THE ACIT, CIRCLE-5, BARODA vs. SHRI MUKESH M.PATEL, BARODA

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ITA 2221/AHD/2014Status: DisposedITAT Ahmedabad19 May 2017AY 2008-094 pages
AI SummaryDismissed

What did the Tribunal hold?

The CIT(A) allowed depreciation at 30% by relying on a CBDT circular and a Bombay High Court decision, stating that using vehicles for one's own business of transportation of goods on hire qualifies for the higher rate. The Tribunal upheld this decision.

What were the facts?

The assessee claimed depreciation at 30% on vehicles used for collecting and transporting waste on hire for the Vadodara Municipal Corporation. The Assessing Officer disallowed the excess depreciation, allowing only 15% as the assessee was not in the business of hiring out vehicles.

What were the issues?

Whether higher depreciation at 30% is admissible on motor lorries used in the business of transportation of goods on hire, even if the vehicles are used for the assessee's own business of transportation for others.

Which sections of the Income-tax Act were involved?

Section 32

AI-generated summary — verify with the full judgment below

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Income Tax Appellate Tribunal, AHMEDABAD “B” BENCH

Before: SHRI N.K. BILLAIYA & SHRI MAHAVIR PRASAD

For Appellant: Shri James Kurian, Sr. D.R

PER N.K. BILLAIYA, ACCOUNTANT MEMBER:

1.

This appeal by the Revenue is preferred against the order of the Ld. CIT(A)- V, Baroda dated 09.05.2014 pertaining to A.Y. 2008-09.

ITA No. 2221/Ahd/2014 2 . A.Y. 2008-09 2. The only grievance of the revenue is that the ld. CIT(A) erred in deleting the disallowance of Rs. 28,40,951/- made on account of excess depreciation claimed by claiming higher rate of depreciation @ 30% as against admissible rate of 15%.

3.

Assessee is in the business of collection of garbage and also engaged in trading activities of Spare parts and Hardware Chemicals. During the course of the scrutiny assessment proceedings, the A.O. noticed that the assessee has claimed depreciation @ 30%. The assessee was show caused to explain why depreciation should be allowed @ 30% and not 15% as the assessee is not engaged in the business of hiring and plying of vehicles. The assessee filed a detailed reply in support of its claim which did not find any favour with the A.O. who was of the firm belief that 30% is allowable only when assessee is carrying on the business of running motor buses, motor lorries and motor taxies on hire and not when vehicles are used for assessee’s own business. The A.O. accordingly recomputed the depreciation @ 15% and made a disallowance of Rs. 28,40,951/-.

4.

Assessee carried the matter before the ld. CIT(A) and strongly agitated the disallowance made by the A.O.

5.

After considering the facts and the submissions, the ld. CIT(A) observed that the assessee is engaged in collection and transportation of waste belonging to Vadodara Municipal Corporation on hire. Drawing support from the CBDT circular No. 652 dated 14.06.1993 and also from the

ITA No. 2221/Ahd/2014 3 . A.Y. 2008-09 decision of the Hon’ble High Court of Bombay in the case of S.C. Thakur & Brothers 322 ITR 463, the ld. CIT(A) came to the conclusion that business of running motor lorries on hire does not necessarily mean that motor lorries should be given on hire to other parties. Even, if the appellant is a transporter and is in the business of transportation of goods on hire for other persons, it also amounts to business of running motor lorries on hire and the higher rate of depreciation will be admissible. The ld. CIT(A) was convinced with the claim of higher rate of depreciation by the assessee and accordingly directed the A.O. to allow depreciation @ 30%.

6.

Aggrieved by this, the revenue is before us. The ld. D.R. strongly supported the findings of the A.O. None appeared on behalf of the assessee.

7.

We have carefully considered the orders of the authorities below. We find that the decision of the Hon’ble High Court of Bombay relied upon by the First Appellate Authority in the case of S.C. Thakur & Brothers (supra) squarely apply on the facts of the case. The relevant portion of decision of the Hon’ble High Court reads as under:- “In appeal the learned Tribunal relied on the Circular No.652 Dt.l4th June 1993 (1993) 112 CTR (St) 14) issued by the CBDT which reads as under:

"Subject: Sec.32 of the IT Act, 1961 Rate of depreciation on motor lorries used in the business of transportation of goods – Regarding

Under sub item 2(ii) of Item No. Ill of Appendix 1 to the IT Rules, 1962 higher rate of depreciation is admissible on motor buses, motor lorries and motor taxis used in a business of running them on hire. A question has been raised as to whether for deriving the benefit of higher depreciation, motor lorries must be hired out to

ITA No. 2221/Ahd/2014 4 . A.Y. 2008-09 some other person and whether the user of the same in the assessee's business of transportation of goods on hire would suffice.

2.

In Board's Circular No.609 dt. 29th July, 1991 (1992)96 CTR (St 233), it was clarified that whether a tour operator or travel agent using motor business or motor taxis owned by him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles. It is further clarified that higher depreciation will also be admissible on motor lorries used for the assessee's business of transportation of goods on hire. The higher rate of depreciation however, will not apply if the motor business, motor lorries etc. are used in some other non-hiring business of the assessee".

8.

There is no dispute that the assessee is collecting and transporting waste on hire for Vadodara Municipal Corporation. Therefore, it can be safely concluded that the vehicles are used by the assessee for his own business of collecting and transporting waste on hire or it can also be said that the assessee is using the vehicles on hire for Vadodara Municipal Corporation. Considering these facts in the light of the CBDT circular and the decision of the Hon’ble High Court (supra), we do not find any error or infirmity in the findings of the ld. CIT(A).

9.

Appeal filed by the Revenue is accordingly dismissed.

Order pronounced in Open Court on 19 - 05- 2017

Sd/- Sd/- (MAHAVIR PRASAD) (N. K. BILLAIYA) JUDICIAL MEMBER True Copy ACCOUNTANT MEMBER Ahmedabad: Dated 19 /05/2017

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