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Income Tax Appellate Tribunal, KOLKATA BENCH “D” KOLKATA
Before: Shri S.S.Godara & Dr. A.L. Saini
O R D E R
PER S.S.Godara, Judicial Member:
- This Revenue’s appeal for assessment year 2010-11 is directed against the Commissioner of Income Tax (Appeals)-Asamsol’s order dated 30.10.2014 in case No.178/C.I.T.(A)/Asl/ACIT/Cir-1/BWN/13-14, involving proceedings u/s 143(3)/144A of the Income Tax Act, 1961; in short ‘the Act’.
The Revenue’s identical former grievance pleads that the CIT(A) has erred in law as well as on facts on the deleting disallowance / additions of ₹39,94,137/- pertaining to higher depreciation rate claimed on transmit complete mixer and loaders and also granting relief of ₹4,73,249/- regarding lower loader machine; respectively. We notice that CIT(A) discuss in on this issue reads as under:- “6. Ground 2 is against not granting depreciation at higher rates for Concrete Mixers and Payloaders, vibrator soil compactor etc. is settled in the cases reported in Vikram Ispat vs. State of Maharastra AIR 2003 Bombay 498 P A.Y.2010-11 ACIT Cir-I, Bwd. Vs. Sh Pintu Bhattacharjee Page 2 501, Gujco Carriers vs. C.I.T. 256 ITR 50 (Guj) and decision of ITAT, C Bench Kolkata in ITA No.1336 (Kol)/2008 in the case of AIT, Circle-3, Asansol vs. M/s Asoka Transport, Kolkata dt. 02.03.2009 by which depreciation at higher rates can be granted, if the assets are let on hire. Here Profit and Loss Account reflects hire income.
The eligibility for granting depreciation at higher rates to payloaders is settled in the above decisions. In regard to concrete mixers, the argument of appellant (the details of concrete mixers is explained in detail in second and third paragraph in page 4 of assessment order) is that the same wheel mounted and is used exclusively for transporting concrete in such a manner that concrete never solidify. It is a special purpose truck. According to assessee the asset falls in the same category as dumpers and since the asset is let on hire, the assessee is eligible for higher rate of depreciation. This explanation was not accepted by Assessing Officer stating that considering nature of material handled (paragraph 4 in page 4 of assessment order). He accordingly granted depreciation at rate of 15%.
The matter is considered. The pictures given below are of transit concrete mixer (left) and dumper (right). Both are of identical nature with the latter general purpose and former special purpose, specifically for concrete.
After considering the nature of asset, manner of usage and considering the judicial decisions spelt in paragraph 6 above, I hold that the assets eligible for higher rate of depreciation as per item III(3)(ii) of schedule of rtes of depreciation read with note 6 to schedule of depreciation. The Assessing Officer is directed to grant the same and rework WDV. Ground 2 is allowed.”
Heard Learned DR strongly reiterated Revenue’s stand that the Assessing Officer had rightly deleted assessee’s higher depreciation claimed on both mixer as well as loader machine(s) in question. We find no substance in its instant plea as it has already come on record that lower appellate finding(s) have duly considered the types of plant and machinery / vehicles in light of the relevant case law deciding the very issue in assessee’s favour. There is no distinction on facts or law being pointed out in Revenue’s pleadings. We therefore adopt Revenue’s instant this substantive ground.
A.Y.2010-11 ACIT Cir-I, Bwd. Vs. Sh Pintu Bhattacharjee Page 3 4. This leaves us with Revenue’s latter substantive ground regarding disallowance of interest paid of ₹13,33,568/- u/s. 40(a)(ia) at assessee’s behest to two payees M/s SREI Equipment Finance (P) Ltd & Ashok Leyland & Finance Ltd. without deducting TDS. We find that the CIT(A) has considered the entire issue in light of hon'ble apex court’s decision in “ICDS” case as well as the relevant hire purchase agreement as per CBDT’s Circular 647/1993 dated 22.03.1993 in the following detailed discussion:- “9. Ground 3 is against addition under section 40(a)(ia). The Assessing Officer noted that interest was paid to finance companies without tax deduction at source violating provisions of section 194A. Before Assessing Officer the assessee relied on section 36(1)(iii) and stated that in view of this sub-section 40(a)(ia) will not apply.
In the assessment order the Assessing Officer mentioned that the purchase was on basis of a hire purchase agreement and assessee is liable to deduct tax at source on interest payment. If the same is purchased under hire purchase scheme than circular 647 dated 22.03.1993 is to be considered. This is raised by assessee in the notes filed during hearing.
Circular 647 deals with application of section 194 on Hire Purchase agreements. Hire Purchase is a system by which a buyer pays for a thing in regular installments while enjoying the use of it. During the repayment period, ownership (title) of the item does not pass to the buyer. Upon the full payment of the loan, the title passes to the buyer. If, directly or indirectly, it is apparent that the lessor has agreed to a permanent beneficial enjoyment of the asset by the lessee, the lessee may be treated as a hire-purchase transaction.
The features of Hire purchase are as given overleaf:
1. 1. The person who has hire the goods will give regular installment or rent to the owner of the good which will include some portion of principal amount and some portion of interest as agreed by both the parties.
2. The ownership of good passes only when the person has paid the last installment of the goods which he or she has hired.
3. Under hire purchase system the buyer can return the goods to the seller if he or she does not want to continue with the agreement.
4. In case of hire purchase the person who has taken the good on hire cannot transfer the goods to a third party as he or she doe s not have the ownership of the goods. In I.C.D.S. Ltd. vs. CIT & Anr. (20133) 350 ITR 527 (SC) it is held that depreciation in case of lease is available to lessor. In the instant case assessee has claimed depreciation on the basis of ownership. Therefore claiming depreciation and benefit of circular 647 does not go simultaneously. Hence the Hire Purchase agreement is to be examined and decided whether the asset has been obtained under a true Hire Purchase agreement. The ground is disposed of with the following directions: A. Call for Hire Purchase/Lease agreements, if any, in respect of acquisition of assets for which interest is debited to Profit and Loss Account. B. Verify whether all 4 conditions mentioned for qualifying the agreement as a true Hire Purchase agreement. C. If yes in respect of a any asset, no disallowance under section 40(a)(ia) is to be made on such interest payment on basis of the Hire Purchase agreement. D. If no in respect of any asset, the disallowance under section 40(a)(ia) stands confirmed on such interest payment on basis of the Hire Purchase agreement