TMI Blog2014 (1) TMI 744X X X X Extracts X X X X X X X X Extracts X X X X ..... yment has been made for the purchase of building material which included the cost of transportation upto the site of the assessee – Thus, the payment made for purchase of material including the transportation cost would not fall under the category of payment to contractor or sub-contractor - the payment made by the assessee will not be hit by the provisions of Section 40 (a)(ia) of the Act. Deletion on account of remission or cessation of liabilities u/s 41 (1) of the Act – Held that:- The assessee has not written back the liabilities nor have the parties forgone their claims – Thus, no benefit has been derived by the assessee - the assessee has made payment to the parties in the year under consideration by way of cash, the payments made to outstanding creditors cannot be treated as income u/s 41(1) of the Act – the assessee had not derived any benefit as the assessee had paid off the liability in the year under consideration - There was no remission or cessation of liability - The AO had not collected any material on record to show that the parties to whom the payments were shown to have been made by the assessee had written off the amounts in the year under consideration - the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... espectively. The AO allowed depreciation on these assets @ 25% on the ground that these vehicles were not transport vehicles as per Motor Vehicle Act and Motor Vehicle Rules. In Assessment year 2006-07, the assessee claimed depreciation on JCB @ 30%. The AO allowed depreciation @ 15%. 3. Before CIT (A), it was submitted that the tippers, road rollers and JCB are covered in Block VII, sub-head motor truck under the main head Plant and Machinery for the purpose of depreciation. During the relevant assessment years the assessee carried on the business of running them on hire which itself constituted the business of the assessee and the hire income was also assessed under the head business . It was also submitted that the above assets are taken with construction equipment vehicle under Motor Vehicle Act, 1939, hence, for the purpose of depreciation all above assets are covered under sub-head Motor vehicles. Therefore, depreciation applicable to motor lorries was- applicable to above assets for computing income of the assessee. Ld. CIT (A) considered the submissions made by the assessee and allowed the depreciation @ 40% by observing as under:- 14. Decision: I h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles. Section 2 (28) of the Motor Vehicles Act, 1988 defines the term motor vehicle or vehicle as under: Motor vehicle or vehicle means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or only in a factory or in any other enclosed premises or a vehicle having less than four wheels internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use fitted with engine capacity of not exceeding twenty-five cubic centimeters. 7. Section 2(16) of the Motor Vehicles Act, 1988 defines the term heavy goods vehicle and means any goods carriage the gross vehicle weight of which, or a tractor or a road-roller the unladen weight of either of which, exceeds 12,000 kilograms. Therefore, a road roller is heavy goods vehicle as per Motor Vehicles Act, 1988. The tippers, road rollers and JCBs are not vehicles running on fixed rails or adapted for use only in a factory or in an enclosed premises. The tippers, dumpers, JCBs are adapted for use upon roads and have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contents. Under these circumstances Hon ble Gauhati High Court held that 30% depreciation was allowable in case of dumpers. Hon ble Gujarat High Court in the case of CIT vs. Shiv Constructions 165 ITR 159 (Guj) held that dumpers are road transport vehicles and will not be entitled for development rebate u/s 33A of the Income-tax Act. Hon ble High Court denied the benefit of development rebate on the ground that the dumpers by their use could not be treated as plant and machinery. In the case of the assessee the road roller and JCB have been used by the assessee in hiring business for the purposes of compaction of roads and excavation, the receipts there from have been treated as business income. Since these machineries fall under the category of motor vehicles under Motor Vehicle Act, 1939 and Central Motor Vehicle Rules, the assessee will be eligible for depreciation at higher rate. 10. Hon ble Gujarat high Court in Gujco Carriers v CIT 92002) 122 Taxman 206 has held that lorry or truck would mean not only any motor vehicle designed to carry freight or goods but also to perform special services like fire fighting. Fire engine, also called fire-truck, is a self propelled mob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... through known transporters of the area where work was executed or from Udaipur. In fact, these payments were made for transportation of building material to various truck/tanker/tractor owners. These payments were made for convenience of business through the listed transport owners, so that payment could have reached the correct service provider. It was also submitted that payments to single party were below Rs. 50,000/-. Therefore, the assessee had not deducted tax at source at the time of payment. It was also submitted that there was no amount paid to a contractor or a sub-contractor for carrying out any work which was debited to transportation expense account. Therefore, the provisions of Section 40 (a)(ia) were not applicable at all in the case of the assessee. The AO considered the explanation of the assessee and held that as per provisions of Section 40 (a)(ia) any amount payable to a contractor or a subcontractor being recipient, for carrying out any work including supply of labour for carrying out any work on which tax is deductible at source under Chapter XVIIB and such tax has not been deducted shall not been allowed in computing income chargeable under the head Profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Section. Section 194C was amended by the Finance Act, 1995 with effect from 1-7-1995. Explanation III was inserted and reads as under : Explanation III. For the purposes of this section, the expression work shall also include : (a) ** ** ** (b) ** ** ** (c) carriage of goods and passengers by any mode of transport other than by railways; 15. Hon ble Supreme Court in Birla Cement Works v CBDT[2001] 115 TAXMAN 359 (SC) has held that the key words in section 194C are carrying out any work . It was argued by the learned counsel for the assessee that a word or collection of words should fit into the structure of the sentence in which the word is used or collection of words formed. The contention was that in the context of section 194C, carrying out any work indicated doing something to conduct the work to completion or something which produced such result. The mere transportation of goods by a carrier would not affect the goods carried thereby. The submission was that by carrying the goods, no work to the goods was undertaken and the context in which the expression carrying out any work has been used makes it evident that it does not include in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor or a sub-contractor being recipient for carrying out any work including supply of labour on which tax is deductible at source under Chapter XVIIB and such tax has not been deducted or after deduction has not been paid within the specified time, the amount will not be allowed as deduction. In the case before us, the assessee had not made payment to a contractor or a subcontractor. The payment has been made for the purchase of building material which included the cost of transportation upto the site of the assessee. Therefore, the payment made for purchase of material including the transportation cost would not fall under the category of payment to contractor or sub-contractor. Therefore, the payment made by the assessee will not be hit by the provisions of Section 40 (a)(ia) of the Act. Accordingly, in our considered opinion, ld. CIT (A) has rightly deleted the addition. 17. The next issue for consideration in assessment year 2005-06 relate to deletion of addition of Rs.8,18,661/- on account of remission or cessation of liability u/s 41(1) of the Act. The AO from the list of sundry creditors noted that party-wise details were not filed by the assessee during the year unde ..... X X X X Extracts X X X X X X X X Extracts X X X X
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