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2016 (7) TMI 904

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..... the present case, was proper and calls for no interference. Depreciation in respect of the Oil Tanker - Held that:- CIT(A) has proceeded on the basis that the Hindustan Petroleum Corporation Ltd has to give permission for use of the oil tanker by the assessee for transporting petroleum products and since such permission was not given, it cannot be said that the tanker was kept ready for use. In our view this conclusion of the CIT(A) cannot be sustained. The circumstances viz., absence of permission of HPCL, can at best lead to the conclusion that the assessee was unable to persuade Hindustan Petroleum Corporation Ltd., to give permission for use of the oil tanker for transporting petroleum products. It cannot however be said that the oil tanker was not kept ready to put to use. There was no impediment for use of the oil tanker for transporting petroleum products and this fact is not disputed by the revenue. In the given facts and circumstances of the case we are of the view that the assessee has successfully established that the vehicle in question was ready for use though it was not actually put to use. We therefore are of the view that the claim of the assesee for deduction .....

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..... cluded with purchases. If those two figures were deducted, the purchase figure would stand reconciled. The Assessee claimed that the increase in purchases shown is neutralized by corresponding reduction in the value of closing stock and therefore there would be no effect on the profit shown by the Assessee. 5. The AO however did not accept the stand taken by the Assessee. He held that the Assessee failed to properly reconcile the figures in the purchase account. The following were his findings: (5.1)The assessee's explanation is not tenable. In submission dated 23/11/2011 (received in this Office on 28/11/2011), it was mentioned that purchase amount was inadvertently inflated by misposting of an invoice dated 03/10/2008 in Oil account by ₹ 4,20,818.91; whereas repayment of working capital of ₹ 1,17,454/- (Rs.18,586/- on 18/03/2009, 40,000/- on 18/03/2009, 40,000/- on 27/03/2009 and ₹ 18,868/- on 27/03/2009) were wrongly included in purchases. From the copy of purchase register, submitted by the assessee in course of assessment proceedings, the total purchase figure of oil arrives at ₹ 25,42,14,840/-. By way of misposting of ₹ 5,38,272/-, t .....

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..... icants Total 26,27,92 582.19 Total 26,27,92,582.19 Therefore, either way it is looked into, difference of ₹ 5,38,272/- persists and as such the assessee is not immune of inflated purchase figure. The gross profit is directly hit by such reduction in purchase. Under the circumstance the difference of ₹ 5,38,272/- is treated as bogus purchase and accordingly is added back to the total income. 6. Before CIT(A) the assessee reiterated the submissions that were made before the AO. CIT(A) however confirmed the order of AO by observing as follows :- 3.2. I have carefully considered the submission made. The appellant has stated that if there is excess debit of purchase, closing stock would automatically go up by the same amount. However, this is true only in case where complete quantity records are' maintained in respect of purchase, sales and stock and the same are meticulously tallied. On the other hand, if complete quantity records are not maintained, there is every possibility that any excess debit of purchase may not be reflected in th .....

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..... nference of suppression of income. Even before us no fresh material is brought to our notice to either dislodge the findings of CIT(A) or to come to a conclusion contrary to the one reached by CIT(A). We therefore dismiss ground No.1 raised by the assessee. 10. Ground Nos. 2,3,4 and 5 raised by the assessee and additional ground raised by the assessee read as follows :- II That the Ld. CIT(A) is wrong to reject the claim for Depreciation in respect of the Oil Tanker acquired this year and after performing all necessary formalities factual and legal for its business use and keeping a driver ever ready at the wheel; III That the Ld. CIT(A) is wrong to hold that the Tanker was not ready for instant use for business and he is absolutely wrong in rejecting the Calcutta High Court decision in the case of CIT V Union Carbide(P) Ltd 254 ITR488 referring to some other decisions including the Cal .High Court decision as reported in 206 ITR 682 in the case of CIT V Oriental Coal Co. Ltd.; IV That the Ld' Commissioner is absolutely misguided himself in holding that road tax or insurance premium in respect of the vehicle is a capital and not a revenue expenditure and there .....

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..... The AO was of the view that since the income of the assessee was declared u/s 44AE of the Act no deduction allowable under the provision of sections 30 to 38 of the Act could be allowed as laid down in the provision of section 44AE (3) of the Act. AO therefore did not allow the claim of the assessee for deduction of the aforesaid sums. 13. The assessee claimed before the AO that the declaration of income from oil tanker at ₹ 42,000/- u/s44AE of the Act was a mistake committed by the accountant. In this regard the assessee pointed out that the provision of section 44AE of the Act will apply only to an assessee who owns goods, carriage and who is engaged in the business of plying, hiring or leasing such goods carriages. The assessee pointed out that since the oil tanker in question was purchased by the assessee for use in its own business and since the oil tanker was not engaged in the business of plying, hiring or leasing, the declaration of income u/s 44AE of the Act was erroneous. 14. The AO however did not agree with the stand taken by the assessee and was of the view that such a claim without filing a valid revised return of income cannot be entertained. In this rega .....

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..... two primary conditions for claiming depreciation are ownership of asset and putting it to use for purpose of business. There is no dispute over the fact that the asset i.e tanker acquired during the year was not actually put to use. However, the contention of the appellant is that it was kept ready for use and therefore depreciation should be allowed in light of decisions cited by her. The appellant was asked to support the contention that the tanker was kepi ready for use by producing evidence. it was informed by the appellant that the tanker was acquired in the month of June 2008 and all formalities like registration etc were duly completed in August 2008. However, the tanker could not be actually used, as before the tanker could be used for bringing oil from Hindustan Petroleum, permission of Hindustan Petroleum was required. The appellant was asked to produce documents in respect of such permission sought by her. In response, a letter dated 05.10.2009 from HPCL addressed to the appellant informing the rates offered and a bank guarantee dated 29.10.2009 was produced. These documents are obviously of a period much after the end of the previous year. No correspondence evidencin .....

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..... not actually used. Thus, a large number of the judicial authorities have taken a considered view, that depreciation is allowable only on actual usage and not merely for the asset being kept ready for use. Their ratio is in consonance of the fact, that the term used in section 32 of 1.T.Act, 1961 is 'used for purposes of business' and not 'kept ready for use'. It is undisputed that-the tanker was not actually used during the year. Considering the foregoing discussion, the disallowance of depreciation on tanker is confirmed. 17. Aggrieved by the action of CIT(A) in sustaining the disallowance to the deduction of depreciation and not allowing the expenditure of road tax and insurance as revenue expenditure the assessee has raised ground nos. 2 to 5 and the additional grounds before the Tribunal. 18. We may, at the outset, point out that ground no.5 raised by the assessee and the additional grounds raised by the assessee are general arguments. In fact additional ground no.2 has been decided in favour of the assessee by the CIT(A) and the assessee could not have any grievances whatsoever. As far as additional ground no.1 is concerned the law is well settled that .....

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