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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: SHRI WASEEM AHMED & SHRI SIDDHARTHA NAUTIYAL
O R D E R
PER SIDDHARTHA NAUTIYAL, JM:
This appeal has been filed by the Revenue against the order passed by the Ld. Commissioner of Income Tax(Appeals), (in short “Ld. CIT(A)”), National Faceless Appeal Centre, (in short “NFAC”) in Order No. ITBA/NFAC/S/250/2021-22/1041698705(1) vide order dated 26.03.2022 passed for Assessment Year 2011-12.
The Revenue has taken the following grounds of appeals:-
“1. The Ld. CIT(A) has erred in law and on facts in deleting the disallowance of depreciation amounting to Rs. 2,20,57,239/- claimed on motor lorries @ 30% which was restricted to 15% by ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 2 - the AO holding that motor lorries were not used for running them on hire.
2. The Ld CIT(A) has erred on facts and in law in defining the nature of business as transporter and in holding that the assessee is entitled to higher rate of depreciation @ 30% as against depreciation @ 15% allowed by the AO.
3. The Ld CIT(A) has erred in law and on facts to appreciate that if the dumpers/vehicles were given on hire, then the assessee should have earned income from out of hiring of these vehicles.
4. It is therefore prayed that the order of the Ld CIT(A) be set aside and that of the AO be restored to the above extent.
5. The finding of and the disallowance made by the AO may be upheld in toto.
6. The appellant craves leave to add, amend, alter or withdraw any or more grounds of appeal at the time of hearing of appeal.”
The brief facts of the case are that the assessee is a partnership firm and is engaged in the business of loading, unloading and transportation of excavated material and of overburdened mines. During the course of assessment, the AO was of the view that the assessee is not entitled to depreciation @ 30% on motor lorries as the assessee is not engaged in the business of hiring of vehicles and therefore, the AO issued notice
ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 3 - under Section 148 of the Act dated 24.03.2015. During the course of assessment, the AO was of the view that in facts of the business of the assessee, it cannot be said that motor lorries, tempos, trucks etc. have been used by the assessee for giving on hire, and accordingly, the Assessing Officer held that the assessee’s claim of depreciation on dumpers, trucks etc. is not allowable as the same have not be used by the assessee for purpose of giving on “hire”. Accordingly, the AO restricted depreciation on dumpers, trucks etc. at Rs. 2,20,57,239/- against the assessee’s claim at Rs. 4,41,14,478/-.
In appeal, Ld. CIT(Appeals) allowed the appeal of the assessee with the following observations:
“5.3.1 Ground 1 to 3: These grounds are taken up together as they deal with disallowance of the higher depreciation claimed.
5.3.2 The appellant has informed that similar disallowance had been made by the Assessing Officer in A.Y. 2012-13, against which the appellant had filed an appeal before the CIT(A)-3, Rajkot. This appeal was decided by the Ld. CIT(A)-3, Rajkot on 06.06.2016 in Appeal No. CIT(A)-3/A3/0957/14-15 in appellant’s own case for AY 2012-13 in which he allowed this ground.
5.3.3 It is seen that the facts involved in both the years are identical. The Ld. CIT(A)-3, Rajkot has held in Para 5.1.11 of his order as under:-
ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 4 - “…Further, I agree with Ld. AR that decision of Hon’ble ITAT Rajkot in the case of M/s. R.R. Construction in is fully applicable in this case. In my opinion, Ld. AR is correct in his proposition that appellant’s work include providing its vehicles for transportation to the third parties and the amount received on this count constitute part of business receipts of the appellant and therefore such vehicles are eligible for depreciation at the higher rate of 30% to the tune of Rs.55837567.78. This ground of appeal is allowed.”
5.3.4 Respectfully following the CIT(A)’s decision in the appellant’s case for A.Y. 2012-13, the disallowance of higher depreciation by the Assessing Officer on vehicles is deleted and the grounds raised by the appellant are allowed.
6. In effect, the appeal is Partly Allowed.”
The Department is in appeal before us against the aforesaid relief granted by Ld. CIT(Appeals).
6. At the outset, the Counsel for the assessee submitted that the case of the assessee is directly covered in its favour by the decision of ITAT in the assessee’s own case in wherein on identical set of facts the ITAT has decided the issue in favour of the assessee. It would be useful to reproduce the relevant extracts of the decision of ITAT in the case of ACIT v. Ravji Manji Sorathia in ITA No. 344/Rajkot/2016 vide order dated 24.03.2022, in which the ITAT
ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 5 - decided this issue in favour of the assessee, with the following observations:
“6. We have gone through the relevant record and impugned order and heard both the parties. Undisputedly, assessee is in the business of civil contract and sub-contract of road work, over burden removal and mining work. The learned AO himself has mentioned above the said in his assessment order. Undisputedly, assessee is in the business of transportation; loading, unloading of the mined/ excavated/ over-burdened waste rock from the mine to the separate demarcated specific areas. In support of its contention, the assessee has filed the letter of intent from Bridge & Roof Co. India Ltd., wherein nature of contract has been defined as ‘providing & supplying of potable water required and also submitted a letter from M/s. Mundra Port & special Economic Zone wherein contract was given to the assessee for transportation. Assessee has also submitted audit report to emphasize that Form No.3CD clearly declared the nature of his business. Assessee has also filed ledger accounts for freight charges and transportation charges before the lower authorities. In similar facts and circumstances, Hon’ble Gujarat High Court in case of PCIT vs. Durga Construction Co. [2018] 93 taxmann.com 436 (Gujarat) has granted relief to the assessee and dismissed the Revenue’s appeals by observing as under:
ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 6 - “5. The assessee has been awarded contract for providing equipments on hire with manpower to execute the work of excavation, loading and removal of minerals from one place to another. The entire operation is scheduled and controlled by the principal. The assessee is required to provide stipulated equipments and vehicles on hire. The assessee would not be allowed to remove any equipments or vehicles provided under the contract without prior permission of the principal. I he business of the assessee-firm itself was providing equipments and motor vehicles on hire.
CIT[A] accepted the assessee's contention and reversed the decision of Assessing Officer, relying oil the earlier decision. The Appellate Commissioner has also relied on CBDT Circular No. 652 which provides that under sub-item 2[ii] of Item III of Appendix I to the Rules, higher rate of depreciation would be admissible on motor buses, motor lorries and motor taxis used in the business of running them on hire. It was clarified that higher depreciation will also be admissible on motor lorries used in the assessee’s business of transportation of goods on hire.
7. The revenue carried the matter in appeal before the Tribunal. The Tribunal confirmed the view of the CIT [A] taking note of the scope of work awarded to the assessee under the tender terms as also placing reliance on the CBDT Circular No. 652 dated 14th June 1993.
ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 7 -
Against such judgment, the Revenue has filed the present appeal.
Facts in all other appeals are substantially similar and are therefore not separately recorded.
Section 32 [1] of the Income-tax Act, 1961 [“the Act” for brevity] provides for depreciation in respect of buildings, machinery, plant or furniture, being tangible assets as well as certain intangible assets owned wholly or partly by the assessee and used for the purpose of the business or profession, at the prescribed rates. New Appendix I, which is applicable for Asst. Year 2006-2007 and onwards, in Part-A contends specific rate of depreciation for “tangible assets”. Capital-Ill thereof pertains to “machinery and plant” Under sub-item [2] of Item [3] (iii), the rate of depreciation on “motor buses, motor lorries and motor taxis used in the business of running them on hire” is prescribed @ 30%. It is in this context we have to test the correctness of the view taken by CIT [A] and the Tribunal. Revenue’s main contention appears to be that the assessee had not given the said machinery on hire since the assessee was awarded the contract for mining. However, we have noticed some of the leading terms of the tender. These terms inter alia required the assessee to provide machinery for hire for excavation of overburden; transportation of such excavated overburden minerals; transportation of minerals
ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 8 - from mines to pit-head, stock piles or at any other place, and the transportation of overburden of minerals and excavated minerals to be done by running motor vehicles such as tippers, dumpers etc. Essentially, therefore, the assessee was awarded contract for providing such equipments on hire. It was in this context, the assessee has highlighted that the assessee has no control over the equipments so hired and it was the principal which would decide to deploy the equipments at the appropriate place.
From the material available on record though the assessee essentially was awarded contract for providing specialized equipments and trained manpower for mining and transportation of excavated minerals on hire, the terms of the tender and the eventual contract awarded would suggest that the assessee was given the work of mining. The assessee was essentially required to provide equipments and manpower on hire. In view of such discussion, we find no error in the view taken by the Tribunal. Even if the assessee had used such equipments and manpower for its direct mining operations for the contract, if it was so awarded, we wonder whether that would make any difference particularly in view of CBDT Circulars No. 609 and 652 and the decision of the Supreme Court in case of I.C.D.S. Ltd. v. CIT [2013] 350 1TR 527/212 Taxman 550/29 taxmann.com 129. However, when this issue does not arise for direct consideration, we need not conclude the same.
ACIT vs. M/s. Ravji Manji Sorathia & Co. Asst.Year –2011-12 - 9 -
All in all, we see no error in the view taken by the Tribunal. No question of law arises.
Tax Appeals are dismissed.”
In view of above, respectfully following the Hon’ble Jurisdictional High Court’s judgment, we dismiss the appeal of the Revenue.”
Since the ITAT, Rajkot in assessee’s own case decided the issue in favour of the assessee on the same before us, respectfully following the decision rendered by ITAT in assessee’s own case for A.Y. 2012-13, the issue is hereby decided in favour of the assessee.
In the result, the appeal of the Revenue is dismissed. This Order pronounced in Open Court on 23/08/2023
Sd/- Sd/- (WASEEM AHMED) (SIDDHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 23/08/2023 TANMAY, Sr. PS TRUE COPY आदेश क� ��त�ल�प अ�े�षत/Copy of the Order forwarded to : 1. अपीलाथ� / The Appellant 2. ��यथ� / The Respondent. 3. संबं�धत आयकर आयु�त / Concerned CIT 4. आयकर आयु�त(अपील) / The CIT(A)- 5. �वभागीय ��त�न�ध, आयकर अपील�य अ�धकरण, राजोकट / DR, ITAT, Rajkot 6. गाड� फाईल / Guard file. आदेशानुसार/ BY ORDER,