,57,247/- for the cost of replacement cylinder heads and Rs. 18,01,76,741/- on account of excess depreciation on buses. The respondent is the Delhi Transport Corporation. The High Court was considering whether these issues presented substantial questions of law.

What were the issues?

The High Court was asked to decide two questions of law: 1. Whether the ITAT/CIT(A) erred in allowing the deletion of an addition of Rs. 3,83,57,247/- made by the AO on account of free of cost replacement of cylinder heads. 2. Whether the ITAT/CIT(A) erred in allowing the deletion of an addition of Rs. 18,01,76,741/- made by the AO on account of excess depreciation on buses. Assessee's Contentions: The judgment does not explicitly record the assessee's contentions. However, it implies that the assessee argued that the Rs. 120,11,78,279/- received was for compensation of losses due to delays, not for reducing the cost of buses. Revenue's Contentions: The appellant (Revenue) contended that the ITAT/CIT(A) erred in deleting the additions made by the AO on both counts, specifically regarding the cost of replacement cylinder heads and excess depreciation on buses.

AI-generated summary — verify with the full judgment below

$~16 * IN THE HIGH COURT OF DELHI AT NEW DELHI + ITA 1022/2019

THE PR. COMMISSIONER OF INCOME TAX -3, New Delhi ..... Appellant

Through: Mr. Aseem Chawla, Sr.SC with

Mr. Aditya Gupta and Mr.

Naveen Rohila, Advs.

versus

DELHI TRANSPORT CORPORATION ..... Respondent

Through: Ms.Avnish Ahlawat, SC with

Mr.Nitesh Kumar Singh,

Ms.Laavanya Kaushik and

Ms.Aliza Alam, Advs.

CORAM:

HON'BLE MR. JUSTICE YASHWANT VARMA

HON'BLE MR. JUSTICE PURUSHAINDRA KUMAR

KAURAV

O R D E R %

19.01.2024 1. Having heard Mr. Chawla and Ms. Ahlawat, learned counsels representing parties, we find that the Principal Commissioner seeks admission of the instant appeal on the following two questions of law:- “(a) Whether on the facts and in the circumstances of the case and in law, Income Tax Appellate Tribunal [“ITAT”]/ Commissioner of Income Tax (Appeals) [“CIT(A)”] has erred in addition of Rs.3,83,57,247/- made by the Assessing officer [“AO”] on account of free of cost basis for replacement of cylinder heads ? (b) Whether on the facts and in the circumstance of the case and in law, the ITAT/CIT(A) has erred in deletion the addition of Rs.18,01,76,741/- made by the AO on account of excess depreciation on buses?” 2. In so far as question (a) is concerned, we find that the same clearly stands concluded by findings of fact and would thus give rise to no substantial questions of law for our consideration.

3.

That then takes us to the second question which has been framed for our consideration. As the ITAT has recorded in paragraphs 5, 6 and 7 of the impugned order, the total order value was of Rs.654,62,81,543/-. In terms of the contract entered into between the supplier and the respondent-assessee, in case of delayed delivery of vehicles, the respondent-assessee was liable to impose penalties and claim liquidated damages. It was on that score that the respondent- assessee received a sum of Rs.120,11,78,279/-. 4. The AO however for the purposes of computing depreciation, subtracted the liquidated damages amount from the purchase order. It was on the culmination of the aforesaid exercise, that depreciation to the tune of Rs.18,01,76,741/- as claimed was disallowed by the AO. 5. The ITAT has in our considered opinion, rightly come to the conclusion that the sum of Rs.120,11,78,279/- which was received in the hands of the respondent-assessee was clearly not aimed at reducing the cost of the buses but essentially for compensating loss caused by delays. 6. In view of the aforesaid, we find no ground to interfere with the impugned order. Consequently, no substantial question of law arises in the instant appeal. 7. The appeal fails and shall stand dismissed on the aforesaid terms.

YASHWANT VARMA, J.

PURUSHAINDRA KUMAR KAURAV, J. JANUARY 19, 2024/MJ

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