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IN THE INCOME TAX APPELLATE TRIBUNAL, SURAT BENCH, SURAT BEFORE SHRI PAWAN SINGH, JUDICIAL MEMBER AND DR. ARJUN LAL SAINI, ACCOUNTANT MEMBER ITA No.295/SRT/2019 (AY 2012-13) (Hearing in Virtual Court) The Assistant Commissioner Om Sai Metal, of Income Tax, Navsari. Vansda Road, Village-Alipore, Vs Tal-Chikhli, Navsari. PAN: AABFO 7092 H Appellant/ Revenue Respondent/ Assessee
Assessee by Shri Parimalsinh B. Parmar – Advocate Revenue by Mrs. Anupma Singla – Sr. DR 07/10/2021 Date of hearing 04/01/2022 Date of pronouncement Order under section 254(1) of Income Tax Act PER PAWAN SINGH, JUDICIAL MEMBER: 1. This appeal by Revenue is directed against the order of ld. Commissioner of Income Tax (Appeals)-Valsad, dated 28.03.2019 for Assessment Year (AY) 2012-13. The Revenue raised the following grounds of appeal: “(1) On the facts and in the circumstances of the case, the order of the Ld.CIT(A) is perverse as the Ld. CIT(A) erred in deleting the addition of Rs. 12,09,625/- made on account of disallowance out of excess depreciation claimed on trucks without appreciating the fact that assessee engaged in the business of stone quarry and as per I T Act, 1961, motor buses, motor lories and motor taxis used in the business of running them on hire are eligible for depreciation at higher rate of 30% and vehicle used other than that business are eligible for depreciation at ordinary rate of 15% only.
ITA No.295/SRT/2019 (AY 2012-13) Om Sai Metal, Navsari
(2) On the facts and in the circumstances of the case, the order of the Ld.CIT(A) is perverse as the Ld.CIT(A) erred in appreciating the fact that the assessee not eligible for higher rate of depreciating at when the trucks/motor lorries are primarily used in assessee’s own business, occasionally let out on hire.
(6) The appellant craves to add, modify or alter any grounds during the course of appeal proceedings.”
Brief facts of the case are that in this case initially the assessment was completed under section 143(3) on 29.12.2014. Thereafter, the case was reopened under section 147 of the Act. Notice under section 148 of the Act was issued to the assessee on 29.03.2017. The case was reopened by the Assessing Office r(AO) by taking view that on verification of record, it was found that assessee claimed depreciation of Rs24,19,250/- on trucks falling under block of asset ‘plant & machinery’ @ 30%. On further perusal of Profit and Loss Account, it was noted that assessee has shown income from Stone Quarry activity only and no income has been shown from renting/ hiring/ leasing activities of trucks. The trucks were wholly used for stone quarry business eligible for depreciation rate of 15%. On the basis of aforesaid observation, the AO was of the view that income to the extent of excess depreciation has escaped assessment. The AO after serving the reasons recorded and disposing off of objections against the said reopening proceeded for assessment. The AO during the reassessment issued show cause notice as 2
ITA No.295/SRT/2019 (AY 2012-13) Om Sai Metal, Navsari
to why the excess depreciation claimed on such asset should not be disallowed and added to the total income. 3. In response to the show cause notice, the assessee filed reply dated 16.08.2017. In the reply, the assessee stated that from the first year of purchase of these trucks, the assessee firm used them for trucks plying business, hence, they got categorised in block of 30%. In earlier years in F.Y. 2009-10 and 2010-11 they were purchased and subsequently and in the current year the same trucks have been used for the business of quarrying of the assessee’s firm. This year is not the first year of the assets acquired. These trucks were already existing in the block of assets, which qualified for 30%, since the point of time they were purchased. There is no mechanism available in law, through which one can segregate /carve out of particular block of 30%, unless these trucks are sold or discarded or scrapped. These trucks did not fall under any of the above exceptional situations. The assessee stated that they are entitled for full rate of depreciation i.e. @320%. The reply of assessee was not accepted by the AO by taking view that, the trucks on which the assessee claimed depreciation @30% were entirely used for the purpose of stone quarry business and not were engaged in the renting, hiring or leasing activities and eligible for depreciation at the prescribed rate of 15%. The assessee claimed depreciation of higher side @30% thereby revealing the
ITA No.295/SRT/2019 (AY 2012-13) Om Sai Metal, Navsari
taxable income to the extent of Rs.12,09,625/-, accordingly, the AO disallowed the 15% of depreciation, thereby made addition of Rs.12,09,625/- . In the assessment order passed under section 143(3) r.w.s 147 of the Act. 4. On appeal before the ld.CIT(A), the assessee again furnished the detailed written submission has filed before the AO. The submissions of assessee are recorded in para 3.2 of his order. The assessee also relied on certain case laws. The ld.CIT(A), after considering the submission of assessee held that in reply to the show cause of AO, the assesse contended that it was earning income from truck hiring/lease income in F.Y. 2009-10 and 2010-11 due to which the trucks were existing block of asset qualified for 30% deduction. In the current assessment year, the assessee had no income from truck hire lease business to block of assets under 30% depreciation rate cannot be changed to block of asset with 15% depreciation rate. It was contended that there was no proviso in law to pull out the truck from block of asset from 30% depreciation rate “block of asset” with 15% depreciation rate, which the AO did not accept by taking view that higher rate of depreciation @30% was eligible for trucks used for hiring purpose only and in the current year the assessee has shown any income from hiring or lease of truck. The assessee again during the appellate proceedings reiterated the same submission. The ld.CIT(A) held that the decision of Hon’ble Delhi High Court in CIT vs. Oswal Agro Mills 357 ITR
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467 supports the submission of assessee wherein it was held that the individual assets entry “block of asset” become inseparable part of block and loose its individual identity and disregarding the fact the individual assets had not been used, the benefit of depreciation was allowable on entire block of asset. The ld.CIT(A) also referred the decision of Kolkata Tribunal in Hindustan Engineering and Industries reported in [90 taxmann.com 230] wherein it was held that depreciation was to be allowed on block of asset and revenue could not segregate the particular product, therefore, on the ground it was not put to use. In case of assessee, the assessee submitted that truck income was shown in subsequent assessment year and on the said basis it was submitted that Assessing Officer(AO) could not disallow the depreciation. The ld.CIT(A) held that trucks were part of asset with 30% depreciation as income from truck hire/lease was earned in F.Y. 2008-09 and F.Y,.2009-10. For this year, merely passive use of block of asset for the purpose of eligibility of claim of depreciation is concerned, the trucks were used by assessee it its stone quarry business. Thus, assessee is eligible for full depreciation for passive use of asset and accepted the appeal of assessee. Aggrieved by the order of ld.CIT(A), the Revenue has filed the present appeal before this Tribunal. 5. We have heard the submission of ld.Sr.Departmetnal Representative (ld.Sr.DR) for the Revenue and ld. Authorised Representative(ld.AR) for the
ITA No.295/SRT/2019 (AY 2012-13) Om Sai Metal, Navsari
Assessee and have gone through the orders of Lower Authorities carefully. On perusal of grounds of appeal, we found that tax effect involved in the present appeal is less than the monetary limit of Rs.50 lakhs as determined by CBDT in its circular 17/2019 dated 08.08.2019. The ld.Sr.DR for the Revenue submits that since the case of assessee was reopened on the basis of audit objection, therefore, the case falls under para 10c of CBDT Circular No.3/2018 dated 11.07.2018. We instead of going to the controversy, whether case is covered by clause ‘c’ of para 10 of CBDT Circular No.3/2018, proceeded for adjudicating the appeal on merit. The ld.Sr.DR for the Revenue submits that for the year under consideration the assessee has not shown any income from hire of lease of trucks, though the assessee claimed depreciation @30%. In absence of income from hire or leasing out of trucks, the assessee is eligible for depreciation @15% only. The ld.CIT(A) allowed relief to the assessee, despite recording that no income from leasing of trucks were shown by assessee. 6. On the other hand, the ld.AR of the assessee supported the order of ld.CIT(A). The ld.AR of the assessee submits that once the asset entered the block of asset, it loose its individual identity. Even on subsequently, if something happens to the individual asset, the assessee nevertheless is eligible for depreciation in respect of block of asset. As per the decision of Hon’ble
ITA No.295/SRT/2019 (AY 2012-13) Om Sai Metal, Navsari
Jurisdictional High Court in case of Deepak Nitrite Ltd. vs. DCIT in Tax Appeal No.429 of 2017 dated 18.12.2014. The ld.AR further submits that in earlier years the trucks were qualified for disallowance @30% and there is no mechanism available in law through which one can segregate out of that particular block of 30%, unless trucks are sold or discarded. The ld.AR submits that ld.CIT(A) after appreciating the facts of the case rightly appreciated that for current year mere passive use of block of asset, the assessee is eligible for depreciation and cannot be put to disadvantage. To support his submission, the ld.AR of the assessee relied upon the decision of Hon’ble High Court in Deepak Nitrate Ltd.(supra) and decision of Ahmedabad Tribunal in Navkar Shares & Stock Broker Pvt. Ltd., vs. ACIT in ITA No.1823/Ahd/2011 dated 28.03.2017. 7. We have considered the rival submission of the parties and have gone through the orders of authorities below. We find that the AO made disallowance of additional depreciation by taking view that during this year, these trucks were wholly used by assessee for its business and were eligible for depreciation at normal rate, thereby allowed depreciation @15% against the claim of depreciation 30% claimed by assessee. The ld.CIT(A), allowed relief to the assessee by relying on the decision of Hon’ble Delhi High Court in CIT vs. Oswal Agro Mills (supra), wherein it was held that the individual assets entry
ITA No.295/SRT/2019 (AY 2012-13) Om Sai Metal, Navsari
“block of asset” become inseparable part of block and loose its individual identity and disregarding the fact the individual assets had not been used, the benefit of depreciation was allowable on entire block of asset. The ld.CIT(A) also relied on the decision of Kolkata Tribunal in Hindustan Engineering and Industries(supra) wherein it was held that depreciation was to be allowed on block of asset and revenue could not segregate the particular product, therefore, on the ground it was not put to use. The ld.CIT(A) further held that these trucks were part of block of asset, qualified for 30% depreciation. Further, as income from truck hire/lease was earned in F.Y. 2008-09 and F.Y,.2009-10, in this year, merely passive use of block of asset for the purpose of eligibility of claim of depreciation is concerned, the trucks were used by assessee it its stone quarry business. And the assessee is eligible for similar depreciation for passive use of asset. The Co-ordinate Bench of Tribunal in Navkar Share and Stock Brokers Pvt. Ltd. vs. ACIT (supra) while referring the decision of Jurisdictional High Court in Deepak Nitrite Ltd. vs. DCIT (supra) held that it is settled legal position that, once an asset enters the block of asset, it looses its individual identity. Subsequently, even if something happens to individual assets, the assessee is nevertheless eligible for depreciation in respect of that block of asset. Thus, in view of aforesaid factual and legal discussion and respectfully following the aforesaid decision,
ITA No.295/SRT/2019 (AY 2012-13) Om Sai Metal, Navsari
we affirm the order of ld.CIT(A). In the result, grounds of appeal raised by the Revenue are dismissed. 8. In the result, appeal of the Revenue is dismissed. Order announced on 04 January, 2022 in open court by placing result on the notice board.
Sd/- Sd/- (Dr ARJUN LAL SAINI) (PAWAN SINGH) ACCOUNTANT MEMBER JUDICIAL MEMBER Surat, Dated: 04/01/2022 /SGR* Copy to: 1. Appellant 2. Respondent 3. CIT(A) 4. CIT 5. DR 6. Guard File By order / / TRUE COPY / / Sr.Pvt. Secretary, ITAT, Surat