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Income Tax Appellate Tribunal, RAJKOT BENCH, RAJKOT
Before: Smt. Annapurna Gupta & Shri T.R. Senthil Kumar
The Dy. Commissioner M/s. P C Patel & Co. of Income Tax, 1st Floor, Bhoomi Gandhidham Circle, Vs Complex, Mundra Gandhidham Road, Plot No. 4, S. No. 242, Alya Nagar, (Appellant) Bhuj-Kutch PAN No: AACFP5417A (Respondent) Assessee Represented: None Revenue Represented: Shri Shramdeep Sinha, CIT-DR Date of hearing : 18-07-2023 Date of pronouncement : 21-07-2023 आदेश/ORDER PER : T.R. SENTHIL KUMAR, JUDICIAL MEMBER:-
This appeal is filed by the Revenue as against the Appellate order dated 13.11.2019 passed by the Commissioner of Income Tax (Appeals)-3, Rajkot arising out of the assessment order passed under section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as ‘the Act’) relating to the Assessment Year (A.Y) 2015- 16.
Page No 2 DCIT Vs. M/s. P C Patel & Co.
The brief facts of the case is that the assessee is a Partnership Firm engaged in the business of Earth Moving Equipments on hire basis and Mining Contractor, Cargo Handlers and Transporters. For the Assessment Year 2015-16, the assessee filed its original Return of Income on 30-09-2015 declaring total income of Rs.17,16,53,528/-. The case was selected for scrutiny assessment and made disallowance of Rs. 10,00,000/- on various expenses claimed by the assessee and also disallowed higher rate of depreciation on Dumper, Tipper etc. @ 30% instead of 15% of depreciation.
Aggrieved against the same, the assessee filed an appeal before Commissioner of Income Tax (Appeals). The Ld. CIT(A) allowed the benefit of higher rate of depreciation @ 30% by following the judgment of the Gujarat High Court in assessee’s own case for the earlier assessment years 2011-12 to 2013-14.
Aggrieved against the same, the Revenue is in appeal before us raising the following Grounds of Appeal: A. The Ld.CIT(A) has erred on facts and in law in defining the nature of business of the assessee as transporter and in holding that the assessee is entitled to higher rate of depreciation @30% on dumpers as against depreciation @15% allowed by the AO. B. The Ld.CIT(A) has erred on facts and in law to appreciate that if the vehicle/dumpers were given on hire, then the assessee must have earned income from hiring out of the these equipment. C. In the alternative and without prejudice to above, the Id.CIT(A) has also failed to appreciate that if the assessee has taken the equipment on hire, then there would be no question of claiming depreciation thereon. It is therefore, prayed that the order of Ld. CIT(A) be set aside and that of AO be restored to the above extent.
Page No 3 DCIT Vs. M/s. P C Patel & Co.
4.1. None appeared on behalf of the assessee in spite of service of notices.
Ld. CIT-D.R. Shri Shramdeep Sinha appearing for the Revenue fairly admitted that the issue of higher rate of depreciation is squarely covered against the Revenue in assessee’s own case for the earlier assessment years. Respectfully following the same, the appeal is to be decided against the Revenue.
We have given our thoughtful consideration and perused the materials available on record. The Hon’ble High Court of Gujarat in assessee’s own case in Tax Appeal Nos. 418, 420 & 421 of 2018 dated 01-05-2018 for the Assessment Years 2011-12 to 2013-14 held as follows: “….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. The 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 on 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. 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. Against such judgment, the Revenue has filed the present appeal.
Page No 4 DCIT Vs. M/s. P C Patel & Co.
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 AY 2006- 2007 and onwards, in Part-A contends specific rate of depreciation for “tangible assets”. Capital-III 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 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 Limited v. Commissioner of Income-Tax & Anr., reported in [2013] 350 ITR 527 (SC). However, when this issue does not arise for direct consideration, we need not conclude the same. All in all, we see no error in the view taken by the Tribunal. No question of law arises. Tax Appeals are dismissed.”
Page No 5 DCIT Vs. M/s. P C Patel & Co.
6.1. Respectfully following the judgment of the Hon’ble High Court, we have no hesitation in allowing the benefit of higher rate of depreciation @ 30% on Dumper, Tipper etc. to the assessee Thus the grounds raised by the Revenue is devoid of merits.
In the result, the appeal filed by the Revenue is hereby dismissed.
Order pronounced in the open court on 21-07-2023 Sd/- Sd/- (ANNAPURNA GUPTA) (T.R. SENTHIL KUMAR) ACCOUNTANT MEMBER True Copy JUDICIAL MEMBER Ahmedabad : Dated 21/07/2023 आदेश क� ��त�ल�प अ�े�षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order/आदेश से,
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