D.C.I.T CIR - 1,KOLATA, KOLKATA vs. M/S PARIJAT VYAPAAR PVT. LTD., KOLKATA

आदेश /O R D E R PER Waseem Ahmed, Accountant Member:- Both appeals by the Revenue are directed against the different orders of Commissioner of Income Tax (Appeals)-XXIV, Kolkata of even date i.e. 10.05.2013. Assessments were framed by DCIT, Circle-1, Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) vide their orders dated 15.12.2010 &29.12.2011 for assessment years 2008-09 & 2009-10. Both appeals are heard together and are being disposed off by this consolidated order for the sake of convenience and brevity.

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 2 Shri Arindam Bhattacherjee Ld. Departmental Representative appeared on behalf of Revenue and Shri Subash Agarwal, Ld. Advocate appeared on behalf of assessee. We first take up appeal of Revenue in ITA No.2241/Kol/2013 relating to AY 2008-09. 2. The Revenue has raised the following grounds:- “1. That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in deleting the disallowance on purchase of tyres for Rs.5,91,642/-/ and in allowing depreciation on addition to fixed assets for Rs.13,67,889/-. 2. That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in allowing depreciation of Rs.87,45,827/- @ 30% block on dumpers and drippers as against depreciation @ 15% block allowed by the AO. 3. That the appellant craves leave to add, alter/or amend any of the grounds of appeal during the course of hearing.” 3. First issue raised by Revenue in ground No.1 is that Ld. CIT(A) erred in deleting the addition made by Assessing Officer for ₹5,91,642/- on account of purchase of tyres as well as depreciation on fixed assets of ₹13,67,889/-. 4. Briefly stated facts are that assessee in the present case is a private limited company and engaged in business of earth moving activities and construction activities. The assessee in the year under consideration has made addition made in the fixed assets in the form of tyres / other accessories of dumper & excavators. These assets were categorized under the block “plant & machinery”. During the course of assessment proceedings, Assessing Officer asked the assessee to file the supporting evidence for the addition made to the fixed assets. But the assessee failed to do so in respect of one party, namely, M/s Tyre Arcade.

The AO on perusal of ledger account of M/s Tyre Arcade observed that the closing balance shown by assessee was at ₹13,91,688/- whereas the opening balance was shown for ₹1,09,99,459/-. Thus, AO observed the difference in the account of M/s Tyre Arcade between opening and closing balance. On questioned about the difference in the opening & closing balance, the assessee failed to explain.

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 3 The AO further observed that payment made by assessee to M/s Tyres Arcade were returned by the bank namely, Bank of India. The assessee also failed to justify whether the payment was subsequently made to M/s Tyre Arcade. The AO also observed that out of the total purchases of Rs. 19,59,531.00 from M/s Tyre Arcade, a sum of Rs. 5,91,642.00 was incurred on revenue account & the balance of Rs. 11,30,838.00 was capitalized. Accordingly, Assessing Officer disallowed the expenses incurred by assessee on revenue account which is coming for ₹5,91,642/- and added to the total income of assessee. 5. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that total purchase made from M/s Tyre Arcade during the year stood of ₹14,16,688/- only. Out of such purchase an amount of ₹13,67,889/- was capitalized during the year and balance of 48,789/- was debited in the profit and loss account. But AO has wrongly taken the amount of ₹19,59,531/- as total purchase from M/s Tyre Arcade. The cheque payments made to M/s Tyres Arcade were not cleared by the bank due to insufficiency of fund. Therefore the cheques were returned by Bank but the reason for dishonor of the cheque cannot be basis for making the disallowance of the expenses. In fact, the AO has not made the disallowance on the ground of non-production of evidence. As such, all the evidences were duly filed before AO. Ld. CIT(A) after considering the submission of assessee deleted the addition made by AO by observing as under:- “2.3 I have carefully considered the observation of the Assessing Officer in the assessment order and also the submission of thee Ld. A/R. During the course of the appellate proceedings, the Ld. A/R has explained that the appellant had purchased tyres for Rs.14,16,688/- from M/s Tyre Arcade during the year. Out of the said purchase, the amount of Rs.13,67,889/- was capitalized & shown as fixed assets and the remaining amount of Rs.48,789/- was debited to the P & L A/c as expenses for spare. During the course of the scrutiny am, the appellant had submitted the supporting bills as well s the ledger copy of M/s Tyre Arcade before the AO. However, the AO has treated the entire purchases from Tyre Arcade as bogus. The Ld. A/R has stated that the AO has also wrongly taken the purchase value as Rs.19,59,531/- instead of the correct figure of R.14,16,688/-. The AO has treated the purchases from M/s Tyre Arcade as bogus on the ground that the cheques were dishonoued. The Ld. A/R has explained that the dishonour of cheques cannot be a sound ground for treating the purchases s bogus. The Ld. A/R has further explained that the appellant

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 4 company was short of liquid fu9nds and the cheques were not honoured by the bank for insufficient balances available in its accounts. The Ld A/R has further clarified that fresh cheques were issued to M/s Tyre Arcade in subsequent year and the debts for the said purchases were liquidated. Considering the facts of the case, I am of the opinion that the AO has treated the purchases amounting to Rs.19,59,531/- as bogus based on conjectures and surmises. Accordingly, the AO is directed to delete the addition of R.5,91,642/- on account of transactions with M/s Tyre Arcade. The AO is fu9rther directed to allow depreciation on the remaining purchase of rs.13,67,889/- in respect to the addition to fixed assets from the said party. This ground of appeal is allowed.” The Revenue, being aggrieve, is in appeal before us. 6. Before us Ld. DR vehemently relied on the order of AO whereas Ld. AR filed paper book which is consist of pages 1 to 44 and drew our attention on pags 12 to 17 of the paper book where the ledger copy of M/s Tyre Arcade pertaining to AYs 2008- 09 to 2010-11 was placed. From the copy of said ledger it was demonstrated that the payment was subsequently made to M/s Tyre Arcade. He relied on the order of Ld. CIT(A) and stated that issue may be decided on merit. 7. We have heard the rival contentions of both the side and perused the materials available on record. In the instant case the disallowance was made by the AO on the ground that the cheque issued to the party was returned back on account of insufficient fund in the bank account of the assessee. The AO while making such disallowance has taken the amount of total purchase of ₹19,43,531/- whereas as per assessee correct figure is of ₹14,16,688/- only. Out of the said amount a sum of ₹48,789/- was only claimed as revenue expenses. However, AO has made the disallowance of ₹5,91,642/- . On perusal of the order of the AO and ledger copy of M/s Tyre Arcade, we find that the facts of the case are in dispute as detailed under : 1. Opening credit balance as per the assessee is Rs. 16,58,705.00 whereas the AO mentions credit balance of Rs. 1,09,99,459.00. 2. Purchases during the year shown by the assessee from M/s Tyre Arcade are of Rs. 14,16,688.00 whereas the AO claims purchases from M/s Tyre Arcade by the assessee comes for Rs. 19,43,531.00 only. 3. The assessee claimed to have capitalized a sum of Rs. 13,67,889.00 out of the total purchase of Rs. 14,16,688.00 and the balance of Rs. 48,789.00 was

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 5 claimed as revenue expenses. Whereas as per the AO the amount capitalized is of Rs. 11,30,838.00 only out of the total purchases of Rs. 19,59,531.00 and the balance of Rs. 5,91,642.00. (note the sum of Rs. 11,30,838.00 & 5,91,642.00 do not match with the amount of Rs. 19,59,531.00). We note that the copy of the ledger of M/s Tyre Arcade was available before the AO and no defect was reported in the copy of ledger. Thus in our considered view the finding of the AO depends on the wrong assumption of facts it does not represent the correct amount in view of the fact as discussed above. Thus, we are of the opinion, the addition made by the AO is not sustainable. The ld. DR has also not brought anything on record contrary to the findings of ld. CIT-A. In the light of above reasoning, we hold that the order of the Ld. CIT(A) is correct and in accordance with law and no interference is called for. We hold accordingly. Consequently, Revenue’s ground is dismissed. 8. Next issue raised by Revenue in ground No.2 is that Ld. CIT(A) erred in allowing depreciation on dumpers and trippers @ 30% whereas AO calculated the depreciation @ 15%. 9. During the course of assessment proceedings, AO calculated the depreciation @ 15% as dumpers and trippers whereas assessee claimed depreciation @ 30%. Thus, AO disallowed excess depreciation as claimed by assessee and added it to the total income of assessee. 10. Aggrieved, assessee preferred an appeal before Ld. CIT(A) who reversed the order of AO and granted depreciation @ 30% by observing as under:- “3.3 I have carefully considered the observation of the Assessing Officer in the am order and also the submissions of the Ld. A/R. The Ld. A/R has explained that the appellant has claimed the depreciation of Rs.87,45,827/- @ 30% on dumpers and tippers which are being used in the business of running them on hire. The appellant has also claimed the depreciation of Rs.28,17,935/- @ 30% on payloaders which are also being used in the business of running them on hire. As penalty the Oxford Advanced Learners’s Dictionary the word “tipper” means “a lorry / tuck with a container part that can be moved into a sloping position so that it load can slide off at the back.”. A dumper is a vehicle for carrying bulk materials. In the case of Gujco Carriers Vs. CIT (supra) , the Hon'ble High Court of Gujarat has held that the “Lorry or Truck would, therefore, mean not only any motor vehicle designed to carry freight

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 6 or goods but also to perform special services like fire fighting.” In the case of CIT Vs. Rakesh Jain (supra), the Hon'ble High Court of Punjab & Haryana has upheld the order of the ITAT that the tippers would be covered by the expression “commercial vehicle” as tippers are registered under the Motor Vehicles Act, 1988. In the case of Shiv Construction Co. Vs. CIT (supra), the Hon'ble High Court of Gujarat has held that the dumpers are motor lorries / road transport vehicles and entitled to depreciation @ 30% under the group D(9) of Item III of Part I of the Depreciation Schedule attached to the Income- tax Rules, 1962 as applicable for AY 1974-75 and 1975-76. In the present case, the tippers and dumpers are used for the purpose of the business of running them on hire. Respectfully following the decision of the Hon'ble High Court of Gujarat in the case of Shiv Construction Co. Vs. CIT (supra) and also the decision of the Hon'ble High Court of Punjab & Haryana in the case of CIT Vs. Rakesh Jain (supra), the AO is directed to treat the tippers and dumpers as motor lorries / road transport vehicles and allow depreciation @ 30% under the group 3(ii) of the item III of the Part A of the Appendix I to the Income-tax Rules 1962 as applicable for AY 2008-09. A pay loader is a heavy equipment which is used to load materials such as debris, rock, sand, logs and other raw materials into a tipper / dumper or railcar. Considering the functional test, the pay loader cannot be treated as motor lorry. Accordingly, restricting the depreciation on pay loaders @ 15% instead of 30% is confirmed. However, the AO is directed tore-compute the WDV of the pay loaders as on 31.03.2008 after allowing depreciation @ 15% on it. This ground of appeal is partly allowed.” The Revenue, being aggrieved, is in appeal before us. 11. Before us both party relied on the order of Authorities Below as favorable to them. 12. We have heard the rival contentions of both the parties and perused the material available on record. At the outset, Ld. AR for the assessee pleaded that identical issue has been decided in favour of assessee by the Hon'ble Co-ordinate Bench of this Tribunal in ITA No.1296/Kol/2015 for A.Y. 2010-11 dated 18.10.2017, The Ld. DR fairly agreed that the issue involved is covered in favour of assessee. We reproduced the same for the sake of clarity:- “3. We have heard rival submissions and gone through the facts and circumstances of the case and carefully perused the material available on record. We note that the assessee has claimed depreciation @ 30% on dumper and tipper. In earlier two assessment years the assessee also claimed depreciation @ 30% which was not allowed by the Revenue Authority. Based on the same facts and circumstances, the AO disallowed 15% excess depreciation in this year. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who directed the AO to allow depreciation @ 30% on dumper and tipper by following various judgments of Hon'ble Gujarat

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 7 High Court and Hon'ble Punjab & Haryana High Court. Aggrieved, revenue is now in appeal before us. We note that the issue is squarely covered in favour of the assessee by the decision of Hon'ble Karnataka High Court the case of CIT Vs. Mahaling Setty & Co. (1992) 195 ITR 526 (Kar) , wherein the Hon'bIe High Court has held as under: "INVESTMENT ALLOWANCE - ELIGIBILITY FOR ALLOWANCE - MACHINERY MUST BE OWNED AND WHOLLY USED FOR PURPOSES OF BUSINESS - PURPOSE OF BUSINESS INCLUDES EVERY ACTIVITY NECESSARY TO CARRY ON BUSINESS - BUSINESS OF CONSTRUCTION WORK - DUMPERS AND TIPPERS USED TO LIFT EARTH AND TRANSPORT SAME - RESULT IN PRODUCTION OF AN ARTICLE OR THING - ARE MACHINERY EN71TLED TO INVESTMENT ALLOWANCE - "THINGS", "ARTICLES", MEANING OF - INCOME-TAX ACT, 1961, SECTION 32A The word "thing" is shown in Earl Jowitt's Dictionary as meaning "the subject of dominion or property as distinguished from persons". There are three things: things real or immovable, comprehending lands, tenements and hereditaments; things personal or movable, comprehending goods and chattels, and things mixed; partaking of the characteristics of the former two, as a title deed. The civil law divided things into corporeal and incorporeal. The incorporeal items like debts would be things. Therefore, the word "things" comprehends incorporeal assets also. The term "article" is not confined to movable property only under section 32A of the Income- tax Act, 1961. Investment allowance is granted, inter alia, in respect of machinery or plant specified in sub-section (2) of section 32A which is owned by the assessee and is wholly used for the purpose of business carried on by the assessee. The purpose of business includes every activity which is necessary to carry on the business. It is not the final touches involved in a construction work that result in the carrying on of the business. The various activities from the beginning to the end will be part of the business. Machine used in the business of construction is eligible for investment allowance as is clear from section 32A(2)(b)(iii). The phrase "the business of construction is wide and, normally, a business of construction involves construction of buildings, dams, roads, channels, etc. Machinery which is necessary for business of construction involving several activities cannot be held as not contemplated by Parliament as covered for the purpose of investment allowance. The words and phrases used in a statute will have to be understood in the context in which they are used. Clause (b) in the second proviso to section 32A has to be read in the setting in which other clauses (a), (c) and (d) are used. Specially, clauses (a) and (b) in the second proviso make it clear that exclusion from the provision is only in respect of the machinery or plant or appliances connected with the administrative part of the business, i.e., those used in the office premises or residential accommodation of the assessee. Naturally, road transport vehicles referred to therein will have to be such vehicles which are made to carry the employees to the office and back home.

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 8 The words "road transport vehicles" include vehicles like omnibuses, cars, etc., and not dumpers and tippers which are directly used in the activity of the business, et the place where the business is actually carried on. Dumpers and tippers are essentially machinery used to carry on a construction work. Therefore, the use of dumpers and tippers for the purpose of business of construction, i.e., used to lift earth and transport the same, results in the production of an article or thing and such machinery is entitled to investment allowance under section 32A of the Act. The issue before us has been answered by the Hon'ble High Court of Karnataka (supra), so we do not find any infirmity in the order of the Ld. CIT(A) in allowing depreciation @ 30% on dumper and tipper. Therefore, we uphold the same. This appeal of Revenue is dismissed.” Accordingly, respectfully following the consistent view of the Co-ordinate Bench of this Tribunal we decline to interfere with the order passed by the Ld. CIT(A) on this account and accordingly the ground taken by Revenue is regretted. 13. Last issue is general and does not require any separate order. 14. In the result, Revenue’s appeal is dismissed. Coming to ITA No.2242/Kol/2013 for A.Y. 09-10. 15. Grounds raised by Revenue as under:- “1. That on the facts and in the circumstances of the case the Ld. CIT(A) has erred in allowing depreciation of Rs.74,02,051/- @ 30% on dumpers and tippers as against depreciation @ 15% allowed by the AO. 2. That on the facts and in the circumstances of the case the Ld. CIT(A) is not justified in law in allowing the assessee’s appeal by admitting fresh evidence produced before him in contravention of Rule 46A of the IT Rules regarding the deletion of addition u/s.40(a)(ia) regarding non deduction of Tax u/s. 194C. 3. That the appellant craves leave to add, alter/or amend any of the grounds of appeal during the course of hearing.” 16. First issue raised by Revenue in ground No.1 is that Ld. CIT(A) erred in allowing depreciation on dumpers and tippers @ 30% of ₹74,02,051/- as against depreciation allowed by AO @ 15%. 17. It is relevant to observe here that the fact in issue No.1 of this appeal is similar to the facts in ITA No.2241/Kol/2013 for A.Y. 2008-09 of Revenue’s appeal and the findings given in ITA No.2241/Kol/2013 shall apply to this case also with equal force. Consequently, Revenue’s ground is dismissed.

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 9 18. Next issue raised by Revenue in ground No.2 is that Ld. CIT(A) erred in deleting the addition made by the AO on account of non-deduction of Tax Deducted at Source (TDS) u/s. 194C r.w.s 40(a)(ia) of the Act on the basis of additional evidence. 19. During the course of assessment proceedings, AO observed that assessee has claimed transportation charges of ₹1,42,033/- without deducting the TDS u/s. 194C r.w.s. 40(a)(ia) of the Act. On confrontation, the assessee failed to file necessary explanation. Therefore, AO disallowed the same and added to the total income of assessee. 20. Aggrieved, assessee preferred an appeal before Ld. CIT(A). The assessee before Ld. CIT(A) submitted that in none of the case payment is exceeding the limit as specified u/s. 194C of the Act. As such, there was no liability for deducting TDS. However, Ld. CIT(A) after considering the submissions of assessee deleted the addition made by AO by observing as under:- “3.3 I have carefully considered the observation of the o in the assessment order and also the submission of the Ld. A/R. During the course of the appellate proceedings, the Ld. A/R has explained that none of the payments exceeded the limits specified u/s. 194C for deducing TD and the appellant company was not liable to deduct any TDS from the transportation charge of Rs.1,42,033/- debited in P & L A/c/. Considering the facts of the case, I am of the opinion that the provisions of section 40(a)(ia) are not applicable in this case. Accordingly, the AO is directed to delete the addition of Rs.1,42,033/- u/s. 40(a)(ia) for non-deduction of TDS from transportation charge. This ground of appeal is allowed.” The Revenue, being aggrieved, is in appeal before us. 21. Before us both parties relied on the order of Authorities Below as favourable to them. 22. We have heard the rival contentions of both the parties and perused the material available on record. In the instant case, we find that the ledger of transportation charges is placed on pages 24 to 33 of the paper and it is observed that the payment is not exceeding the limits as specified u/s. 194C of the Act. Therefore, in our considered view, assessee is not liable to deduct the TDS u/s. 194C of the Act. In the background of the above discussions and precedent we do not find any infirmity in

ITA No.2241-42/Kol/2013 A/Ys 08-09 & 09-10 DCIT Cir-1, Kol. Vs. M/s Parajit Vyapaar Pvt. Ltd. Page 10 the order of Ld. CIT(A) and accordingly we uphold the same. This ground of Revenue is dismissed. 23. Last ground is general and does not call for any adjudication. 24. In the result, Revenue’s appeal is dismissed. 25. In combine result, both appeal of Revenue stand dismissed. Order pronounced in open court on 19/01/2018 Sd/- Sd/- (�या)यक सद"य) (लेखा सद"य) (S.S.Viswanethra Ravi) (Waseem Ahmed) Judicial Member Accountant Member *Dkp, Sr.P.S +दनांकः- 19/01/2018 कोलकाता / Kolkata आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. आवेदक/Assessee-M/s Parjat Vyapaar Pvt. Ltd. 12A, N.S. Road, 5th Fl. Kolkata-001 2. राज"व/Revenue-DCIT, Circle-1, P-7, Chowringhee Sq. Kolkata-69 3. संबं.धत आयकर आयु/त / Concerned CIT 4. आयकर आयु/त- अपील / CIT (A) 5. 0वभागीय �)त)न.ध, आयकर अपील�य अ.धकरण कोलकाता / DR, ITAT, Kolkata 6. गाड4 फाइल / Guard file. By order/आदेश से, /True Copy/ Sr. Private Secretary Head of Office/DDO आयकर अपील�य अ.धकरण, कोलकाता