TMI Blog2019 (5) TMI 1673X X X X Extracts X X X X X X X X Extracts X X X X ..... sportation of goods, then also higher rate of depreciation would be allowed to them. In view the CBDT circular as well as the consistent claim of the appellant for higher rate of depreciation in all the years throughout, we delete the disallowance so done by the Ld. A.O. and sustained by the Ld. CIT(A). Thus, the higher rate of depreciation at 30% is allowed to the appellant and accordingly, this ground of appeal is allowed. Disallowance of Service Tax liability u/s 43B - tax liability unpaid before the due date of filling of return u/s 139(1) - HELD THAT:- Since the provisions of Service Tax rules, prior to its amendment which was applicable from 1-4-2011, stated that the service tax would be payable only on receipt of the same from the service receiver, hence how could the appellant pay the same when the service tax was not received from the service recipient, and therefore the same cannot be added u/s 43B, as it never became due to be paid to the service tax department as the same was not even realised from the appellants service recipients. The intention of the revenue in inserting the provisions of the section 43B was that the assessee should not take benefit from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 43B as service tax not deposited before the due date of filing of return of income as per provisions of section 139(1) of the Act and the AO has further added an amount of ₹ 7,05,147/- being the amount debited by the assessee on account of insurance keymen persons in the profit and loss account by observing that it is not being used for business purpose and disallowed by the A.O. u/s 37(1) of the Act. Further, the assessee has debited an amount of ₹ 8,44,871/- under repair and maintenance which the A.O. has treated as capital expenditure and thus the amount is disallowed u/s 37(1) of the Act. 3. The appellant assessee in the present proceedings before us has taken the following grounds of appeal: 1. That on the facts and circumstances of the case and in law and in any view of the matter, the Ld. Authorities below have erred in making and upholding the disallowance of ₹ 46,80,814/- on account of alleged excess depreciation claimed at higher rate of 30% instead of allowable depreciation of 15% on Trucks and Trailers. 2. That on the facts and circumstances of the case and in law and in any view of the matter, the Ld. Authorities below ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enance of equipment s, are not transport receipt and hence are not eligible for higher rate of depreciation on the trucks and trailers being used for this purpose and therefore, he curtailed the depreciation from 30% as claimed by the assessee in his return of income and also worked out in the Tax Audit Report by the Chartered Accountant to normal depreciation of 15%. 4.2 While confirming the finding of the AO, in the appellate order, the Ld. CIT(A) has held that the appellant did not carried on the business of running the trucks, trailers and cranes on hire and hence as per the CBDT circular no. 652 higher rate of depreciation would not be admissible on them, as it is admissible on motor lorries used in assessee s business of transportation of goods on hire and hence he has sustained the addition on the disallowance made by the A.O. for the claim of higher rate of depreciation. 4.3 During the course of hearing before us, the Ld. counsel Shri Deependra Mohan has submitted a synopsis and has further stated that the appellant carried on the business of contractual work like dump site management, material handling services, container handling services, hauling and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - Do - P-14-16 7 Cont. of VDBPL Dump Project (Miyana) Dumsite Management - Do - P-17-19 8 Cont. of VDBPL Dump Project (Shivpuri) Dumsite Management - Do - P-20-22 9 Cont. of VDBPL Dump Project (Chhata) Dumsite Management - Do - P-23-25 10 Cont. of VDBPL Dump Project (Shikandrabad) Dumsite Management - Do - P-26-28 11 Cont. Dadri-Panipat Project (Kptl) Hiring of Vehicles Hiring of Vehicles i.e. Trailer P-29-30 12 Cont. Mundra Bhatinda Line Project (Kptl) Hiring of Vehicles ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... andling services P-112-127 24 Cont. of Material Handling Services (Chennai) Material Services Hand Hiring of crane with material handling services P-128-139 25 Cont. of Mathura Handling Services Material Services Hand - Do - P-140 -154 26 Cont. of Panipat Handling A/c Material Services Hand Hiring of crane and trailer with material handling services P-155-169 27 Cont. of O/M Heavy Equipment A/c Operation Maintenance Equipment Hiring of crane with operation and maintenance of equipment P-170-177 28 Cont. Bina Kota Pipe Project Transportation Transportation P-178-182 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ice. 1. Under sub-item 2(ii) of item-III of Appendix I to the Income-tax Rules, 1962, higher rate of depreciation is admissible on motor buses, motor lorries and motor taxis used in business of running them on hire. A question has been raised as to whether, for deriving the benefit of higher depreciation, motor lorries must be hired out to some other person or whether the user of the same in the assesse s business of transportation of goods on hire would suffice. 2. In Board s Circular No. 609, dated 29-7-1991 (Sl. No. 244) it was clarified that where a tour operator or travel agent uses motor buses or motor taxis owned by him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles. It is further clarified that higher depreciation will also be admissible on motor lorries used in the assessee s business of transportation of goods on hire. The higher rate of depreciation, however, will not apply if the motor buses, motor lorries etc., are used in some other non-hiring business of the assessee. 4.3.3 The Ld. A.R. has also submitted that for the succeeding assessment years i.e for A.Y. 2014-15, 2015 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstrue all its term in the context of the object sought to be achieved and the purpose sought to be attained by implementation of the contract. Reading parts of the contract as imposing distinct applications may not be proper way to understand the composite contract specially for installation and commissioning and delivery of a project or a system. 6. We have heard both the parties on this issue and have perused the relevant material on record with regard thereto. The assessee is a transport contractor firm and has claimed higher rate of depreciation of 30% on trucks and trailers being used in appellants business as is evident from the records available. The case of the department is that higher rate of depreciation is not admissible as the appellant has not done the business of hiring of trucks and trailers, but has used it in its own business for hiring the equipments. 6.1 From the facts as emerging out of the records, it is evidently clear that the assessee has received contractual receipts from his principal contractor for the hiring of trucks, trailers, cranes and other equipment s which the assessee held and has shown in his balance sheet in the fixed as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowance so done by the Ld. A.O. and sustained by the Ld. CIT(A). Thus, the higher rate of depreciation at 30% is allowed to the appellant and accordingly, this ground of appeal is allowed. 7. With regard to the next ground of appeal, it is seen that during the course of the assessment proceedings, the Ld. A.O. has disallowed ₹ 37,19,883/- u/s 43B of the Act as service tax liability unpaid before the due date of filling of return u/s 139(1) of the Act. The ld. CIT(A) has confirmed the addition on account of disallowance of Service Tax liability u/s 43B of the Act, in accordance with the law. 7.1 The Ld. A.R. has stated that the appellant in its balance sheet as on 31.03.2010 has shown service tax payable of ₹ 75,90,253/- and that out of this so payable amount, an amount of ₹ 37,19,883/- was not deposited before the due date of filing of return which was disallowed by the Ld. AO u/s 43B of the act. The Ld. A.R. has submitted provision of section 43B of the Act can be invoked only, where, a deduction was claimed by the appellant. But, in this case, the appellant has not claimed the deduction of ₹ 37,19,883/- of service tax liability by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt in a separate account. Service tax amount in the bill is credited to this account and the payment done to the service tax department when the amount is realised from his client the service tax component is paid to the service tax department and the same is then debited to this account. Thus, the appellant has never claimed the service tax amount as an expense in its profit and loss account nor claimed any deduction of the same in arriving at the taxable income. The Ld. A.R. again placed reliance on the case of CIT vs Ovira Logistics Pvt Ltd. rendered by Hon ble High Court of Bombay in 58 taxmann.com 2006 wherein it has been held that where it was found that before end of year, amount on which service tax was payable had not been received from the parties to whom services were rendered, claim of service tax paid could not be disallowed. Following this judgement in another case it has been held by the Hon ble Bombay High Court in PCIT vs Tops Security Ltd. , 97 taxmann.com 525 that- 10. With the assistance of both sides, we have perused this Judgment and we find that it dealt with an identical issue. This Court held that Section 43B does not contemplate liability to pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ount, nor any deduction of the same is taken in arriving at the gross taxable income. We have also pursed the tax audit report in this regard which is submitted at paper book book page 1-7, wherein the tax auditor has also not disallowed the service tax payable u/s 43B in clause 21 of the said report. Since, the service tax has not been routed through the profit loss account and no deduction of the same has been claimed by the appellant in its profit and loss account which is duly submitted before as well as the authorities below, we find no reason that the service tax payable of ₹ 37,19,883/- which was not paid before the due date of filing of return be disallowed. 10. It is seen from the facts on record which have not been disputed by both the authorities below nor by the Ld. DR that as on 31-3-2010, there was an outstanding service tax payable of ₹ 75,90,253/- and out of this amount ₹ 37,19,883/- remained outstanding before the due of filing of return, which itself means that the appellant has paid more than half of the service tax payable before the due date. 10.1 Further, as it has been held in the case of CIT vs Ovira Logistics Private L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he disallowance of ₹ 37,19,883/- is deleted. Accordingly, the 2nd ground of appeal is allowed. 11. With regard to the third ground of appeal it is seen that during the course of the assessment proceedings, the A.O. has disallowed ₹ 7,05,147/- for the insurance premium paid on the life of keyman of the firm. The said addition was duly confirmed by the Ld. CIT(A). 13. Since this ground of appeal has not been pressed by the Ld. A.R. of the appellant during the course of hearing before us, hence the same is held to be dismissed as unpressed. 14. With regard to the fourth ground of appeal it is seen that during the course of the assessment proceedings, the A.O. has disallowed ₹ 8,44,871/- considering it as capital expenditure which was claimed as revenue expenditure under the head office repair and maintenance. During the year under consideration the appellant had moved to a new office which was a leased premise wherein it has debited to office repairs and maintenance head certain woodwork etc. done in the rented premises. The Ld. A.O. has held these expenses to be capital in nature and has disallowed the same. The appellant during the cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come Tax Act, hence these expenditures were claimed as revenue expenditure by the appellant. In support, he also placed reliance on the following case laws: - CIT vs Karanpura Development Co. Ltd. (1983) 144 ITR 538 (Cal.) - CIT vs L. M. VAN Mopes Diamond Tools India Ltd. (1999) 151 CTR (Mad) 435 - CIT vs Haridas Bhagath and Co. (P). Ltd. (1999) 240 ITR 169 (Mad) - DCIT vs Gujarat Small Industries Corporation (2004) 84 TTJ (Ahd) 22 - Herbalife International India (P) Ltd. vs. ACIT (2006) 103 TTJ (Del.) 78 - Amway India Enterprises vs DCIT, New Delhi (2009) 27 SOT 344 (Del.) 16 The Ld. D.R. has placed Reliance on the order of Ld. CIT(A) which upheld the addition done by the Ld. A.O. He reiterated the findings of the Ld. A.O. which were duly confirmed by the Ld. CIT(A), stating that the expenditure incurred should have been capitalised and cannot be debited as office repair and maintenance as claimed in the profit and loss account. 17. We have pursued the submissions made by both the parties and the record which is available, we find that during the year under consideration the assessee had shifted its o ..... X X X X Extracts X X X X X X X X Extracts X X X X
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