2024 (5) TMI 1530 - AT - Income Tax

Disallowance on higher depreciation on plant and machinery tippers - assessment was finalized upon restricting the disallowance @15% instead of higher rate @ 30% - HELD THAT - As it is evident from the records before us and the orders passed by the authorities below which had not been able to be controverted by the Ld. DR that the assessee engaged in the activities of excavation of over burden mining of minerals transportation of such excavated over burden material excavation of minerals transportation of minerals from mines to Pit head and transportation of minerals from Pit head to Lignite handling system/power plant where the motor lorries used for the transportation of goods on hire. The condition under the zone of consideration for claiming higher rate of depreciation at 30% on dumpers and tippers have been fulfilled by the assessee and therefore having regard to the entire aspect of the matter i.e. the business activities of the assessee qua the claim of the assessee particularly when the fact of composite contract awarded to the assessee of mining and transportation has not been able to be controverted by the Ld. DR. We do not find any reason to interfere with the order passed by the Ld. CIT (A) in granting relief by deleting the addition made by the Ld. AO by restricting the depreciation at 15% against the claim of depreciation at 30% on the dumpers and tippers used by the assessee. The same is found to be just and proper and therefore upheld. Disallowance being interest on delay in payment of statutory liabilities of TDS service tax VAT GST and entry tax - HELD THAT - We find that the judgment relied upon by CIT (A) in the case of Mahalaksmi Sugar Mill Company Ltd. 1980 (4) TMI 1 - SUPREME COURT decided the issue in favour of the assessee. However whether interest on service tax VAT interest GST interest and entry tax interest paid by the assessee is compensatory in nature or in the nature of penalty has to be examined by AO in the case in hand. This issue has also been considered by the Mumbai Bench in the case of Gini and Jony Ltd. in 2018 (8) TMI 1259 - ITAT MUMBAI In that view of the matter at the time of hearing of the instant appeal we have expressed our mind for setting aside the issue to the file of the Learned AO for verification of the same which has been agreed by both the parties.

2025 (3) TMI 718 - AT

1. ISSUES PRESENTED and CONSIDERED

The core legal questions considered in this judgment include:

Whether the assessee is entitled to claim a higher rate of depreciation at 30% on dumpers and tippers used in its business operations, specifically in the context of whether these vehicles are used for transportation of goods on hire.
Whether interest paid on delayed payment of statutory liabilities such as service tax, VAT, GST, and entry tax qualifies as a business expenditure deductible under Section 37(1) of the Income Tax Act, 1961.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Higher Rate of Depreciation on Dumpers and Tippers

Relevant Legal Framework and Precedents: The legal framework involves Section 32 of the Income Tax Act, which provides for depreciation allowances. Relevant precedents include decisions from the Supreme Court and various High Courts regarding the conditions under which higher depreciation rates apply, particularly for vehicles used in the business of transportation on hire.
Court's Interpretation and Reasoning: The Tribunal considered the assessee's argument that the dumpers and tippers were used for transporting goods belonging to third parties, thus qualifying for higher depreciation. The Tribunal relied on past judgments, including the Supreme Court's decision in CIT v. Gupta Global Exim (P.) Ltd., which emphasized the business of transportation as a key factor.
Key Evidence and Findings: The assessee demonstrated that its contracts involved transportation of materials not owned by it, thus supporting its claim of using vehicles for hire. The Tribunal noted that the assessee's business activities included transportation as a significant component.
Application of Law to Facts: The Tribunal found that the assessee's use of dumpers and tippers for transporting third-party goods met the criteria for higher depreciation. The Tribunal emphasized the nature of the contracts and the business activities as supporting evidence.
Treatment of Competing Arguments: The Tribunal rejected the Revenue's argument that the assessee's business was primarily mining, not transportation, and that the vehicles were not used exclusively for hire. The Tribunal found the Revenue's reliance on certain High Court decisions unpersuasive in light of the Supreme Court's precedent.
Conclusions: The Tribunal upheld the CIT(A)'s decision to allow higher depreciation, finding the assessee's claim consistent with legal standards and past judicial interpretations.

Issue 2: Deductibility of Interest on Delayed Statutory Payments

Relevant Legal Framework and Precedents: Section 37(1) of the Income Tax Act allows deductions for business expenditures not expressly covered by other sections, provided they are not capital or personal expenses and are not incurred for illegal purposes. The Tribunal considered precedents that distinguish between compensatory and penal interest.
Court's Interpretation and Reasoning: The Tribunal examined whether the interest paid by the assessee was compensatory or penal. It relied on the Supreme Court's decision in Mahalaxmi Sugar Mills Co. Ltd. v. CIT, which characterized certain interest payments as compensatory and thus deductible.
Key Evidence and Findings: The Tribunal noted that the assessee's interest payments were related to delays in statutory payments, which the assessee argued were compensatory. The Tribunal considered similar cases where such interest was deemed deductible.
Application of Law to Facts: The Tribunal directed the Assessing Officer to verify whether the interest payments were indeed compensatory. The Tribunal emphasized the need for a factual determination based on the nature of the payments.
Treatment of Competing Arguments: The Tribunal acknowledged the Revenue's position that interest on delayed payments could be penal, but it found the assessee's reliance on compensatory interest precedents compelling enough to warrant further examination.
Conclusions: The Tribunal remanded the issue to the Assessing Officer for further verification, allowing the appeal for statistical purposes. It upheld the CIT(A)'s decision to allow deductions for interest on service tax, VAT, GST, and entry tax while confirming the disallowance of interest on TDS as penal.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The condition under the zone of consideration for claiming higher rate of depreciation at 30% on dumpers and tippers have been fulfilled by the assessee."
Core Principles Established: The judgment reinforces the principle that higher depreciation rates apply when vehicles are used for transporting third-party goods on hire. It also clarifies the distinction between compensatory and penal interest for the purpose of deductibility under Section 37(1).
Final Determinations on Each Issue: The Tribunal dismissed the Revenue's appeal regarding the higher depreciation rate, affirming the CIT(A)'s decision. It remanded the issue of interest deductibility to the Assessing Officer for further review, allowing the appeal for statistical purposes.

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