TMI Blog2016 (8) TMI 730X X X X Extracts X X X X X X X X Extracts X X X X ..... made, if the expenditure incurred is paid during the same financial year even though no TDS has been deducted. We do not see any reason to interfere with the order of the CIT(A). Hence, we inclined to upheld the order of CIT(A) and reject the ground raised by the revenue. Disallowance of bad debts claim - Held that:- Once the debt is written off in the books of accounts, no need to prove that the debt has become bad in the year in which the claim is made. We find force in the arguments of the assessee for the reason that in view of the clear provisions of section 36(1)(vii) of the Act, once the assessee written off debt as irrecoverable, need not to prove that the debt has become bad. The only requirement is that it needs to write off the debt in the books of accounts. The CIT(A) after considering the explanations furnished by the assessee, set aside the issue to the file of the A.O. and direct the A.O. to examine whether the bad debt claim made by the assessee is part of revenue receipts in the earlier years. In case the same is offered to tax in the earlier years, then claim made by the assessee towards bad debt should be allowed. The CIT(A) has rightly decided the issue. We d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ative evidences found during the course of search. We further observed that as admitted in the statement recorded u/s 132(4) of the Act, the assessee has admitted ₹ 1,00,00,000/- income for the assessment year 2009-10 in the hands of M/s. Venkatarama Engineering. Similarly, in the statement the assessee has disclosed income of ₹ 1,55,30,000/- for the assessment year 2010-11 which is based on the books of accounts as on the date of search. Therefore, we are of the opinion that the additions made by the A.O. based on the assessee’s admission u/s 132(4) of the Act without any incriminating material cannot sustain in the eyes of law. The A.O. failed to bring on record any material evidences to show that these additions represents undisclosed income of the assessee. The CIT(A) after considering the explanations furnished by the assessee deleted the additions made by the A.O. We do not see any reasons to interfere with the order passed by the CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the revenue. Disallowance of pro-rate depreciation for 11 days in the hands of Maruthi Transporters - Held that:- As per the proviso provided to sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act, 1961 (hereinafter called as the Act ). A search and seizure operation u/s 132 of the Act was conducted in the case of M/s. Mahamaruthi Logistics Pvt. Ltd., Visakhapatnam on 4.2.2010. Consequent to search, the case of the assessee was centralised to DCIT, Central Circle, Vijayawada. Thereafter, the assessing officer issued notice u/s 153A/153C of the Act and requested assessee to file the return of income for the six assessment years immediately preceding the assessment year in which the search took place. In response to notice u/s 153A/153C of the Act, the assessee has filed return of income for the assessment year 2004-05 to 2010-11 on 14.2.2011. The case has been selected for scrutiny and accordingly notice u/s 143(2) and 142(1) of the Act along with detailed questionnaire were issued. In response to show cause notice, the authorised representative of the assessee appeared from time to tome and furnished books of accounts and other details called for. The A.O. after considering the details furnished by the assessee, completed assessment u/s 143(3) r.w.s. 153A/153C of the Act and made following additions/disallowances: a) Disallowance of various expenditure under the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act. The A.O. after considering the explanations furnished by the assessee held that the assessee company failed to deduct tax at source in the case of expenditure claimed under the head handling charges, transportation charges and hire charges. The assessee has defaulted in deducting TDS on amounts payable to a contractor or sub-contractor for carrying out the work of transportation, watch and ward services and also handling charges, therefore, in view of the provisions of section 40(a)(ia) of the Act, disallowed the amount for non deduction of TDS. The A.O. was of the opinion that the assessee ought to have deducted TDS on these expenses, however failed to deduct TDS under the provisions of Act, therefore, the expenditure cannot be allowed while computing the income from profits gains of business or profession. It is the contention of the assessee that it has complied with the TDS provisions wherever applicable. The assessee further contended that the expenditure incurred under the head transportation charges, handling charges and hire charges are incurred and paid during the same financial year. Therefore, in view of the special bench decision of ITAT, Visakhapatnam in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... T, has considered the issue and after considering the revenue objection with regard to the special bench decision of Merilyn Shipping Transporters and also considering the ratio of decision of Hon ble A.P. High Court, in the case of Janapriya Engineering Syndicate decided the issue in favour of the assessee. The relevant portion of the order is reproduced hereunder: We have carefully considered the rival submissions and perused the record. Consistent with the view taken by the ITAT Special Bench Visakhapatnam and also in the light of the view expressed by the Hon ble A.P. High Court in the case of Janapriya Engineering Syndicate, we are of the opinion that the provisions of section 40a(ia) of the Act cannot be made applicable in respect of the amounts already paid before 31st March. In other words, the A.O. is directed to restrict the disallowance to the amounts payable after 31st March. With these observations, ground no.3 of the assessee is treated as partly allowed. 8. The CIT(A) after considering the explanations furnished by the assessee and also following the coordinate bench decision of ITAT, Visakhapatnam in the case of Merilyn Shipping Transporters Vs. ACI ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ceipts in the earlier years. In case the same is offered to tax in the earlier years, then claim made by the assessee towards bad debt should be allowed. The CIT(A) has rightly decided the issue. We do not see any error or infirmity in the order passed by the Ld. CIT(A). Hence, we inclined to upheld the CIT(A) order and reject the ground raised by the revenue. 10. The next issue that came up for our consideration is disallowance of higher depreciation claim in respect of commercial vehicles such as Reach stackers, mobile cranes and Forklifts. The facts relating to the issue are that the assessee is involved in the business of transportation and handling of goods as consignment agent for RINL, CONCOR, IC, DCS and CFS and also C F Agent for other parties. The assessee has used the commercial vehicles such as tippers, Reach Stackers, mobile cranes and Forklifts in the business of handling and transport of materials from stock yards to wagons and containers. The assessee has claimed depreciation as per entry III(3)(ii) of Part A of New Appendix-1 of Income Tax Rules 1962, which is applicable to Commercial and New Commercial vehicle used in the business of running them on hire. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d Motor Taxies on hire. The assessee is not involved in the business of hiring of commercial vehicles, therefore, not eligible for claiming higher depreciation as per entry III(3)(ii) of Part A of New Appendix-1 of Income Tax Rules 1962. With these observations disallowed the claim of higher depreciation on commercial vehicles. 12. The Ld. D.R. submitted that the assessee is not eligible to claim higher rate of depreciation on commercial vehicles, as the assessee is not involved in the business of running commercial vehicles on hire. The D.R. further submitted that higher rate of depreciation is allowable to those assessees who are involved in the business of hiring of commercial vehicles. The assessee used the vehicles in its business of handling and storage of goods, therefore, it cannot be held that the main activity of the assessee is hiring of commercial vehicles, thereby it is eligible for higher depreciation. The D.R. further submitted that the higher rate of depreciation in respect of Tippers, Mobile cranes, Reach Stackers and Forklifts is available, when the same are used in the business of running them on hire. The D.R. further argued that whether assessee is eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... one place to another place. Once the vehicles are used for transportation of goods, the assessee is eligible for claiming higher depreciation. 14. We have heard both the parties and perused the materials available on record. The factual matrix of the case is that the assessee is involved in the business of transportation and handling goods as consignment agent for various companies. In the process, the assessee has employed commercial vehicles such as tippers, mobile cranes, Reach Stackers and Forklifts for the purpose of transportation and loading and unloading goods from one place to another place. The dominant activity of the assessee is transportation and handling goods at various places. The assessee needs to establish a stock yard, where the goods belonging to other companies are comes to the stock yard. The assessee main activity is handling and transportation of goods from stock yards to containers. The A.O. disallowed the claim of higher depreciation for the reason that the main activity of the assessee is not transportation of goods or hiring of vehicles. The assessee is involved in the business of storage and handling of goods and the transportation activity is incid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se vehicles are used in the business of the assessee. According to the A.O., Reach Stackers is basically a container handler and used for loading containers either from a railway wagon or a trailer lorry and thereafter stacking the same from one container to another container or from one place to another place. The Reach Stackers are mounted on a moving assembly having wheels/tyres and its mechanical components are designed for heavy duty work. It has a hydraulic mounted lifting boom to which a separator is also attached. Hydraulic cylinders inside the boom would carry the lifting and extenion of functions of the boom. On a whole, it is heavy duty machinery equipment which is mounted on a moving assembly. Though its mobility is that of a heavy vehicle, yet it is not suitable to be used in public places like road/railways etc. Similarly, in respect of mobile cranes, the A.O. opined that it also performs almost similar functions as that of Reach Stackers, but are not meant for heavy capacity. The standard equipment of a mobile crane have a facility for lifting empty containers and other cargos of weight not exceeding 10 tonnes. Entire assembly of lifting the cargo/empty containers an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ased in a specified period are eligible for higher rate of depreciation, if they are put in the business of running them on hire. 18. In the present case on hand, the assessee is into the busienss of transportation and handling of goods belonging to others. The assessee has entered into an agreement with RINL and others to transport and handling goods as a consignment agent. The main activity of the assessee is to transport goods from stock yards to containers loading and unloading etc. In the process, the assessee has used commercial vehicles such as tippers, mobile cranes, Reach Stackers and Forklifts. These commercial vehicles are considered as heavy duty vehicles and also registered with the RTO. The assessee has used these vehicles in its business of transportation of goods. On perusal of the details filed by the assessee, we find that the dominant activity of the assessee is to transport goods from one place to another place. These commercial vehicles are used in the business of transportation of goods from one place to another place. Therefore, we are of the view that these commercial vehicles are eligible for higher rate of depreciation as per clause III(3)(ii) of Part-A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndling goods belonging to third parties. The assessee has used these commercial vehicles for the exclusive purpose of transportation and handling and also loading and unloading of goods to the containers and tippers for onward transmission of goods. Therefore, we are of the view that the assessee is engaged in the business of transportation of goods belongs to third parties. In the process it has employed commercial vehicles for the purpose of transportation of goods and loading and unloading of goods from stock yards to containers or stacking points. Therefore, and hence, eligible for higher rate of depreciation as per clause III(3)(ii) of Part-A of new Appendix-1 of Income Tax Rules 1962. 21. It is pertinent to discuss here the case law relied upon by the assessee. The assessee relied upon the decision of High Court of Gujarat, in the case of Gujco Carriers Vs. CIT (2002) 256 ITR 50. The Hon ble High Court, held that the mobile crane which admittedly was registered as a heavy motor vehicle under the Motor Vehicles Act and the rules thereunder clearly fell within the expression Motor Lorries in entry 3-E(1A) of the table in Appendix 1 of I.T. Rules, since it was used by the ase ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s with flanged wheels for use on railway tracks and 'floating crane' on a barge or scow. Therefore, search for the item 'cranes' in the Entries in Appendix I without keeping in mind the nature of equipment, was based on an erroneous premise. A crane mounted on a truck is a truck crane which is a well known machinery which can easily move over roads and highways and is not a statutory equipment. Thus, a mobile crane mounted on a truck constitutes a single unit known as a 'truck crane' which is adapted for use upon roads for special services. The truck on which the crane is mounted is constructed and adapted specially to carry the crane. In the instant case, truck is adapted for use solely for carriage of the crane mounted on it. The mounted crane is attached to the truck which carries it. The test of carrying goods such as potatoes and tomatoes that require loading and unloading in context of carriage of freight when transported, as was suggested on behalf of the Revenue, will not be decisive. Unloading, in the context of truck crane where the crane remains mounted and attached to the truck when carried and even at the destination where it is put to use is no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for higher rate of depreciation. The relevant portion of the order is extracted below: ITAT found that the Tribunal in Assessee's own case earlier has decided the issue in favour of the Assessee. In this regard the Tribunal's decision in Assessee's own case in ITA NO.334/Kol/2001 for A.Yr. 1997-98 and ITA No.687/KoI/2002 for A.Yr.1998-99 are relevant. Since it has been decided by the Tribunal in Assessee's own case on identical issue there is no reason to differ from the same. Moreover, the case law of the Hon'ble Calcutta High Court in the case of CIT vs Jiyajeerao Cotton Mills Ltd. (supra) also supports the Assessee's case. In this case the Hon 'ble Jurisdictional High Court has expounded as under -. 'The goods were not delivered in time and thereby a penalty under the default clause had to be paid. It is not a penalty for breach of any law. The payment was made on account of the contractual obligation under the agreement. When the goods were not delivered within the stipulated period, an extra amount, designated 'penalty' had to be paid. This was done in course of carrying on the business by the assessee. Usually, time is not o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. 226 Taxman.com 103 (IT appeal no.24 of 2012) order dated September, 26, 2013, followed. (para 6) 24. Coming to the case laws relied upon by the Ld. D.R. The D.R. relied upon the decision of Hon ble Supreme Court of India, in the case of CIT Vs. Gupta Global Exim Pvt. Ltd. (2008) 305 ITR 132 and submitted that once commercial vehicles are used in assessee s own business, then the assessee is not eligible for higher rate of depreciation. We have considered the case law relied upon by the D.R, in the light of the facts of the present case and come to the conclusion that the case law relied upon by the Ld. D.R. is not applicable to the facts of the present case. The facts of the case before the Hon ble Supreme Court was that in that case the assessee was engaged in the business of importing timber logs and selling them in India. The assessee in its business of trading in timber used trailers and loaders and put them on hire and also some time given the vehicles on hire to third parties. Under these facts and circumstances of the case the Hon ble Supreme Court held that mere inclusion of transportation income in total business income was not a determinative factor for d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of search, certain incriminating documents found reveals that the assessee has maintained cash book wherein receipts and expenditure are recorded. During the course of assessment proceedings, the A.O. noticed that the assessee has not recorded these receipts and expenditure in the regular books of accounts maintained for the relevant period, therefore, made additions towards income and expenditure separately under the head unexplained income and unexplained expenditure and brought to tax. The A.O. was of the opinion that the transaction recorded in the seized books of accounts is not accounted in the regular books of accounts. The A.O. further was of the opinion that these income and expenditure is kept outside the regular books of accounts therefore, opined that the assessee has not included these receipts in the regular returns filed for the respective assessment years. With these observations, made separate additions towards receipts and expenditure. It is the contention of the assessee that once addition is made towards income, the A.O. was not correct in making separate addition towards expenditure. When the unexplained income has been assessed based on material detecte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... me in the statement recorded u/s 132(4) of the Act to stop further enquiries by the investigating department. Therefore, the assessee was not correct in explaining that the income has been offered in different assessees names and also telescoped against the regular income declared for the assessment year 2010-11. It is the contention of the assessee that it has admitted income of ₹ 1,00,00,000/- in the name of M/s. Venkatarama Engineering for the assessment year 2009-10 and ₹ 1,55,30,000/- for the A.Y. 2010-11. The assessee further contended that as regards the Asst. year 2010-11, the assessee has admitted income based on the regular books of accounts which was updated at the time of search and accordingly disclosed the income and paid the taxes. The assessee further contended that the Managing Director of the company, while answering the statement recorded u/s 132(4) of the Act, never stated that he would disclose additional income in the hands of the company. The assessee further contended that addition made by the A.O. is based on the admission of the assessee and not based on any material found during the course of search. Therefore, the A.O. was not correct in mak ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ny reasons to interfere with the order passed by the CIT(A). Hence, we inclined to uphold the CIT(A) order and reject the ground raised by the revenue. 30. The next issue that emanates from the assessee appeal for the A.Y. 2007-08 is disallowance of pro-rate depreciation for 11 days in the hands of Maruthi Transporters. The facts which leads to the litigation is that the assessee was initially came in to existence as a partnership firm under the name and style of Maruthi Transports, later became Maha Maruthi Logistics Pvt Ltd by way of conversion of partnership firm into Private Limited Company under part IX of Companies Act, 1956. The assessee firm was converted in to Private Limited Company on 11-4- 2006, i.e. the firm was in existence for eleven days. The assessee claimed depreciation on block of assets for a period of eleven days. The A.O. was of the opinion that when a firm is converted into Company all assets and liabilities have been taken over by the succeeding Company, therefore, it is wrong on the part of assessee to claim depreciation for eleven days. The A.O. further observed that the succeeding Company, i.e. Maha Maruthi Logistics Private Limited has claimed depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys for the purpose of allowing depreciation. In case, asset is put to use for more than 180 days or less than 180 days, then it is eligible for 100% or 50% depreciation as the case may be, irrespective of the fact that the assets is purchased or put use on any date between 1st day of the financial year or last day of the financial year. Under the given facts and circumstances, there is a little possibility of double claim by both the assessee s for those eleven days. Though, assessee claims that it has claimed depreciation for eleven days, the A.O. observed that the succeeding company has claimed depreciation for the whole year. The facts are not clear, tterefore, we set aside the issue to the file of A.O. and direct the A.O. to verify the claim in the light of the discussion above and allow accordingly. In case, both firm as well as the Company have claimed depreciation on pro-rata basis for actual number of days the assets are held by them, then the A.O. is directed to allow depreciation as claimed by the assessee. 33. The assessee has filed cross objection in support of the order passed by the CIT(A). The assessee has filed the cross objections on 25.2.2016. There is a inordi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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