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M/s Chhotabhai Jethabhai Patel Tobacco Products Co. Ltd. Versus ACIT, Kheda Circle, Nadiad

2016 (8) TMI 759 - ITAT AHMEDABAD

Disallowance of depreciation - depreciation claimed by the assessee on w.d.v. and new motor car purchased falling under the category of 50% block of depreciation which was not accepted by AO on the basis of specific observation that assessee’s business is not of running cars on hire and assessee’s claim of depreciation under 50% rate is not admissible - Held that:- Assessee was having special block of asset for depreciation @ 50% in the preceding year and in the year under appeal on LMV i.e. Toy .....

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- Dated:- 27-6-2016 - Shri S. S. Godara, JM And Shri Manish Borad, AM Appellant by Smt. Urvashi Sodhan, AR Respondent by Shri Keyur Patel, Sr. DR ORDER Per Manish Borad, Accountant Member This appeal of the assessee is directed against the order of ld. CIT(A)-IV, Baroda dated 13.03.2013 vide appeal No.CAB-IV-N- 332/2011-12 relating to Asst. Year 2009-10. Assessment u/s 143(3) of the IT Act, 1961 (in short the Act) was framed by DCIT, Kheda Circle, Nadiad on 29/11/2011. We observe that this appe .....

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e accept the same and condone the delay and proceed to adjudicate the appeal. Following grounds have been raised by the assessee:- (1) The learned Commissioner (Appeal) failed to understand the facts and circumstances of the case. (2) The learned Commissioner (Appeal) erred hi not adjudicating ground of appeal no 2 as under: "The Learned Assessing officer erred in fact and in law in disallowing depreciation of ₹ 6,787/-on opening written down value of the block of assets namely Plant .....

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period" as specified in clause [3](via) of the New Appendix I to the Income Tax Rules, 1962 on invalid ground that assessee is not engaged in business of hiring. (4) Your appellant prays for appropriate relief on above grounds of appeal. (5) Your appellant craves leave to add, alter, amend, substitute or withdrawn any of the Grounds of Appeal stated hereinabove. 2. Ground nos.1,4 & 5 are general in nature, hence need not be adjudicated. 3. Now we take up ground no.2 & 3 which are i .....

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to the assessing officer. (3) The learned commissioner (Appeal) erred in confirming disallowing of depreciation of ₹ 1,78,699/- on addition made during the year on Motor vehicle in respect of which depreciation @ 50% in the category of "New commercial vehicles acquired during the specified period" as specified in clause [3](via) of the New Appendix I to the Income Tax Rules, 1962 on invalid ground that assessee is not engaged in business of hiring. 4. Brief facts of the case are .....

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ch, 2009 at a cost of ₹ 10,21,134/- and claimed depreciation @ 25% in block of depreciation @ 50% depreciation meant for new commercial vehicles under the block-III Machinery & Plant (3) (via) of New Appendix-I under Rule-5 of the IT Rules, 1962. The Assessing Officer was of the view that assessee being engaged in the business of marketing of bidi and cars are not used for hiring and therefore, the motor cars are subject to depreciation @ 15% and not 50% on block rate and accordingly r .....

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f the appellant is not found to be tenable. The appellant had purchased the new Toyota Innova Car in march 2011 for which cost of acquisition was shown at ? 10,21,134/- and depreciation of said Toyota Car was shown @ 25% as this car was purchased by the appellant after September. In this regard, it i mentioned that the appellant is not entitled for claiming the depreciation @ 50% on such Toyota Car as the business of the appellant was not running the cars on hire. In view of this fact, the benef .....

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fore, the appellant is entitled to claim depreciation @ 15% on such car. Considering these facts, it is held that the AO has correctly disallowed the excess claim of depreciation of ₹ 1,85,486/-as made by the appellant and therefore, such disallowance of depreciation of the AO is hereby confirmed. Thus, the above grounds of appeal of the appellant are dismissed. 4. Aggrieved, assessee is now in appeal before the Tribunal. 5. Ld. AR submitted that the Light Motor Vehicle (LMV) Toyota Innova .....

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ppendix-I of IT Rules. Therefore, depreciation was allowable under block 50% category only and ld. CIT(A) ought to have deleted the disallowance of ₹ 1,85,486/- made by ld. Assessing Officer. Ld. AR further referred and relied on the decision of the Tribunal Mumbai Bench in the case of Daleep S. Chandnani vs. ACIT in ITA Nos.7307(Mum) of 2003 and 4059(Mum) of 2004 for Asst. Years 1999-2000 and 2001-02 vide order dated 12th October, 2006, wherein similar type of issue was adjudicated and de .....

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pecific observation that assessee s business is not of running cars on hire and assessee s claim of depreciation under 50% rate is not admissible. 8. Rates for claiming of depreciation for the year under appeal are available at New Appendix-1 with respect to Rule 5 of IT Rules and impugned asset on which depreciation has been disallowed falls under category -3 of Part-A relating to machinery and plant. We find that assessee has claimed the special rate of depreciation @ 50% for acquiring commerc .....

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me to time special clauses (iii), (iv), (v), (v) & (via) have been introduced in Sl.No.3 of Part -A of New Appendix-I relating to depreciation on acquisition of commercial/new commercial vehicle within some specific time frame, which in the case of assessee was to acquire the new commercial vehicle after the first day of January, 2009 but before the first day of October, 2009 and which is to be put to use before the first day of October, 2009 for the purpose of business or profession then as .....

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e depreciation has to be allowed on such percentage on the WDV thereof as may be prescribed. As per the provisions of section 43(6)(c )(\\) WDV means the written down value of that block of asset as increased by the actual cost of any asset falling within that block acquired during the previous year and as reduced by the monies payable together with scrap value, if any, in respect of the assets falling within that block which are sold or discarded or demolished or destroyed during the previous y .....

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t the expression 'commercial vehicle' would mean 'light motor vehicle' and the 'light motor vehicle' as defined in the , Motor Vehicles Act, 1988, means any transport vehicle or omini bus, the gross physical weight of either of which or a motor car or a tractor or road roller the unladen weight of which does not exceed 7,500 kgs. Thus, a motor car not exceeding the specified weight is covered under the definition of 'light motor vehicle'. It is further provided th .....

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motor cab as given in the Motor Vehicles Act are read together then motor vehicles used for hire or reward would not be covered under the third proviso to section 32 and such motor vehicles would be covered under entry (2)(\i) of Item III of Part A of Appendix I (applicable for the assessment years 1988-89 to 2002-03) of the Rules. This conclusion further leads to an inference that the Legislature has given benefit of higher depreciation to the assessees not engaged in the business of motor buse .....

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