TMI Blog2020 (1) TMI 500X X X X Extracts X X X X X X X X Extracts X X X X ..... ARYANA HIGH COURT] . Therefore, taking into account the submission of the Counsel and relevant assessment records, the addition made by AO, on account of additional depreciation claim on higher rate, should be deleted. - Decided in favour of assessee Deemed dividend u/s.2(22)(e) - appellant company has received the loan of ₹ 29977000/- from Capital Tours India Pvt. Ltd. wherein also holds more than 25% of the shares in Capital Tours India Pvt. Ltd. - HELD THAT:- DR ails to rebut the clinching fact that the assessee has paid interest @ 9% to M/s Capital Tours India Pvt. Ltd., in commercial terms. This tribunal s co-ordinate bench s order in Smt. Sangita Jain vs. Income Tax Officer Ward-36(3) Kolkata [ 2016 (3) TMI 1202 - ITAT KOLKATA] holds that such an instance of commercial loans does not attract sec. 2(22)(e) - Decided against revenue Sundry balances written off / puja expenses addition - HELD THAT:- Assessee had originally claimed puja expenses only which stood treated as sundry balances written off. Be that as it may, there can hardly be any dispute that puja expense as incurred wholly and exclusively for the purpose of business since they relate to assessee s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessment order dated 31.03.2015. The assessee s depreciation claim was on its commercial depreciation @ 30% on hire and other vehicles which stood restricted to 15% only during the course of assessment. The CIT(A) s detailed discussion deleting the impugned depreciation disallowance reads as under:- Ground No.3 is regarding disallowance of depreciation at the rate of 30% to the extent of ₹ 8486809/- claimed by the appellant. The basic facts are that the assessee is carrying on the business of civil construction in the North Eastern region. The assessee is using vehicles like Tippers, Tractor etc. For construction work. The appellant has been using the tippers both for own work and for hire. On such vehicles the company has charged depreciation at the rate of 30%. However the Assessing Officer has allowed depreciation at the rate of 15% only. it has been argued that the issue is covered by the orders of my predecessors in AY 2007-08 and AY 2010-11. In the AY 2007-08 in appeal No.754/CIT(A)-16/Kol/2014-15/C- 15(1)/Kol order dated 20/07/2016 it has been held as under:- I have gone through the submissions of the AR I find that the AO is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hod of accounting has been followed by the AO in previous year and no doubt were raised by the AO even in scrutiny assessment. In this connection reference may be made to the decision of the Apex Court in CIT vs. Excel Industries 358 ITR 295, where the court reiterated that the principal of consistency should be followed. The AO could not bring any material on record, to dispute the appellant s claim, that the vehicles and other equipments were deployed in difficult areas and therefore, entitle tougher rate of depreciation. The Assessing Officer's contention, that the explanation given by the A/R of the appellant, is an afterthought, and that no hiring charges have bee received, is not supported by facts. The tippers used by the appellant in its business are registered under the Motor Vehicles Act, 1988. They met the functional test as the basis for grant of 30% depreciation, and also on the ground that the higher depreciation is on account of rigorous and hard use of commercial vehicles, in comparison to the stationery and permanently installed machinery. These views find support in the decision of the Punjab and Haryana High Court in the case of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is declared to be ₹ 3,25,93,616/- with additions for a period of 180 days or more to the tune of ₹ 32,78,346/- and deletion of ₹ 2,50,000/-. Apart from this, an amount of ₹ 4,22,77,628/- is declared as additions to the block for a period less than 180 days. In serial No. 12 and 13 of that Schedule, assessee clearly declared 'Additional depreciation , if any as Nil. Therefore, AO was of the view that that the assessee willfully misled the department by over claiming depreciation for the plant and machinery for which it is eligible to claim at the rate of 15%,depreciation only. In an exceptional nature of usage, it should mention the claim on the return itself by showing the amount of additional depreciation. The AO noted that in course of the assessment proceedings, the assessee came up with new claim of partial usage to show a part of its motor vehicles for hiring purpose to justify its claim of excess depreciation. 6. In response, the assessee submitted the written reply to the assessing officer as follows: .. the assessee company is carrying on business of civil construction and manufacturing of cons ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pted, as no specific income has been declared from hiring purchases. 10. We note that the assessee as per assessment records have been claiming depreciation @ 30% on vehicles used in their business on the grounds of them been deployed in difficult areas including North East. The assessee had made the same claim in assessment year 2009- 10, which was disallowed by the A.O. The CIT(A)-16, Kolkata had deleted the addition and allowed depreciation at higher rate in A.Y.2009-10. Thus, clearly shows that the assessee in past assessment orders, have also been claimed depreciation at higher rate. The contention of the A.O., that explanation given is an afterthought, which is offered only after discovery of excess depreciation by the department, is not correct, and not supported by the facts. Regarding hire charges, the Counsel for the assessee has submitted before us that the Assessing Officer had not asked for details of hire charges received against the tippers given on hire. Such details could have been provided if asked for. The Counsel of the assessee also submitted that the vehicles were given on hiring to person against whom the assessee received se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion. The A.O s contention, that the explanation given by the assessee, is an afterthought, and that no hiring charges have been received, is not supported by facts. The tippers used by the assessee in its business are registered under the Motor Vehicles Act, 1988. They met the functional test as the basis for grant of 30% depreciation, and also on the ground that the higher depreciation is on account of rigorous and hard use of commercial vehicles, in comparison to the stationery and permanently installed machinery. These views, find support in the decision of the Punjab Haryana High Court in the case of CIT vs. Rakesh Jain [2013] 350 ITR 230 (P J). Therefore, taking into account the submission of the Counsel and relevant assessment records, the addition of ₹ 85,17,966/-, made by AO, on account of additional depreciation claim on higher rate, should be deleted. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid addition. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue is dismissed . We adopt the judicial consistency in this backdrop of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rd Such loan has been taken as a consequence of any further consideration, which is beneficial to the company received from such a shareholder, in such a case, such advance or loan cannot be said to be a deemed dividend within the meaning of section 2(22)e of the Act. Our view finds support from the decision of the Hon'ble Jurisdictional High Court in the case, of Pradip Kumar Malhotrat (supra), which had been relied upon by the }d. CIT(A) in deleting the addition made by the At). The facts of such case [ in the case of Pradip Kumar Malhotra ] are reproduced herein below for die sake of convenience; - 338 ITR 538(Cal) in the case o(Pradip Kumar Malhotra The assesses had substantial shareholding in a company. He had mortgaged his valuable immovable property with the hank as a security for the loan facility enjoyed by that company. Consequently, the company passed a resolution authorising the assessee to obtain interest fixe deposit up to Rrs.50 lakhs as and when required from it When the assessee required funds for his personal needs, he requested the said company to purchase the said property or to release the same so that he could sell it to so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ] Consequently, the order of the Tribunal below was to be set aside directing the Assessing Officer not to treat the advance in question as a deemed dividend. [Para 14) 7.2 In view of the said decision of the Hon 'ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra), we find no infirmity in the impugned order of the Ld. CIT(A), who has rightly deleted the addition made by the AO. We uphold the same. Ground nos. 1 2 s of revenue's appeal are dismissed . It is observed that in the case of Zenon India (Supra) the loan was given at the rate of 9%.The Hon'ble Tribunal has held that since the loan has been taken on the basis of a commercial consideration which is beneficial to the company therefore such advance cannot be treated as deemed dividend within the amendment of section 2(22)(e). In the impugned case also the facts are similar and the loan carries an interest @ 9% per annum. Therefore, section 2(22)( e) would not apply. Respectfully following the decision in Zenon India (Supra) the .addition made by the Assessing Officer of ₹ 12247571/- is hereby deleted . 7. Learned department ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce given by a Company to those classes of shareholders thus would come within the purview of section 2(22)(e) but not the cases where the loan or advance is given in return to an advantage conferred upon the Company by such shareholder. In the case of ACIT -vs.- M/s. Zenon (India) Pvt. Limited, a loan taken by the assessee was treated by the Assessing Officer as deemed dividend under section 2(22)(e), but the Id. CIT(Appeals) did not approve the action of the Assessing Officer after having noticed that interest at the rate of 9% per annum was paid by the assessee on such loan, which, according to him, was a consideration received from her shareholders, which was beneficial to the Company and the order of the Id. CIT (Appeals) giving relief to the assessee was upheld by the Tribunal vide its order dated 29.06.2015 passed in ITA No. 1124/KOL/2012 by relying on the decision of the Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra). Keeping in view the said decision of the Hon'ble Calcutta High Court which has been followed by the Coordinate Bench of this Tribunal in the case of M/s. Zen on (India) Pvt. Limited (supra), we hold that the addition made by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ex Court the claim of sundry balances written off of ₹ 74164/- is hereby allowed . 9. The above detailed discussion makes it sufficiently clear that the assessee had originally claimed puja expenses only which stood treated as sundry balances written off. Be that as it may, there can hardly be any dispute that puja expense as incurred wholly and exclusively for the purpose of business since they relate to assessee s business sites in civil construction business. We further notice that the CIT(A) has rightly placed reliance on hon'ble apex court s decision in T.R.F. Ltd. vs. Commissioner of Income Tax (2010) 323 ITR 397 (SC) to hold that it is no more necessary as per the amended statutory provision w.e.f 01.04.1989 to prove that the corresponding sums have become actually irrecoverable. We thus conclude that the CIT(A) has rightly reversed the assessment findings on these twin counts of puja as well as sundry balance. The Revenue fails in its third substantive grievance as well. 10. Lastly comes sec. 14A disallowance of ₹2,99,698/- qua exempt dividend income of ₹17,060/-. We notice that the Assessing Officer had invoked Rule ..... X X X X Extracts X X X X X X X X Extracts X X X X
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