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2016 (6) TMI 1084 - ITAT PUNE

2016 (6) TMI 1084 - ITAT PUNE - TMI - Higher rate of depreciation on account of hiring of vehicles - rectification of mistake - AO reduced the depreciation from 30% to 15% by resorting to provisions of section 154 - Held that:- When an assessee receives hire charges/rental receipt on account of hiring of vehicles the issue relating to rate of depreciation is a debatable one. The Hon’ble Supreme Court in the case of Volkart Brothers and others (1971 (8) TMI 3 - SUPREME Court ) has held that a mis .....

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essee is entitled to higher rate of depreciation on account of hiring of vehicles, therefore, we are of the considered opinion that it is not a case for rectification u/s.154 of the I.T. Act. We, therefore, are of the considered opinion that the AO could not have reduced the depreciation from 30% to 15% by resorting to provisions of section 154 of the I.T. Act. The Ld. Counsel for the assessee also made a statement at the bar that in the subsequent year although the assessee has claimed such hig .....

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r dated 13-01-2014 of the CIT(A), Kolhapur relating to Assessment Year 2008-09. 2. Facts of the case, in brief, are that the assessee is a partnership firm engaged in the business of manufacturing of cement and concrete pipes and trading of cement and hiring of earth moving equipments. The assessee filed its return of income on 29-09-2008 declaring total income of ₹ 80,47,920/-. The AO completed the assessment u/s.143(3) on 28-12-2010 determining the total income at ₹ 1,48,03,630/-. .....

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claimed depreciation @30% on vehicles since the firm has earned income by giving vehicles on hire. It was submitted that as per the profit and loss account the assessee has received contract receipt of ₹ 10,51,87,040/- and motor car hire charges at ₹ 13,32,500/-. 3. However, the AO rejected the submission of the assessee on the ground that the rate of depreciation @30% applies only for motor taxies as per I.T. Rules, 1962. He accordingly made addition of ₹ 5,71,165/- being exce .....

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wever, the CIT(A) also was not satisfied with the explanation given by the assessee and dismissed the ground raised by the assessee by observing as under : 6. On going through the Note 6 of the Depreciation Schedule, I find that the commercial vehicle has been defined to include heavy goods vehicle, light motor vehicle etc. which shall have the meaning respectively assigned to them in section 2 of the Motor Vehicles Act, 1988. However, the commercial vehicles are the vehicles which are used for .....

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and reduced life. Therefore, higher rate of depreciation is necessary. The appellant s case does not fall into this category. Therefore, the assessing officer was justified in allowing depreciation @15%. The disallowance is sustained and the ground is rejected. 6. Aggrieved with such order of the CIT(A) the assessee is in appeal before us with the following grounds : The following grounds are taken without prejudice to each other- On facts and in law, 1] The learned CIT(A) erred in confirming t .....

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tion @ 30% on the said vehicles. 4] The learned CIT(A) failed to appreciate that the rectification order passed by the learned A.O. was not valid since there was no mistake apparent from record and accordingly, the addition made should have been deleted. 5] The learned CIT(A) ought to have appreciated that the issue involved regarding allowability of depreciation was a debatable issue and since two opinions were possible, the rectification order was invalid in law. 6] The appellant craves leave .....

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n has held that when assessee receives rental receipts on hiring of vehicles assessee is entitled to higher rate of depreciation @30%. He submitted that in that case also the assessee company was engaged in the business of undertaking contract work for road construction and trading in Ingergoll Rand products etc. In that case, the assessee had received rental receipts on account of hiring of the vehicles. The AO and the CIT(A) rejected the claim of higher depreciation. However, the Tribunal allo .....

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the asset should be used for the purpose of the assessee s business and the entry in the Appendix refers to the user it should be put to. Once it is accepted that the leasing out of the vehicles is one of the modes of doing business by the assessee and in fact the income from such leasing is treated as business income of the assessee, it would be clearly contradictory in terms to hold that the vehicles in question were not used wholly for the purpose of the assessee s business. 8. He submitted t .....

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s reported in 82 ITR 50 he submitted that the Hon ble Supreme Court in the said decision has held that a mistake apparent on the record must be an obvious and patent mistake and not something which can be established by a long drawn process of reasoning on points on which there may be conceivably two opinions. A decision on a debatable point of law is not a mistake apparent from the record. He accordingly submitted that the 154 proceedings initiated by the AO is illegal and no addition can be ma .....

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of manufacturing of cement and concrete pipes and trading of cement and hiring of earth moving equipments. It is not the business of the assessee to hire motor cars. Therefore, the AO was fully justified in rectifying the assessment by reducing higher depreciation claimed by the assessee. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee be dismissed. 11. We have considered the rival arguments made by both the sides, perused the orders of the .....

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hich was allowed by the AO in the order passed u/s.143(3). Subsequently, the AO passed an order u/s.154 on 19- 03-2012 revising the depreciation of motor cars at 15% on the ground that the assessee is not entitled to depreciation @30%. In appeal the Ld.CIT(A) upheld the disallowance made by the AO in the order passed u/s.154 of the I.T. Act. It is the submission of the Ld. Counsel for the assessee that whether the assessee is entitled to higher rate of depreciation on motor cars which were given .....

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ion @30%. In that case, the assessee company was engaged in the business of undertaking contract work for road construction and also trading in Ingergoll Rand products etc. It had received contract receipts as well as receipt on account of hiring of the vehicles. The AO rejected the higher claim of depreciation of 30% and allowed depreciation of 15% which was upheld by the CIT(A). On further appeal the Tribunal set aside the order of the CIT(A) and directed the AO to allow depreciation @30% on t .....

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