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Income Tax Appellate Tribunal, DELHI BENCH D, NEW DELHI
Before: SHRI H.S. SIDHU & SHRI O.P. KANT
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:-
1. Whether on the facts and circumstances of the case and in law, the 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?
2. That the order of the Ld. CIT(A) is erroneous and is not tenable on facts and in law.
3. That the appellant craves leave to add, alter, amend or forgo any ground(s) of appeal raised aboe at the time of hearing.
The brief facts of the case are that the original assessment in this 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.
Aggrieved with the impugned order of the Ld. CIT(A), the Revenue is in appeal before the Tribunal.
Ld. DR relied upon the order of the AO and reiterated the contentions raised in the grounds of appeal.
In this case, Notice of hearing to the assessee was sent by the 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.
We have heard Ld. DR and perused the relevant records, especially 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.”
On going through the aforesaid findings of the Ld. CIT(A), we find 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.
In the result, the Appeal filed by the Revenue stands dismissed. Order pronounced on 26/05/2017.