SHRI SURESH CHAND AGARWAL,JAIPUR vs. INCOME TAX OFFICER, WARD-5-3, JAIPUR

आयकर अपीलीय अधिकरण] जयपुर न्यायपीठ] जयपुर IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHES,”A” JAIPUR Jh lanhi xkslkbZ]U;kf;d lnL; ,oa JhjkBksM deys'k t;UrHkkbZ] ys[kk lnL; ds le{k BEFORE: SHRI SANDEEP GOSAIN, JM & SHRI RATHOD KAMLESH JAYANTBHAI, AM vk;dj vihy la-@ITA No.1070 & 1071/JP/2018 fu/kZkj.ko"kZ@AssessmentYear : 2013-14 & 2014-15 Shri Suresh Chand Agarwal cuke The ITO Vs. 17-C, Burmese Colony, Jaipur Ward 5(3) , Jaipur LFkk;hys[kk la-@thvkbZvkj la-@PAN/GIR No.: ABEPA 2551 R vihykFkhZ@Appellant izR;FkhZ@Respondent fu/kZkfjrh dh vksj ls@Assessee by : Shri Sandeep Jhanwar, CA jktLo dh vksj ls@Revenue by: Smt. Monisha Choudhary (JCIT) lquokbZ dh rkjh[k@Date of Hearing : 05/04/2022 mn?kks"k.kk dh rkjh[k@Date of Pronouncement: 05/05/2022 vkns'k@ORDER PER BENCH Both these appeals by the assessee are directed against two different orders of the ld. CIT(A)-2, Jaipur dated 19-06-2018 for the assessment year 2013-14 and 2014-15 respectively. 2. The hearing of the appeal was concluded through video conference in view of the prevailing situation of Covid-19 Pandemic. 3.0 First of all, we take up the following grounds of appeal of the assessee for the A.Y. 2013-14 for adjudication:- ‘’1. Under the facts and circumstances of the case, the ld.CIT(A) Jaipur has erred on fact and in law in confirming the addition of Rs.1,42,238/- on account of excess depreciation claimed on tanker.

2 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur 2. Under the facts and circumstances of the case, the ld.CIT(A) Jaipur has erred on fact and in law in confirming the addition of Rs.67,835/- on account of car expenses and depreciation by treating the use of vehicle for personal use. 4.1 Apropos Ground No. 1, brief facts of the case are that the AO while making the assessment in the case of the assessee noted that the assessee is engaged in the business of running Petrol Pump. The Return of income was filed by the assessee on 27-09-2013 showing a total income of Rs.21,23,230/-. The case of the assessee was selected for scrutiny and accordingly the notices u/s 143(2) of the Act was issued. In response to the notices, the ld. AR of the assesee filed the written reply alongwith required information before the AO who examined the books of accounts comprising of Cash Book, Ledger, Journal, Bank Account, Purchase and Sales Register, Stock Register and Bills/vouchers for expenses etc. on test check basis. The AO while making assessment noted that the assessee has claimed depreciation on Tankers @ 30%. However, the AO asked from the assessee about the use of Tanker. The assesee submitted that the tankers are used in the transportation of diesel/ petrol from the depot of the Company to the assessee’s petrol pump. The assessee confirmed the AO that the transportation charges for transportation of diesel/ petrol are paid by the Company at a fixed rate. Simultaneously, the assessee confirmed that the tankers are neither run on hire nor used for any other purpose except assessee’s business. The AO thus observed from the reply of the assessee that the tankers are used by the assessee as a plant and machinery for running

3 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur his business of petrol pump. According to the observation of the AO, the tanker falls in the category of Plant & Machinery for which eligible depreciation is 15% as against 30% claimed by the assessee. Therefore, the AO disallowed excess depreciation amounting to Rs.1,42,238/- and added to the total income of the assessee. 4.2 In first appeal, the ld. CIT (A) confirmed the action of the AO by giving detailed finding on the issue of depreciation claimed by the assessee as under:-

‘’2.3 I have perused the facts of the case, the assessment order and the submissions of the appellant. The facts of the case are that the appellant is engaged in running of a petrol pump and during the year has shown a GP% of Rs. 99.99 lacs on a turnover of Rs. 5524.75 lacs giving a GP rate of 1.81%. The Assessing Officer noted that depreciation on tankers had been claimed at 30% considering the same as used in the transportation of diesel/petrol from the depot of company to appellants petrol pump. It was also observed that transportation charges for transport of diesel/petrol are paid by the company at a fixed rate and it was also admitted by the appellant that the tankers are not run on hire or used for any purpose other than assessee's business. The Assessing Officer thus concluded that the same were to be treated as plant and machinery and restricted, the depreciation to 15%. In the present proceedings, it was submitted that the tanker was running on hire basis and hire charges were paid by BPCL to the appellant for transportation of petroleum products from the depot of the company to the petrol pump of the appellant. It was also submitted that transport agreement is executed between the appellant and the company and payments are made as per the terms of the same. Reliance was placed on the decision of ITAT Rajkot Bench in ITA No.. 1188/Rjt/2010, where it was held relying on the decision of Bombay High Court in the case of SC Thakur & Bros. that higher rate of depreciation was eligible in a case where the tanker was used to carry on the business of petroleum products traded by him. It is seen that the trucks are not being used for hiring business but being used in the-business of the appellant for transporting diesel/petrol from depot to the

4 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur appellants premises. Reliance is placed on the decision of CIT versus Bimalchand Jain wherein the jurisdictional High Court has held as follows:- "3. Learned counsel for the Revenue has submitted that the reference made for opinion of the Court was also subject- matter in case CIT v. Manjeet Stone Co. [1991] 190 ITR 183 (Raj.) and stood answered by Division Bench of this Court. On perusal of the aforesaid judgment, we find that the issue was the same and while dealing with the issue, the Division Bench of this Court observed as under: "In the present case, the business of the assessee is that of mining and sale of stones excavated from the mines and the trucks, are used mainly for its business of mining. They are used mainly for carrying the stones from the mine-site to the sales depot or to the godown of the assessee. If the trucks are used for its own business, then they are entitled to depreciation at 30 per cent only, as the assessee was not using the trucks in the business of running them on hire. The registration of the trucks as 'public carriers' will not, in any way, affect the eligibility to depreciation as the main consideration as per entry No. III(ii)E(1A) is that the assessee is using the vehicle in the business of running them on hire. The business of the assessee is quarrying and selling the stones after excavation and not of hiring. If a small portion of its income is received from the business of hiring from two or three transactions of hiring, then it will not make the business of the assessee as one of hiring the trucks. Even otherwise, when we look into the finding arrived at by the Tribunal regarding the business of the assessee, then we find that the findings are to the effect that the business of the assessee is of quarrying and selling stones and the trucks are mainly used for carrying the stones from the mines to the sales depot. As the trucks were mainly used by the assessee in its own business for carrying the stones from the mine-site to the sales depot, the case of the assessee is covered by entry No. III(ii)D(9) and not by Entry No. III(ii)E(1A), and as such the assessee is entitled to depreciation at 30 per cent and not at 40 per cent. In this view of the matter, we are of the opinion that the Tribunal was not right in holding that the assessee is entitled to depreciation at 40 per cent and not at 30 per cent on the trucks and dumpers used by it for its business. We, therefore, answer the question in the negative, i.e., in favour of the Revenue and against the assessee, by holding that the assessee is entitled to depreciation at 30 per cent and not at

5 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur 40 per cent, as the case of assessee is covered by Entry No. III(ii)D(9) and not by Entry No. III(ii)E(1A). No order as to costs." (p. 186) 4. We answer the reference in favour of the Revenue and against the assessee, accordingly." Further as regards the contention of the appellant that the trucks/lorries are run on hire and the income is shown separately, it is seen that these amounts are paid by HPCL from whom the Petro/diesel is plarbirptattflinfle nem-. are used to transport these products to appellants petrol pumps. Thus, the hiring is only causal and with reference to its own business and not from the business of hiring of the trucks/lorries. This aspect has been further discussed in details in the case of [1995] 215 ITR 350 (Rajasthan) Commissioner of Income-tax v. Sardar Stones wherein it was held as follows: "The business of running the vehicles on hire is different from giving the vehicles on hire casually. The vehicle may be given on hire occasionally which may or may not constitute a carrying on of business of running them on hire. It is the main activity and the intention behind it which has to be considered for the purpose of hiring as to whether the assessee is carrying on the business of running the vehicles on hire or not. Even those motor buses, motor lorries, etc., which are not used in the business of running them on hire are entitled to depreciation at 30 per cent. The limit of 40 per cent depreciation to motor buses, motor lorries and motor taxis is provided because more running is required in the business of running them on hire. In the instant case, the assessee had been mentioned as a trader of stones using two trucks for transportation of stones from the mine site to the depot of the assessee as well as to the destination of the customers. It had nowhere come on record that the assessee was carrying on the business of running the vehicles on hire. In these circumstances, even the Tribunal had not disputed the finding of the Commissioner that the assessee was not engaged in the business of running the vehicles on hire and for that reason, it could be said that the Tribunal was not justified in coming to the conclusion that the sale price realised including the price of stones as hire charges from customers, and that was why the assessee was not entitled to depreciation at 40 per cent and depreciation at 30 per cent was allowable in the case of motor lorries of the assessee. Note The case was decided in favour of the revenue."

6 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur The facts in the above case, as reproduced from the order, were as follows: "The rate of depreciation which is provided in respect of motor lorries other than those in a business of running them on hire is 30 per cent. If the motor buses, motor lorries and motor taxis are used in a business of running them on hire, then the depreciation is allowable at 40 per cent. in accordance with law. The finding which has been recorded by the Tribunal is that there is no specific mention in respect of hire charges of the truck in the bills yet the hire charges should be considered to have been realized. The dispute was not with regard to the hire charges, but was with regard to the nature of business. The Tribunal has observed that the trucks of the assessee are hired by hisCustomers for transportation of their goods and it does not make any difference if the separate amount of transportation has not been shown in the bill. It is possible that the transportation charges are not shown separately and yet may be realized. This is what happens in a case where the terms of the contract provide that the goods are to be supplied F.O.R destination of buyer and for that purpose the entire responsibility of transportation of the goods to the destination of buyer remains that of the supplier. There may be other contingencies also where the hire charges may not be shown separately in the bill itself Even charging or showing hire charges separately in the bill would not be the only determinative factor but the Tribunal was required to come to the conclusion as to whether the assessee was carrying on the business of running the vehicles on hire. Charging of hire for the use of the vehicles may be casual as was found in the present case and the main business was of carrying on stones from the mines to the depot of the assessee and also to the destination of the customer. The business of running trucks on hire by transportation stands on a different footing from that of using the truck on hire by a person which is considered different business for which the rate of depreciation has been separately provided. The view this court has taken in the case of CIT v. Manjeet Stone Co. [1991] 190 ITR 183, referred to above that the trucks were mainly used by the assessee for carrying stones from the mine site to the sales depot and, therefore, he should be entitled to depreciation at 30 per cent. is undisputed in the facts of the present case also. In the statement of case, the assessee has been mentioned as a trader of stones using two trucks for transportation of stones from the mine site to the depot of the assessee as well as to the destination of the customers. It has

7 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur nowhere come on record that the assessee was carrying on the business of running the vehicles on hire. The business of running the vehicles on hire is different from giving the vehicle on hire casually. The vehicle may be given on hire occasionally which may or may not constitute a carrying on of business of running them on hire. It is the main activity and the intention behind it which has to be considered for the purpose of hiring as to whether the assessee is carrying on the business of running the vehicles on hire or not. Even those motor buses, motor lorries, etc., which are not used in the business of running them on hire are entitled to depreciation at 30 per cent. The limit of 40 per cent. depreciation to motor buses, motor lorries and motor taxis is provided because more running is required in the business of running them on hire. In these circumstances, even the Tribunal has not disputed the finding of the Commissioner of Income-tax that the assessee was not engaged in the business of running the vehicles on hire and for that reason and for the reason that the decision which was relied upon by the Tribunal has already been reversed by this court, we are of the view that the Tribunal was not justified in coming to the conclusion that the sale price realised including the price of stones as hire charges from customers, and that is why the assessee is not entitled to depreciation at 40 per cent. and depreciation at 30 per cent is allowable in the case of motor lorries of the assessee. Accordingly, the reference is answered in favour of the Revenue and against the assessee. No order as to costs." In view of the discussion above and the decisions relied on, it is clear that to avail higher rate of depreciation the assessee has to be involved in the business of hiring of the lorries/trucks. The disallowance made by the AO of the excess depreciation is upheld. The ground of appeal is dismissed.’’

4.3 During the course of hearing, the ld. AR of the assessee prayed that ld.CIT(A) has erred in sustaining the addition of Rs.1,42,238/-. The ld. AR of the assessee has submitted the copy of Transport Agreement between Bharat Petroleum Corporation Ltd. and Ravi Road Lines dated 03-05-2014 for transportation of the Petrol/ Diesel Oil of the Petroleum Company (APB 17-46).

8 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur The ld. AR of the assessee has submitted the copy of Road Transport Tender 2013-16 vide letter dated 15-02-2013 issued by Territory Manager (Retail), Jaipur in the name of Ravi Road Lines (Bharat Petroleum Dealer) (APB 48-49) which indicates that both the business of the assessee are different. Thus, the ld. AR submitted that the depreciation @ 30% claimed by the assessee is in accordance with law and since income from hiring activity is also earned separately, therefore, higher rate of depreciation should be allowed. 4.4 On the other hand, the ld. DR supported the orders of the authorities below. 4.5 We have heard both the parties and perused the materials available on record. We find from the records that the assessee has two types of businesses. One business of the assessee is running a Petrol Pump and other business of the assessee is providing the Tankers to HPCL (Oil Company) for transportation of Petrol/Diesel Oil of the Petroleum Company from the Oil Depot to the destination of the Petrol Pump. The assessee is being paid transportation charges by the petroleum company for transportation of diesel/ petrol at a fixed rate. From the records available before us, it does not indicate that the tankers are used by the assessee as a plant and machinery in its business of running the Petrol Pump. The assessee has a separate line of business activities in the name of Ravi Road Lines which provides the services of transporting the Petroleum Products of M/s.HPCL by charging a fixed amount as per the agreement made

9 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur between the parties. Even, the GST on the hire charges is paid by the Petroleum Company on these services separately provided by that company on reversed charge. In this view of the matter, we do not concur with the findings of the ld. CIT(A) that tankers are being used by the assessee in its business for running the Petrol Pump. Thus, the addition sustained by the ld. CIT(A) amounting to Rs.1,42,238/- on account of depreciation is deleted. Hence, Ground No. 1 of the assessee is allowed. 5.1 Apropos Ground No. 2 of the assessee, brief facts of the case are that the AO during the course of assessment proceedings noted that assessee is using two cars in the business and has debited Rs.3,93,960/- towards Car Fuel Expenses, Rs.1,88,780/- towards depreciation, Rs.13,927/- towards insurance and Rs.81,687/- towards Repairs. The AO noted that all these payments have been incurred in cash and the assessee has not maintained any log book for the cars so as to work out the business and personal use. Thus, the AO observed that the vehicles are used for personal as well as business purposes and these vehicles have not been exclusively used for business purposes. The AO, thus taking into consideration the above facts and circumstances of the case, made 1/10th disallowance of the total expenses which comes to Rs.67,835/- and added the same to the total income of the assessee. 5.2 In first appeal, the ld. CIT(A) has confirmed the action of the AO by observing as under:-

10 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur ‘’3.3 I have perused the facts of the case, assessment order and the submissions of the appellant. The Assessing Officer disallowed car expenses and depreciation of Rs.67,835/- for the personal use. The same is found to be reasonable and confirmed. Ground of appeal is dismissed. 5.3 During the course of hearing, the ld. AR of the assessee has prayed that the ld. CIT(A) has erred in confirming the addition of Rs.67,835/- which should be deleted. 5.4 On the other hand, the ld. DR supported the order of the ld. CIT(A). 5.5 We have heard both the parties and perused the materials available on record. It is noted that the assessee is using two Cars and debited the expenses as under:- Car Fuel Expenses Rs. 3,93,960/- Depreciation Rs. 1,88,780/- Insurance of Vehicles Rs. 13,927/- Repairs Rs. 81,687/- Total:- Rs. 6,78,354/- The AO has made disallowance of 1/10th of the total expenses because the assessee has not maintained any log book for cars so as to work out the business and personal use and also incurred the above expenses in cash. Thus, the vehicles have not been exclusively used for the business purposes. The ld. CIT(A) has also confirmed the action of the AO. However, the ld. AR of the assessee could not controvert the findings of the ld. CIT(A) on the issue in question. The ld. AR of the assessee argued before us that if assessee uses the vehicle for personal purposes or not but depreciation and insurance are legally allowable. In this view of the matter, we find that in the interest of equity and

11 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur justice, 1/10th of car fuel expenses and repairs would render the justice to the assesssee and thus, Rs.47,564/- is sustained and assessee would get relief of Rs.20,271/-. Thus Ground No. 2 of the assessee is partly allowed.

6.1 Now we take up the grounds of appeal of the assessee for the A.Y. 2014-15 which are as under:-

‘’1. Under the facts and circumstances of the case, the ld.CIT(A) Jaipur has erred on fact and in law in confirming the addition of Rs.98,867/- on account of excess depreciation claimed on tanker.

6.2 We have heard both the parties and perused the materials available on record. The Bench has noticed that the issues raised by the assessee in the A.Y. 2014-15 are similar to the case of the assessee for the A.Y. 2013-14 (supra) and it is not imperative to repeat the facts of the case being similar grounds of appeal. Hence, the Bench feels that the decision taken by us in the case of the assessee for the A.Y. 2013-14 shall apply mutatis mutandis in the case of the assessee for the A.Y. 2014-15.

12 ITA No. 1070/JP/2018 Shri Suresh Chand Agarwal vs ITO, Ward 5(3), Jaipur 7.0. In the result, the appeals of the assessee for A.Y 2013-14 is partly allowed and appeal of A.Y 2014-15 is allowed. Order pronounced in the open court on 05/05/2022

Sd/- Sd/- ¼jkBksM deys'k t;UrHkkbZ ½ ¼lanhi xkslkbZ½ (Sandeep Gosain) (Rathod Kamlesh Jayantbhai) U;kf;d lnL;@Judicial Member ys[kk lnL;@Accountant Member Tk;iqj@Jaipur fnukad@Dated:- 05/05/2022 *Mishra आदेश की प्रतिलिपिअग्रेf’ात@ब्वचल वf जीम वतकमत वितूंतकमक जवरू 1. The Appellant-,. Shri Suresh Chand Agarwal, Jaipur 2. izR;FkhZ@ The Respondent-.The ITO, Ward 5(3), Jaipur 3. vk;djvk;qDr@ ld. CIT 4. vk;dj vk;qDr¼vihy½@The ld CIT(A) 5. विभागीय प्रतिनिधि] आयकरअपीलीय अधिकरण] जयपुर@क्त्ए प्ज्Aज्ए Jंपचनत 6. xkMZQkbZy@ Guard File (ITA No. 1070 & 1071/JP/2018) vkns'kkuqlkj@ By order, सहायकपंजीकार@Aेेज. त्महपेजतंत