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Income Tax Appellate Tribunal, KOLKATA BENCH ‘C’, KOLKATA
Before: Shri M. Balaganesh, A.M. & Shri S.S.Viswanethra Ravi, J.M.)
ORDER Per Shri S.S.Viswanethra Ravi, J.M. This appeal is preferred by the Revenue against the order dated 10.05.2012 passed by the CIT(Appeals)-VIII, Kolkata in Appeal No.258/CIT(A)-VIII/Kol/11-12 for the assessment year 2009-10 framed under section 143(3) of the I.T.Act.
The assessee has raised the following two grounds before us. “1. That under the facts and circumstances of the case, the Ld. CIT(Appeals) has erred in law as well as in facts in deleting the disallowance made by the A.O. towards excess depreciation claimed by the assessee company in respect of Tippers & Dumpers for assessee’s own business and not let out on hire. 2. That under the facts and circumstances of the case, the Ld. CIT(Appeals) has erred in law as well as in facts in deleting the disallowance made by the A.O. of Rs.98,32,370 towards demurrage charge and penalty charge (imposed by M/s. Repley & Company Ltd. Assessment Year: 2009-10 Steel authority of India Ltd.) respectively since these are penal in nature and under the Income tax Act, 1961 penalty of any sort is not an allowable expense.”
Brief facts of the case are that the assessee is a domestic company comprised stevedoring, cargo handling, hiring of equipments, custom clearance, logistics, mining and exports and during the year derived income from execution of jobs of handling contractors under the Central Coalfield and SAIL (government undertakings). During the course of assessment proceedings, it was observed by the AO that the assessee claimed depreciation at 30% on the block of assets i.e. tippers and dumpers. The A.R. claimed that the assessee is using the vehicles for its own business and transportation of goods on hire. The AO took a view that in terms of a circular no.652 dated 14.06.1993 issued by the C.B.D.T. which provides higher rate of depreciation only for motor buses and motor lorries. Thereby, he disallowed the depreciation at 30% but however restricted the depreciation at 15% treating the block assets of the assessee as plant and machinery.
3.1 Before the ld. CIT(A), the assessee contended that the vehicles were used by the assessee in two capacities i.e. transportation of goods for his own purpose and transportation of goods on hire. To be clear for clarity, the transportation of goods during the course of contract, work taken for purposes of transportation of certain products to various companies, the ld. CIT(A) considered the earlier orders passed for assessment year 2005-06 dated 11.04.2008, 2006-07 dated 26.06.2009 and for assessment year 2008-09 dated 24.11.2011, thereby while considering the above orders, the ld. CIT(A) directed the AO to allow depreciation at 30%.
M/s. Repley & Company Ltd. Assessment Year: 2009-10 3.2 Regarding the second ground, the assessee claimed an amount of Rs.98,32,370/- as expenses as the said amount was paid to SAIL on account of demurrage and punitive charges due to delay caused by railways. The AO disallowed the said expenses in view of the payments made in the nature of fine and penalty and opined not allowable with reference to provisions of the Act.
3.3 The ld. CIT(A) deleted the addition while considering the orders of his predecessors and also decision reported in [1980] 123 ITR 269 in the case of M/s. Kamal Jyoti Prasad –vs- CIT and [1986] 157 ITR 689 in the case of Mahalaxmi Sugar Mills Co. Ltd. –vs- CIT.
Though the batch of two appeals being filed by the Revenue, the ld. Counsel submitted that the first ground raised by the Revenue are covered by an order dated 10.01.2011 in of 2010 of the Hon’ble Jurisdictional High Court at Calcutta for assessment year 2006-07 wherein it held that the ITAT rightly held that the assessee was entitled to the benefit of circular no.652 dated 14.06.1993. The relevant portion of the above order is reproduced below.
“…. the assessee was entitled to the benefit because of the fact that the assessee was using the vehicles in both the capacities, that is to say, business for transportation of goods on hire as well as transportation of goods. It was also pointed out that in the past for the assessment years 2005- 2006 and 2004-2005, the learned C.I.T.(A) held that the assessee had the business of transportation of goods on hiere as well as transporting other goods and, as such, was entitled to higher rate of depreciation as per the said Circular No.652. It appears that the Revenue did not challenge those decisions.
We, therefore, find that in the facts of the present case, the learned Appellate Tribunal rightly held that the assessee was entitled to the benefit of Circular No.652. No M/s. Repley & Company Ltd. Assessment Year: 2009-10 substantial question of law being involved, we dismiss this appeal.”
4.1 Further, the ld. Counsel submitted that the Revenue did not prefer any appeal before the Apex Court and the ld. DR also conceded the same. Hence, the Judgment on ground no.1 of the Hon’ble Jurisdictional High Court at Calcutta has become final and binding on us. By respectfully following the judgment mentioned (supra), we confirm the order of the ld. CIT(A) regarding the ground no.1 and dismiss the ground no.1 against the Revenue.
The ld. Counsel also submitted in respect of ground no.2 that it is also covered by the order of this Tribunal from assessment years 1996- 97 by an order dated 29.05.2002 in of “B” bench, observation of which are reproduced hereinbelow:
“12. We have heard the rival submissions and gone through the orders of the authorities below. We find from the record that in the course of execution of its handling job, the appellant had not always been given adequate time for completing the job resulted in imposition of demurrages for detention of the wages by the Railway Authorities on the appellant’s principal agent M/s. Karamchand Thaper & Bros. Ltd. who in turn deduct the same from the gross bill of the appellant. The demurrages arose out of the contract entered into by the appellant in the ordinary course of its business and there was no element of infringement of any law in which penalty was liable to be imposed. Thus as per our considered view that the payment of demurrages was incidental business and its impact was to increase the cost to the assessee the goods handled. Moreover, the demurrage was not imposed on the appellant by the authority, but was imposed on its principal, who in turn made a deduction of the amount from appellant’s bill.”
5.1. The ld. Counsel submitted that the Revenue did not file any appeal before the Hon’ble High Court and no such order contrary to the M/s. Repley & Company Ltd. Assessment Year: 2009-10 view of “B” bench of the ITAT for the assessment year 1996-97 and for the assessment years subsequent to thereon which has been conceded by the ld. DR. Hence, the order of the “B” bench of ITAT, Kolkata has become final and we, respectfully following the said order, dismiss the ground no.2 of the Revenue and confirm the order of the ld. CIT(A).
In the result, the appeal filed by the Revenue is dismissed.
Order Pronounced in the Open Court on 4th December, 2015.