ACIT, CIRCLE - 15(1), KOLKATA , KOLKATA vs. M/S. ABCI INFRASTRUCTURES PVT. LTD., , KOLKATA

The captioned appeal filed by the Revenue pertaining to assessment year 2010-11, is directed against an order passed by the learned Commissioner of Income Tax (Appeals)-5, Kolkata (in short the ld. CIT(A)], which in turn arises out of an assessment order passed by the Assessing Officer u/s 147 / 143(3) of the Income Tax Act, 1961 ( in short the ‘Act’) dated 27.12.2016.

In this appeal, however, the revenue has raised multiple grounds of appeal, but at the time of hearing the main grievance of the revenue has been confined to the following issues:

Now we shall take issue no. 1 raised by the Revenue which relates to disallowance of depreciation of Rs. 85,17,966/-.

The brief facts qua the issue are that theduring the assessment proceedings, AO had disallowed Rs.85,17,966/- on account of additional depreciation claimed by the assessee. The AO in his assessment order had stated that the assessee being a civil contractor, had to deploy various kinds of plant and machinery which includes several machines like JCB, Excavator etc. and goods transport vehicles like tippers for carrying raw materials etc. to different sites across the country. Assessee also maintained various kinds of motor vehicles to carry workers to the sites and for the use of the officials/directors. In its return of income, the asessee is found to have shown 30% on the WDV of vehicles used for its own business in the relevant yearunder consideration and thereby claimed depreciation of Rs.l,70,28,233/- @ 30%. The allowable depreciation rate as per assessing officer was @ 15%. It is worthwhile to mention that on verification of 'Schedule DPM' (Depreciation on Plant and Machinery) of the return filed by the assessee, wherein it is found that in column of 30% Block of Plant and Machinery that WDV as on 01.04.2009 is declared to be Rs. 3,25,93,616/- with additions for a period of 180 days or more to the tune of Rs.32,78,346/- and deletion of Rs.2,50,000/-. Apart from this, an amount of Rs.4,22,77,628/- is declared as additions to the block for a period less than 180 days. In serial No. 12 and 13 of that Schedule, assessee clearly declared 'Additional depreciation’, if any as Nil.

In response, the assessee submitted the written reply to the assessing officer as follows: “…….. the assessee company is carrying on business of civil construction and manufacturing of construction material. It is doing civil construction in various places in India particularly in North Eastern Region. The company has purchased various light and heavy vehicles for its civil construction work and other official work such as trucks, tippers, tractor, car motor cycle etc. The assessee company has claimed depreciation on such vehicles at 30%. All the heavy vehicles are not used by the assessee company for substantial part of the year and therefore, it gives such vehicles on hire to other contractors carrying construction work in nearby places to earn more income. Some of the heavy vehicles including tippers are exclusively given on hire.”

Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition. Aggrieved, the Revenue is in appeal before us.

Before us, the ld. DR has primarily reiterated the stand taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. On the other hand, the ld. Counsel for the assessee defended the order passed by the ld. CIT(A).

We note that the assessee as per assessment records have been claiming depreciation @ 30% on vehicles used in their business on the grounds of them been deployed in difficult areas including North East. The assessee had made the same claim in assessment year 2009-10, which was disallowed by the A.O. The CIT(A)-16, Kolkata had deleted the addition and allowed depreciation at higher rate in A.Y.2009-10. Thus, clearly shows that the assessee in past assessment orders, have also been claimed depreciation at higher rate. The contention of the A.O., that explanation given is an afterthought, which is offered only after discovery of excess depreciation by the department, is not correct, and not supported by the facts. Regarding hire charges, the Counsel for the assessee has submitted before us that the Assessing Officer had not asked for details of hire charges received against the tippers given on hire. Such details could have been provided if asked for. The Counsel of the assessee also submitted that the vehicles were given on hiring to person against whom the assessee received services in the form of goods, labour supply etc. The hiring charges receivable are adjusted against payments to be made to these persons. These facts have been submitted to M/s ABCI Infrastructures Pvt. Ltd. Assessment Year:2010-11 the A.O. This method of accounting has been followed by the Assessing Officer in previous year and no doubt were raised by the A.O. even in scrutiny assessments. Therefore, a method followed by the Assessing Officer in previous year should not be changed unless there is a change in facts and law. We note that it is a well settled legal position that factual matters which permeate through more than one assessment year, if the Revenue has accepted a particular's view or proposition in the past, it is not open for the Revenue to take a entirely contrary or different stand in a later year on the same issue, involving identical facts unless and until a cogent case is made out by the Assessing Officer on the basis of change in facts. For that we rely on the order of the Hon’ble Supreme Court in RadhasoamiSatsang vs. CIT 193 ITR 321 (SC), wherein it was held as follows: "We are aware of the fact that, strictly speaking, res judicata does not apply to income tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. On these reasoning, in the absence of any material change justifying the Revenue to take a different view of the matter - and, if there was no change, it was in support of the assessee – we do not think the question should have been reopened and contrary to what had been decided by the Commissioner of lncome-tax in the earlier proceedings, a different and contradictory stand should have been taken."

We note that the A.O. could not bring any material on record, to dispute the assessee’s claim, that the vehicles and other equipments were deployed in difficult areas and therefore, entitle to higher rate of depreciation. The A.O’s contention, that the explanation given by the assessee, is an afterthought, and that no hiring charges have been received, is not supported by facts. The tippers used by the assessee in its business are registered under the Motor Vehicles Act, 1988. They met the functional test as the basis for grant of 30% depreciation, and also on the ground that the higher depreciation is on account of rigorous and hard use of commercial vehicles, in comparison to the stationery and permanently installed Page | 5

The brief facts qua the issue are that during the assessment proceedings, the assessee filed its audited Balance Sheet as on 31.03.2011 before the AO, for the assessment proceedings of A.Y. 2011-12. In Balance Sheet, a change had been made in asset with balancing entry in liability side. In Hire purchase interest suspense account under 'Other Current Assets' the balance of Rs.36,00,000/-was found to have vacated to nil. On the opposite side, the same amount has been reduced from' Secured Loan'. The AO noticed that this change was done without any clarification or note. Even no change has been made in the audited accountssupplied with the compliance of assessment proceedings of A.Y. 2010-11. In course of the assessment proceedings, assessee was asked to explain the issue and show cause as to why the omission in asset and liabilities will not be added to the total income. In response, the assessee submitted a written submission, vide letter dated 16.12.2016, which is reproduced below: "With reference to your above subjected proceedings and in response to your show cause notice dated 09.12.2016, we would like to submit before your honour that Rs.36,00,000/- shown in the Balance Sheet as on 31.03.2010 under "Other Current Assets" against "Hire Purchase Interest Suspense" represents the amount of interest on term loan accrued but not due as on the date of the balance sheet. In other words, this is the amount of un-matured interest which shall be payable in future years over the tenure of the term loan. On the other hand, the same amount is included in outstanding amount of term loan in liabilities side of the balance sheet.

Aggrieved by the stand so taken by the Assessing Officer the assessee carried the matter in appeal before the ld. CIT(A) who has deleted the addition. Aggrieved, the Revenue is in appeal before us.

Before us, the ld. DR has primarily reiterated the stands taken by the Assessing Officer which we have already noted in our earlier para and the same is not being repeated for the sake of brevity. On the other hand, the ld. Counsel has defended the order of the ld. CIT(A).

We have heard the rival submission and perused the material available on record. We note that the A.O. has added back hire purchase interest suspense amounting to Rs. 36,00,000/-. The A.O. had not accepted the explanation of the assessee, that this amount represents un-mature interest, which have been payable in future years over the tenure of the term loan on the grounds that it was not brought to the notice of the A.O. before discovery of the matter by the department and not supported by audit report. Theld Counsel for theassessee, submitted before us that in the balance sheet as on 31.03.2011, hire purchase interest suspense amount has been deducted from the amount of term loan for disclosure compliance of schedule VI of the Companies Act,1956. Accordingly, the Page | 7

In the result, the appeal of the Revenue is dismissed. Order pronounced in the Court on 29.03.2019