MADAN MOHAN NAYAK,JAJPUR vs. ACIT, CUTTACK

Per Shri Pavan Kumar Gadale, JM: The assessee has filed an appeal against the order of CIT(A), Cuttack, in IT.Appeal No.131/2013-14, dated 29.01.2015, passed u/s.143(3) of the Income Tax Act, 1961 for the assessment year 2010- 2011, wherein the assessee has raised the following grounds :-

2 c. That, the learned CIT(Appeals) ought to have allowed depreciation @30% on the plant & machinery as claimed by the assessee.

M.M.Nayak and executing civil contract works for various companies and filed the return of income for the assessment year 2010-2011 on 29.9.2010 with total income of Rs.75,81,530/- and the return of income

was processed u/s.143(1) of the Act. Subsequently, the case was selected for scrutiny and notices u/s.142(1) & 143(2) of the Act were issued. In compliance, the ld. AR of the assessee appeared and produced

books of accounts and submitted details as per the questionnaire. The AO

on perusal of the profit and loss account found that the assessee has claimed depreciation @30% on Rock Breaker, Compressors, Crow Drill

Machine, Escavators, Tippers, Hitachis, Bull Dozers, Hiwas & JCBs

instead of 15% allowable as per I.T.Rules.

buses, motor lorries and motor taxis used in the business of running on hire is eligible for depreciation @30%. Since the above vehicles used by the assessee does not fall within the purview of the schedule of depreciation as per III(3)(ii) of New Appendix-I of I.T.Rules, 1962,

therefore, the AO disallowed the excess claim of depreciation of Rs.57,90,447/- and assessed the total income at Rs.1,33,71,977/- and passed the order u/s.143(3) of the Act, dated 11.3.2013. 4. Aggrieved by the order of AO, the assessee has filed an appeal

with the CIT(A). Ld. AR of the assessee argued the grounds and 3 reiterated the submissions and the CIT(A) on perusal of the submissions

of the assessee and findings of AO and dealt on the judicial decisions and observed that the assessee is in the business of various civil contract works with the various companies and the nature of work is civil

contractors and supply of labour but not hiring of vehicles and distinguished the decisions and finally confirmed the action of the AO and partly allowed the appeal.

before the Tribunal.

depreciation @ 30% is applicable to the vehicles used for hiring business

and also assessee has offered income from hiring disclosed in gross

receipts and filed paper book to substantiate the submission and prayed

for allowing the appeal. Contra, ld. DR relied on the orders of CIT(A) and opposed to the grounds.

AR that vehicles/assets used by the assessee for hiring business are eligible for higher depreciation @ 30% and whereas the AO has restricted

the claim of depreciation at the rate of 15% as they do not fall into the depreciation schedule. Further ld. AR vehemently argued that the vehicles are used for hiring by the companies are eligible for higher depreciation

and referred to the page 16 of the paper book explaining that income from 4 hiring business was included in the gross bills. The ld. AR drew our

attention to the statement, where TDS has been deducted by the companies with whom the assessee has a business connection. Ld. AR further explained that the assessee has raised the bills and invoices on the usage of vehicles and machineries at various sites referred at page 34 to 63 of the paper book.

the machinery is supplied along with labour, the ld. AR could not give

convincing reply. We also perused the Tax audit report u/s.44AB of the Act and statement in Form 3CD at column 8(a) where the nature of business of the assessee mentioned as “Labour supply and works

contract”. Considering the apparent facts and material on record, prima

facie, as discussed by the Assessing Authority at page 1 of the assessment order and Tax audit report u/s.44AB of the Act and statement

in Form 3CD, the assessee is engaged in business of labour supply and work contractor and undertakes civil work contracts. In the course of business assessee also provides machineries/vehicles along with labour

supply to the various companies for execution of works and the receipts

are in the nature of contract income. We are of the opinion that the depreciation @ 30% is applicable only on assets used in hiring business.

Prima facie, the explanations provided by the ld. AR and the records of 5 the assessee, does not prove that they are in the business of hiring and it has been quantified by the Assessing Authority that assessee derives the income from labour supply and work contract in the name and style of M/s M.M.Nayak, Proprietor which executes various civil works with HPCL, JSL, Tata Steel etc.. Further, the receipts of the civil contract works as referred by the ld. AR for deduction TDS is under the provisions of Section 194C of the Act and not under Section 194I of the Act.

Accordingly the claim of the assessee of higher depreciation @ 30% on the usage of the above machinery/vehicles cannot be accepted. Therefore, we are not inclined to interfere in the order of CIT(A) who has discussed in detail and confirmed the action of AO in disallowance of excess depreciation and, dismiss the grounds of appeal of the assessee.

6 आयकर अपील"य अ"धकरण, कटक / ITAT, Cuttack