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Facts
The assessees (husband and wife) engaged in trawler-fishing appealed against CIT(A) orders sustaining disallowances by the AO for A.Y. 2015-16. The disallowances included: (i) rejection of their claim to opt for presumptive taxation under section 44AD, (ii) disallowance of depreciation on a trawler, and (iii) partial disallowance of the trawler's cost. The AO and CIT(A) upheld these, leading to the appeal before the Tribunal.
Held
The Tribunal dismissed the assessee's claim for presumptive taxation under section 44AD as it was not opted for in the original or revised return. However, it allowed the claim for depreciation on the trawler, finding that it was put to use and generated income despite delayed registration, and its genuineness was not doubted. The Tribunal also allowed the appeal regarding the partial disallowance of the trawler's cost, noting that the acquisition was capital expenditure, its genuineness was not disputed, and funds were sourced through bank loans and own funds, despite the absence of complete bills.
Key Issues
Whether the assessee can claim presumptive taxation under Section 44AD retrospectively; whether depreciation on a trawler is allowable if put to use, despite delayed registration; and whether partial disallowance of the trawler's cost is justified in absence of complete bills when genuineness and capital nature are not doubted.
Sections Cited
143(3), 250, 44AD, 44AB, 139(1), 5A
AI-generated summary — verify with the full judgment below
Income Tax Appellate Tribunal, “SMC” BENCH PANAJI
ORDER PER PAVAN KUMAR GADALE, JM: These two appeals are filed by the assesses (husband and wife) against the separate orders of the CIT(A) -1 Panaji passed u/sec143(3) and u/sec 250 of the Act. The assesses are governed by the Portuguese civil code and provisions of section 5A of the Act. 2. Since the issues involved in these two appeals are common and identical, hence they are clubbed, heard and aconsolidated order is passed. For the sake of convenience, Shri.Julio D Costa & Smt Bertha D Costa. we shall take up A.Y 2015-16 as a lead case and facts narrated. The assesse has raised grounds of appeal
1. challenging the order of CIT(A) sustaining the (i) rejection of claim of opting the income u/sec44AD of the Act (ii) disallowance of depreciation on Trawler and (iii) partial disallowance of cost of Trawler,
3. The brief facts of the case are that, the assessee is engaged in the business of trawler-fishing and sale of fish. The assesse has filed the return of income for the A.Y 2015-16 on 06.07.2016 disclosing a total income of Rs.2,78,520/-.Subsequently the case was selected for limited scrutiny under the CASS and the Assessing Officer (A.O) has issued notice u/sec 143(2) and u/se 142(1) of the Act. In compliance, the Ld.AR of the assesee appeared from time to time and submitted the details and explanations. Whereas the assesse has furnished the submissions in the assessment proceedings opting for the income @8% of the receipts/ gross revenue u/sec44AD of the Act and the A.O has dealt on the provisions of section 44AD of the Act and details submitted and has rejected the claim. On the second disputed issue, the A.O find that the assessee has purchased the trawler for Rs.60,00,000/- and claimed depreciation @ 20% i.e Rs.12,00,000/-.The A.O observed that the trawler was registered by the authorities after71 days from the financial year ending 31- 03-2015 and therefore A.O is of the opinion that the trawler was not put to use and hence disallowed the claim Shri.Julio D Costa & Smt Bertha D Costa. of depreciation and since the assessee is governed by the Portuguese civil code 50% of the depreciation i.e Rs6,00,000/- was added to the total income declared by the assessee. In respect of last disputed issue, the A.O observed that the assessee has claimed expenditure on the trawler of Rs,60,00,000/- but the purchase bills and invoices/receipts aggregating to Rs.49,28,052/- were only produced and for the balance amount of Rs.10,71,948/- are not substantiated with the details. Therefore A.O made the disallowance to that extent and since the assessee is governed by the Portuguese civil code 50% of Rs.10,71,948/- i.e Rs5,35,974/- was added and finally the A.O has assessed the total income of Rs14,14,494/- and passed the order u/sec 143(3) of the Act dated 31.08.2017.
Aggrieved by the order, the assessee has filed an appeal before the CIT(A), whereas the CIT(A) has considered the grounds of appeal
, statement of facts and findings of the AO and has issued notices of hearing and the assessee has filed the details and submissions. But the CIT(A) has confirmed the action of the A.O and dismissed the appeal. Aggrieved by the order of the CIT(A), the assessee has filed an appeal before the Hon'ble Tribunal.
5. At the time of hearing, the Ld.AR submitted that the CIT(A) has erred in confirming the action of the A.O overlooking the facts and submissions of the assessee in the proceedings. Further the Ld.AR emphasized that the assessee in response to notices has submitted the Shri.Julio D Costa & Smt Bertha D Costa. explanations along with the details to the A.O. The Ld.AR made submissions on the issues that the assessee in entitled to opt for provisions of section 44AD of the Act in the assessment proceedings (ii) in respect of depreciation on the trawler, the Ld.AR submitted that though the registration took place after 71 days after end of the financial year, but the trawler was put to use in F.Y.2014- 15 and has generated income/revenue and same was disclosed in the profit & Loss account filed and the Assessing officer has accepted the gross income/revenue and (iii) in respect of addition of balance purchase consideration of trawler, the Assessing officer has disallowed the claim for want of details, the Ld.AR emphasized that the assessee has obtained loans from bank to acquire the trawler and assesses own funds are utilized and the assessee works in unorganised business of fishing and trawler services. The Ld.AR substantiated the submissions with the factual paper books and judicial decisions and prayed for allowing the appeal. Per contra, the Ld. DR submitted that the assessee has not filed the return of income opting section 44AD of the Act and to claim depreciation on trawler, the asset should have been put to use and similarly the assessee could not substantiate with details and information towards balance purchase price of the trawler. The Ld.DR relied on the order of the CIT(A).
Shri.Julio D Costa & Smt Bertha D Costa.
Heard the rival submissions and perused the material on record. The Ld.AR submitted that the CIT(A) has erred in sustaining the disallowances overlooking the submissions. On the first disputed issue, the ld.AR emphasized that the assesse in entitled to opt for provisions of section 44AD of the Act in the assessment proceedings as the receipts/turnover of the business are below the limits prescribed under section 44AB of the Act and the Ld.DR mentioned that the assesse has not filed return of income opting for section 44AD of the Act u/sec139(1) of the Act nor revised return of income was filed and this is the first time such claim was made for this assessment year only in comparison to earlier assessment years and these facts are not disputed by the Ld.AR. Hence considering the submissions and material placed in the course of hearing, this ground of appeal
of the assesse does stand on merits and is dismissed. On the second disputed issue i.e depreciation on the Trawler-2 the Ld.AR submitted that though the registration took place after 71 days after end of the F.Y.2014-15, but the trawler was put to use and has generated income/revenue and same was disclosed in the profit & Loss account filed along with the financial statements in the assessment proceedings and the Assessing officer has accepted the gross income/revenue. Further the assessee has substantiated the claim in support of return of income filed with the evidences in the assessment proceedings i.e financial statements, certificate of directorate of fisheries, bank statement bills, invoices Shri.Julio D Costa & Smt Bertha D Costa. and vouchers which is not disputed by the Ld DR. The Ld.AR demonstrated the profit & loss account at Page 9 of the paper book in particular fishing income of Rs.62,53,078/- which consist of sale of fish-Trawler
1. Rs.60,00,478/- and Trawler
2. Rs.2,52,600/- and details are placed at page 99 &100 of the paper book.
The assessing officer has disputed the claim of depreciation on Trawler 2 as the trawler was registered by the authorities after 71 days from the financial year ending 31-03-2015 and the A.O is of the opinion that the trawler was not put to use and hence disallowed the claim of depreciation, but the A.O having accepted the income generated from this trawler reflected in the profit &loss account cannot say that the trawler was not put to use. The Ld.AR contentions that though the registration of trawler was after 71 days from end of 31-03-2015 but income has been generated from this trawler and also diesel expenses and salary wages are claimed in the profit & loss account and was not disputed by the revenue nor any disallowance was made in the assessment order by the A,O. The Ld.AR substantiated the submissions on the issue of put to use of the trawler and has relied on the decision of the Honble High Court Of Allahabad - Janardan Prasad Ashok kumar Vs CIT (193 ITR 0186) and the Honble Tribunal Cochin Bench decision in ITA.No.227/Coch/2024 Sri Kizhakkanikode Thankappan vs DCIT order dated 21.10.2024. Hence considering the facts, circumstances, Shri.Julio D Costa & Smt Bertha D Costa. submissions and the ratio of the judicial decisions, the disallowance of depreciation on Trawler cannot be sustained and accordingly direct the assessing officer to delete disallowance of depreciation and this ground of appeal
is allowed in favour of the assessee.
8. On the Last disputed issue, that the A.O has observed that the assessee has claimed expenditure on the trawler of Rs,60,00,000/- but the purchase bills and invoices/receipts aggregating to Rs.49,28,052/- were only produced and for the balance amount of Rs.10,71,948/- the assesse could not file the details and was disallowed. The Ld.AR submitted that the Assessing Officer has not doubted the genuineness of purchase of trawler but has disallowed the balance amount treating as expenditure in the absence of production of bills and vouchers. The Ld.AR emphasized that the assessee has not claimed the cost of trawler as expenditure in the Profit & Loss account and the same was disclosed in the Balance sheet under –Fixed Assets-Trawler2 with the cost/purchase value of Rs.60,00,000/- and claimed the depreciation@20% i.e.Rs.12,00,000/- and the Written down value(WDV) of Rs.48,00,000/- was reflected and the balance sheet is placed at Page 10 of the paper book. The Ld.AR also submitted that the assessee obtained the bank loans from Goa urban co op Bank for acquisition of Trawler and interest on bank loan was claimed as expenditure in the profit & Loss account and the loans from bank was Shri.Julio D Costa & Smt Bertha D Costa. disclosed under “Secured Loan” in the balance sheet and further the balance consideration for acquisition are meet through revenue generation, own funds and unsecured loans.
The assesses area of business is in the unorganised market/sector and depends on the sea and weather conditions and the A.O having verified the facts and has not doubted the genuineness of acquisition of trawler but in the absence of bills, the disallowance was made. The Ld.AR demonstrated the ledger account copy and bank loan statements placed at page 90-98 of the paper book. Further on perusal of these facts and information and availability of own funds of the assesse utilised in acquisition, the A.O has wrongly has interpreted the acquisition as revenue expenditure, but it is in the nature of capital expenditure. The assessee as per the accounting principles and policies has disclosed the trawler under fixed assets and claimed depreciation which is not disputed by the Ld.DR. Therefore considering the facts, material and submissions the partial disallowance in respect of acquisition of trawler is not sustained and accordingly direct the assessing officer to delete the disallowance of partial cost of trawler and this ground of appeal
is allowed in favour of the assessee.
10. In the result, the appeal filed by the assessee is partly allowed.
A.Y. 2015-16.(Smt.Bertha D Costa) 11. As the facts and circumstances in this appeal is identical to for the A.Y 2015-16 (except variance in figures) and the decision rendered in above paragraphs 6 to 10 would apply mutatis mutandis for this appeal also. Accordingly, the grounds of appeal of the assessee are partly allowed.
12. In the result, the appeals filed by both the assesses are partly allowed. Order pronounced in the open court on 15.09.2025.