TMI Blog2023 (1) TMI 23X X X X Extracts X X X X X X X X Extracts X X X X ..... tober, 2014. From the above, it is very clear that the remaining 2 buses were acquired and put to use in the business in the month of October, 2014, which is less than 182 days. Therefore, the assessee is entitled for 50% of actual depreciation on remaining 2 buses. Therefore, we do not find any errors in the reasons given by the AO to allow 50% depreciation on remaining 2 buses and thus, we reject the arguments of the assessee. To sum up, the assessee is entitled for 100% depreciation on 8 buses and thus, we direct the AO to consider the claim of the assessee and for remaining 2 buses, disallowance of excess depreciation is upheld. Disallowance of interest on borrowed capital u/s.36(1)(iii) - HELD THAT:- Since, we already held that the assessee has acquired and put to use the buses from the month of August, 2014 itself, in so far as interest paid on borrowed capital for 8 buses are concerned, the AO is directed to allow interest paid on borrowed capital to banks u/s.36(1)(iii) of the Act, as claimed by the assessee. As regards remaining 2 buses, since we held that the buses were put to use for business from the month of October, 2014 onwards, the disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hicle Permit Tax on the ground that it is in the nature of compounding fees for violation of law in force and hence panel in nature, cannot be allowed u/s.37(1) - HELD THAT:- AO on the basis of sample receipt issued by the Transport Department opined that it is panel in nature for violation of law in force. We find that the assessee has paid road taxes to Transport Department for taking permit to run buses and in the sample receipt considered by the AO nowhere it has specified that the assessee has violated any law and the Department has imposed penalty to consider said payment as panel in nature. The AO without understanding the concept of road tax being paid by transport operators simply disallowed amount paid to Transport Department as compounding fee which is panel in nature. In fact, it is a tax paid by the assessee to Transport Department to take permit to run the buses. Therefore, we are of the considered view that the AO is erred in disallowing expenditure u/s.37(1) of the Act, and thus, we direct the AO to delete the additions made u/s.37(1). - ITA No.535/Chny/2021 - - - Dated:- 14-12-2022 - Shri V. Durga Rao, Hon ble Judicial Member And Shri G. Manjunatha, Hon ble Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2.2 The learned CIT(A) failed to appreciate that the Diesel Expenses were incurred from August 2014 and wrongly concluded that the same was incurred from December 2014. 2.3 The learned CIT(A) failed to consider the fact that the buses started generating revenue from August 2014. 2.4 The learned CIT(A) erred in concluding that all the buses were put to use for less than 6 months based on just a couple of bills evidencing body building and related charges. 2.5 The learned CIT(A) erred in restricting the Depreciation claim on buses to 50% of the actual Depreciation claimed. Tax Effect: 21,27,998/- 3.1 The learned CIT(A) erred in concurring with the learned AO that the buses were put to use from October 2014 and disallowed the interest on capital borrowed up to September 2014. 3.2 The learned CIT(A) ought to have considered that the buses were put to use prior to September 2014 itself. Tax Effect: 2,56,447/- 4.1 The learned CIT(A) failed to consider that a sum of Rs.8,20,602/- was paid as property tax/other charges and also towards ROC filing expenses, which is revenue in nature. This is evident from the Assessment Order itself. 4.2 The learn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. Aggrieved by the order of the Ld.CIT(A), the assessee is in appeal before us. 5. The first issue that came up for our consideration from Ground Nos.2 to 2.5 of the assessee s appeal is disallowance of excess depreciation on motor vehicles amounting to Rs.68,86,722/-. The facts with regard to the impugned dispute are that during the FY relevant to the AY 2015-16, the assessee company has started new business of transportation of passengers, has acquired 10 buses. The assessee had acquired 8 Ashok Leyland bus chassis and 2 buses from Volvo Seater Buses. The assessee has built customized body. The 8 buses were registered with Regional Transport Office on or before 30.09.2014. The remaining 2 buses were registered on 08.10.2014. The Assessee has claimed 30% of depreciation on motor buses for full year on the ground that the assets have been put to use for whole year. The AO has disallowed 50% depreciation on motor buses on the ground that the assessee has put to use motor buses for less than 182 days. According to the AO, although, the buses were ready for use, but the assessee has started using buses in the business of transportation of passengers from Octob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... buses from Volvo Corporation. The assessee has purchased 8 buses from Ashok Leyland and registered them with RTO on or before 30.09.2014. The assessee had claimed 30% depreciation on buses on the ground that buses were put to use in the business of transportation of passengers for more than 182 days. The AO disputed the period of use of asset in the business and according to the AO, the assets have been put to use less than 182 days and thus, the assessee is eligible for 50% of actual depreciation. We find that the sole basis for the AO to consider the period of holding of asset, is payments made by the assessee for diesel bills. As per ledger account copy filed by the assessee, the assessee has made first payment for diesel bill on 16.12.2014 through bank. At the same time, the assessee has furnished copies of diesel bills from various dealers which started from the month of August, 2014 itself. The assessee had also filed a ledger account copy of Revenue from operations being booking charges for buses and as per ledger copy filed by the assessee, the assessee has started Revenue generation from the month of August, 2014 itself. The AO ignored bills for purchase of diesel and R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the month of October, 2014 onwards, the disallowance of interest on borrowed capital up to the date of capitalization of 2 buses are upheld. To sum up, the assessee gets relief towards disallowance of interest u/s.36(1)(iii) of the Act, for 8 buses and for remaining 2 buses, the additions made by the AO is upheld. 7. The next issue that came up for our consideration from Ground Nos.4.1 4.2 of the assessee s appeal is disallowance of rates taxes amounting to Rs.8,20,602/-. The AO has disallowed payments made to Members Secretary, Pondicherry Planning Authority amounting to Rs.6,40,709/- and payment made to Mr.R.Viswanathan towards ROC fees amounting to Rs.13,100/- and payment of property taxes to Pondicherry Panchayat amounting to Rs.1,66,793/-, all totaling to Rs.8,20,602/- debited under the head rates taxes on the ground that they are in the nature of capital expenditure. It was the arguments of the assessee that the amounts debited under the head rates taxes are recurring expenses which are Revenue in nature. 7.1 We have heard both the parties and perused the materials available on record and we find that amount paid to Member Secretary, Pondicherry P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e towards Pondicherry Permit Expense amounting to Rs.13,20,600/-. 9. The next issue that came up for our consideration from Ground Nos.6.1 6.2 of the assessee s appeal is disallowance of expenditure of Penal in nature u/s.37(1) of the Act, amounting to Rs.51,65,350/-. The assessee has debited a sum of Rs.51,65,350/- under the head Vehicle Permit Tax . The assessee claimed that said expenditure is paid towards taking permission to run vehicles for a particular period. The AO disallowed Vehicle Permit Tax on the ground that it is in the nature of compounding fees for violation of law in force and hence panel in nature, cannot be allowed u/s.37(1) of the Act. 9.1 We have heard both the parties, perused the materials available on record and gone through orders of the authorities below. The assessee being a transport operator needs to pay road taxes on periodical basis to State Transport Department. The assessee has paid a sum of Rs.51,65,350/- to Transport Department to avail permit to run the vehicles for a particular period. The AO on the basis of sample receipt issued by the Transport Department opined that it is panel in nature for violation of law in force. We fin ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
