DCIT, NEW DELHI vs. M/S. JAYPEE VENTURES PVT. LTD., NEW DELHI

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH "D", NEW DELHI BEFORE SHRI H.S. SIDHU, JUDICIAL MEMBER AND SHRI O.P. KANT, ACCOUNTANT MEMBER I.T.A. No. 757/DEL/2014 A.Y. 2006-07 DCIT, CIRCLE 4(1), VS. M/s Jaypee Ventures Pvt. New Delhi VS. Ltd., 1095, Sector-A, Pocket-A, Vasant Kunj, New Delhi (PAN AAACI2356L) (APPELLANT) (RESPONDENT)

Department by : Sh. Umesh Chand Dubey, Sr.DR Assessee by : None ORDER PER H.S. SIDHU, JM : This appeal by the Revenue is directed against the Order of the Ld.

Commissioner of Income Tax (Appeals)-VIII, New Delhi dated 29.11.2013

pertaining to Assessment Year 2006-07 on the following grounds:-

Ld. CIT(A) erred in deleting the addition of excess depreciation on

aircraft amounting Rs. 2,20,40,609/- made by the AO by applying

depreciation rate of 15% as against claim of 40% made by the

assessee?

facts and in law.

ground(s) of appeal raised aboe at the time of hearing.

case was completed under section 143(3) of the I.T. Act, 1961 at an

income of Rs. 14,87,39,273/- on 30.12.2008. The assessment was re-

opened u/s. 148 after recording the following reasons:-

"Scrutiny of income tax assessment records revealed that the

assessee had claimed depreciation of Rs. 3,52,64,974/-

@40% on aircraft. As per the provisions of section 32 of the

I.T. Act, 1961 depreciation on aircraft is allowable @15%

which comes to Rs. 1,32,24,365/-. Hence, excess depreciation

of Rs. 2,20,40,609/- (Rs. 3,52,64,974/- - (minus) Rs.

1,32,24,365/- was allowed. The mistake resulted in under

assessment of income of Rs. 2,20,40,609/- involving tax

effect of Rs. 98,67,096/-. Scrutiny of income tax assessment

records revealed that the AO disallowed Rs. 1,80,27,664/- in

relation to expenditure under section 14A related to exempt

dividend income of Rs. 23,09,35,411/- instead of correct

figure of disallowance of Rs. 3,17,48,567/-. The mistake

resulted in underassessment of income of Rs. 1,37,20,903/-

involving tax effect of Rs. 61,42,546/-. Hence, the AO 2

observed that the income of Rs. 2,20,40,609/- and Rs.

1,37,20,.903/- aggregating to Rs. 3,57,61,512/- chargeable

to tax has escaped assessment within the meaning of section

147/148 of the Income Tax."

2.1 In this case notice u/s. 148 of the I.T. Act, 1961 was issued to the

assessee on 18.1.2010 which was duly served upon the assessee,

but in response to the said notice, the assessee did not submit any

reply/response, however, assessee has submitted that the return filed

on 30.11.2006 may be treated as return filed in response to the notice

under section 148 of the Act and also requested for the copy of the

reasons recorded under section 147 of the I.T. Act, 1961. The reasons

recorded under section 147 / 148 was provided to the assessee on

17.5.2010. Thereafter, the statutory notices under section 143(2) of the

I.T. Act, 1961 were issued to the assessee and in response to the said

notice, the A.R. of the Assessee of the assessee company appeared from

time to time and made oral as well as written submissions which were

considered by the AO.

2.2 The assessee company was engaged in the business of Design

Engineering, Software Development and consultancy, contracting and

manpower supply. As per the reasons recorded under section 147 of the

I.T. Act, 1961 the assessee had claimed depreciation on aircrafts @40%

of the WDV whereas as per provisions of section 32 of the I.T. Act, 1961

depreciation on aircrafts is available @15%. Hence, excess depreciation of

Rs. 2,2,40,609/- claimed by the assessee was proposed to be disallowed

and added back to the net taxable income of the assessee. The assessee

vide its letter dated 14.6.2010 has submitted that assessee is entitled for

depreciation on aircrafts @40% in terms of Rule 5(1) read with Appendix

1 of the Income Tax Rules, 1962 as the aircrafts were owned and used for

business. The contention of the assessee was not acceptable to the AO for

the reason that depreciation @40% is allowable only in case where the

aircrafts is used for wholly and exclusively for commercial purpose and

put on hire. In purposes on some occasions, but the business of the

assessee is not giving aircrafts of hire or running the aircraft for

commercial purposes. AO held that depreciation @15% was only

allowable to the assessee and excess depreciation of Rs. 2,20,40,609/-

was disallowed and added back to the net taxable income of the assessee

vide order dated 29.11.2010 passed u/s. 147/143(3) of the I.T. Act,

1961. Aggrieved with the assessment order, assessee filed the appeal

before the Ld. CIT(A) who vide his impugned order dated 29.11.2013

deleted the addition by partly allowing the appeal of the assessee.

is in appeal before the Tribunal.

contentions raised in the grounds of appeal.

Registered AD post, in spite of the same, assessee, nor its authorized 4

representative appeared to prosecute the matter in dispute, nor filed any

application for adjournment. Keeping in view the facts and circumstances

of the present case and the issue involved in the present Appeal, we are

of the view that no useful purpose would be served to issue notice again

and again to the assessee, therefore, we are deciding the present appeal

exparte qua assessee, after hearing the Ld. DR and perusing the records.

the order of the Ld. CTI(A). We find that Ld. First Appellate Authority has

elaborately discussed and adjudicated the issue No.1 as under:-

"The appellant had claimed depreciation on aircraft @40% in

terms of entry no. III(3)(i) of Part-A of the Depreciation Table

in Appendix -I, of the Income Tax Rules, 1962. The AO had

generalized the aircraft as ordinary plant and machinery and

allowed depreciation @15% on it. Hence, the above

disallowance of Rs.2,20,40,609/- was made by the AO. I have

verified the I.T. Rule Book and found that Appellants claim

was correct. The AO should also understand that depreciation

on aircraft cannot be equated with depreciation on motor

vehicle. The depreciation is given on plant and machinery

depending on its life and maintenance cost involved in such

machinery. The depreciation is allowed by the government to

give part of the profit to the businessman and he can make

another plant and machinery at the end of old machinery life

to continue his business. Therefore, the AO should understand

the basic requirement of law and discuss the matter with his

supervise officers before reopening the case.

Hence, the addition of depreciation disallowance of

Rs. 2,20,40,609/- is hereby deleted.”

that the assessee had claimed depreciation on aircraft @40% in terms of

entry no. III(3)(i) of Part-A of the Depreciation Table in Appendix-I, of the

Income Tax Rules, 1962. However, the AO had generalized the aircraft as

ordinary plant and machinery and allowed depreciation @15% on it and

made the disallowance of Rs.2,20,40,609/-. We note that as per Entry

no. III(3)(i) of Part-A of the Depreciation Table in Appendix-I, of

the Income Tax Rules, 1962 the depreciation available on aircraft

is @40%, hence, it was rightly held by the Ld. CIT(A) that the Assessee's

claim was correct and AO should also understand that depreciation on

aircraft cannot be equated with depreciation on motor vehicle. The

depreciation is given on plant and machinery depending on its life and

maintenance cost involved in such machinery. The depreciation is

allowed by the government to give part of the profit to the businessman

and he can make another plant and machinery at the end of the old

machinery life to continue his business. Therefore, Ld. CIT(A) has rightly

observed that the AO should understand the basic requirement of law and

discuss the matter with his supervise officers before reopening the case.

Hence, the addition of depreciation disallowance of Rs. 2,20,40,609/- was

rightly deleted by the Ld. CIT(A), which does not need any interference

on our part, hence, we uphold the action of the Ld. CIT(A) on the issue in

dispute and dismiss the ground no. 1 raised by the Revenue.

Sd/- Sd/- (O.P. KANT) (H.S. SIDHU] ACCOUNTANT MEMBER JUDICIAL MEMBER

Date: 26/05/2017 "SRBHATNAGAR" Copy forwarded to: - 1. Appellant - 2. Respondent - 3. CIT 4. CIT (A) 5. DR, ITAT TRUE COPY By Order,

Assistant Registrar, ITAT, Delhi Benches