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TMI Blog2024 (5) TMI 1530X X X X Extracts X X X X X X X X Extracts X X X X ..... sake of convenience. ITA No. 484/Ahd/2023 for A.Y. 2015-16 3. Deletion of disallowance on higher depreciation of Rs. 8,71,10,768/- on plant and machinery, tippers are the subject matter before us. 4. The appellant, a Private Limited Company, engaged in the business of hiring of heavy earth moving machineries and mining services for mining and other contract works and having income from business, filed the return of income for the year under consideration on 30.09.2015 declaring total income at Rs. 32,21,69,740/-. Upon selection of the case under scrutiny notice under Section 143(2) of the Act dated 21.03.2016 followed by different notices in terms of the provisions of law including 142(1) r.w.s. 129 of the Act dated 20.09.2016 etc. were issued. Such assessment was finalized upon restricting the disallowance @15% instead of higher rate @ 30% on depreciation of Dumper & Tripper to the tune of Rs. 8,71,10,768/-. 5. The facts of the case is this that the assessee claimed higher rate of depreciation on dumpers and Trippers @30%. It is the further case made out by the assessee that their contract is for hire for motor vehicles, namely, dumpers & trippers which ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of Rajmahal OCP and transportation to Main/Interim CHP within lead range of 6-7 km at Rajmahal Area. 2.2.2 Eastern Coalfields Ltd. (Sonepur) The nature of work is transportation of coal 41.701. Te. 2.2.3 Bharat Coking Coal Ltd. (Chaptaria) The nature of work Transportation of coal from 1-11, 10, Salemper and katapur seams of Chaptoria OC Patch of Domaporia cottery of CV. Area. 2.2.4 Bharat Coking Cond (Katras) The nature of work a AXWM Collery of Kutres Arvo transportation of cool coal from Seams of Kumarijere Patch of 2.2.5 Bharat Coking Coal Ltd. (Lada) The nature of work transportation of coal from LT) & I seams of patch T of NT-ST colliery of Ladna Area. 2.2.6 Bharat Coking Coal Ltd. (Old) The nature of work is ...............transportation of coal from Laikdih(Top) Laikdih (Middle), Laikdih(Bottom), L-10, Salanpur 'C' and Salanpur 'D' seoms of Borira OC Patch of Damagoria colliery of CV. Area. 2.2.7 Mahanadi Coalfields Limited: The nature of work is transportation of materials in various strata including drilling, excavation, dumping, spreading, dozing and other allied works in specified areas for dumping as per instructions of P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... age be defined as that they are used in the business of running them on hire. 2.4 Basically, the use of motor vehicles is need to be looked in to whether they have been used for own other business such as trading, manufacturing etc. or otherwise. 2.5 It may please be noted that in respect of all the contracts ● Mine is not owned by us. ● Neither overburden nor extracted minerals belongs to us. 2.6 The operations are scheduled/controlled by the principal/principal contractor 2.7 In the contracts for earth work and mining work we are required to transport the over burden (earth) and extracted minerals from one place to another. We were paid the rates per unit or based on quantity extracted and transported to the specified location. But from this fact, it cannot be denied that the amount thus payable consists of the hire (use) of the tippers, excavators etc. in the process of excavation of and transportation of over burden (earth) and.. minerals. Although the rates may have been determined for a consolidated package for various activities and scope of work, the element of hire charges or charges for use of the assets like tippers are embedded therein as n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issible on motor lorries used in the our business of transportation of goods on hire Before applying above principles, we request to draw your kind attention on brief fact of the case referred above vise a vise present case as under:- In the instant case, the learned CIT for the assessment year 1996-97 recorded a finding that the appellant was required to transport the earth from one place to another for filling and the earth so transported did not belong to tile assessee and as such the appellants business receipts to a large extent, can be held to be price of the charges received for transporting the goods from one place to another. This Fact of the case is totally and identically applicable to us as we are required to transport excavated earth as per instruction for filling etc purpase and the earth so transported does not belongs to us. Our contract is for hiring for motor vehicles (Dumpers, Tippers) which are being exclusively used for transportation of excavated earth belongs to principal and not us. or Minerals which It may please be noted that, considering the judgment of the Hon'ble Supreme Court in CIT v. Gupta Global Exim (P.) Ltd. (2008) 171 Taxmann 4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e transportation work as the nature and scope of work enders received for different sites. Therefore the nature and scope of work carried out by the assessee is analyzed from these copies of work order/LOI submitted by the assessee for different sites as under i) Eastern Coalfields Ltd. (Raimahel)-W.O date 25.02.2012 The nature of work is loading of coal into tippers by excavators at quarry face of Rajmahel OCP and transportation main/interim CHP within lead range of 4-5 km, 5-6 km and 6-7 km at Rajmahel area. ii) Eastern Coalfields Ltd. (Sonepar)-W.O date 28/29.06.2012 The scope of work envisages (i) excavation and removal of 0B 262.10 L.Cum (i) extraction and transportation of coal 41.70 LTe. iii) Bharat Cooking Coal Ltd. (Chaptoria) - R.O date 28.01.2015 The nature of work is hiring of HEMM for removal of 0B and extraction and transportation of coal from L-11, L-10 Salanpur "C" and Salanpur 'D' seams of Chaptaria OC patch of Damagaria colliery of CV area. iv) Bharat Cooking Coal Ltd. (Katras) W.O. date 30.09.2013 The nature of work is hiring of HEMM for removal of OB, expaction and transportation of coal from VIIIA, VI(top), Vin(Bot), VII, V/VI an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... xcavation, blasting, removal of overburden, dumping the overburden at dumping site and transporting the mined mineral from mines to stocking place and leveling of the same. The only difference in some work orders claimed by the assessee is that in some cases separate rates for lignite mining and lignite transportation has been mentioned. Whereas the nature of work for all the sites are similar. So in no way it is all the established that the assessee has been awarded exclusively transition work and its dippers and tippers were exclusively used for earning transportation income. However in the instant case issue is that "30% rate of depreciation is available only if motor lorries are used for running the one is the instant case there is no income from hire, assessee had received all the income from business of mining which includes blast hole, drilling, excavation, blasting, overburden removal & stacking dumping the over burdened material at dumping site transporting the mined material from mines to stacking place. For the same, the assessee got payment for these activities from person who has given them contract on basis of "MT" mined material (net) or of instances on basis of "MT" ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ble. Thus it can be seen that there is merely a presumptive element of hire charges and on such presumption assessee is claiming higher rates of depreciation which should be disallowed. 7.7 It is a matter of fact that Hon'ble Supreme Court in case of Gupta Global exim 305 ITR 132 laid down the real test for claiming depreciation at higher rates applicable for "motor lorring used in business of running them on hire. In this decision the Hon'ble Apex Court has decided that real test is the user of the same in the business of the assessee of transportation is the test". Hon'ble Supreme Court has also held that same has to be determined from constitution of return of income and Memorandum of association of company, etc. It is a matter of fact that assessee's income is from mining business, not from transportation. Although the assessee itself in year under consideration in audit report has written/mentioned its business as mining contractor and civil contractor as was mentioned in earlier year. Also its entire income in year under consideration and even in earlier were from mining contract only. In fact, assessee itself in audit report of AY 2014-15, 2915-26 has s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted to Rs. 8,71,10,768/- as against the depreciation claimed by the assessee at Rs. 17,42,21,537/- on plant & machinery, tipper etc. Therefore excess depreciation claimed on plant & machinery, tipper etc. of Rs. 8,71,10,765/- is added back to the total income of the assessee. I am satisfied that the assessee has furnished inaccurate particulars of income and thereby concealed the income. Penalty proceedings u/s. 274 r.w.s. 271(1)(c) are initiated for furnishing inaccurate particulars of Income and thereby concealing the Income." 7. The case of the assessee is this that the depreciation claimed @30% on the dumper & tipper is as per the provisions of law as the activities of the assessee includes excavation of over burden materials, mining of minerals, transportation of excavated over burden material, excavation of minerals, transportation of minerals from mines to pit head and transportation of minerals from Pit head to Lignite handling system/power plant. Therefore, such motor vehicles, namely, dumpers & tippers are used in transportation of over burden materials and excavated materials owned by the Principal i.e. mining owner and not by the assessee. This particul ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mining contract which is also reflecting from the audit report from A.Ys. 2014-15 & 2015-16 has shown being mining and civil contractor rather than transportation. The assessee fails the test laid down by the Hon'ble Supreme Court and found not eligible for depreciation at higher rate. Addition thereon to the tune of Rs. 8,71,10,768/- was made by the Ld. AO in the hands of the assessee. 8. In appeal, apart from all this explanation, the assessee further relied upon the Circular being No. 652 dated 14.06.1993 issued by the CBDT, wherein it has been categorically fixed that higher rate of depreciation was admissible on motor vehicle in the assessee's business of transportation of goods on hire and that higher rate will not apply if the motor lorries etc. are used in the non-hiring business of the assessee. Further Circular No. 609 dated 29th July, 1991, wherein the Board has clarified that the higher rate of depreciation is also admissible when the assessee is using motor lorry in his own business of transportation of goods on hire. The following facts and figures were also placed before the First Appellate Authority: 9. The assessee further relied upon the followin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and, therefore, having regard to the entire aspect of the matter i.e. the business activities of the assessee qua the claim of the assessee, particularly, when the fact of composite contract awarded to the assessee of mining and transportation has not been able to be controverted by the Ld. DR. We do not find any reason to interfere with the order passed by the Ld. CIT (A) in granting relief by deleting the addition made by the Ld. AO by restricting the depreciation at 15% against the claim of depreciation at 30% on the dumpers and tippers used by the assessee. The same is found to be just and proper and therefore, upheld. 11. In the result, Revenue's appeal is dismissed. 12. The decision in ground relating to deletion of disallowance on higher depreciation in ITA No. 484/Ahd/2023 for A.Y. 2015-16 shall also apply mutatis mutandis in identical grounds of ITA Nos. 485/Ahd/2023 & 486/Ahd/2023. ITA No. 486/Ahd/2023 for A.Y. 2018-19 13. Deleting the disallowance of Rs. 4,31,63,343/- being the interest on service tax + VAT interest, GST interest and entry tax interest is the subject matter before us. 14. The Ld. AO made a disallowance of Rs. 4,64,74,370 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus any delay in the payment of TDS by the assessee cannot be linked to the income tax of the assessee and hence is allowable business expenditure TDS/TCS are part of sum payable for business expenses. Deposit of TDS/ TCS results into payment to payee who get credit for TDS/ TCS deposited. In case of delay in deposit of TDS/ TCS, interest is payable for such late deposit. This is in relation to business expenditure. Therefore, interest paid for delay in deposit of TDS/TCS is also a business expenditure. It is not on account of any offence or for any activity which is prohibited in law. The interest for the delay in making the payment of TDS is compensatory in nature. The interest on delayed payment of TDS is not in the nature of penalty. Interest on TDS was due to late payment of tax and not due to non ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bited under any law. In case of M/s. Emdee Digitronics Pvt. Ltd vs. Pr. CIT-4, Kolkata, Hon'ble ITAT Kolkata in its order dated 28.06.2019 (ITA No 361/Kol/2019), it was decided that interest on late deposit of VAT, service tax, TDS etc. are allowable expenditure under section 37(1) of the Income Tax Act, 1961. Copy of said judgement is attached herewith for your reference. Considering all of the above submissions, your honour is requested to allow Rs. 4,31,63,343/- towards interest on Service Tax, VAT, GST and Entry Tax 7.3.3 After considering the reply of the assessee, another notice u/s 142(1) dated 25.01. 2021 was issued, in reply to which the assessee reiterated its stand taken earlier." 18. However, the Ld. AO was of the view that the interest paid in respect of statutory liability cannot be treated as business expenditure under Section 37(1) of the Act and, therefore, the said expense to the tune of Rs. 4,64,74,370/- was disallowed. While dealing with this issue the Ld. CIT (A) observed as follows: "9.2 During the course of appellate proceedings, the appellant regarding the disallowance of Interest on TDS of Rs. 33,11,027/- has stated that inte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under any law of land. In fact, Interest is paid for the purpose of the compliance with the Act. Interest is paid for mitigating the time value of money of delay in deposit of original service tax, GST, VAT and entry tax due to the respective department of government. Payment of Interest on service tax, GST, VAT and entry tax dues is migratory and compensatory in nature. Hence, these are allowable under Section 37 as it is not an offence or prohibited under any law. The appellant has also relied on the decision of the Hon'ble Supreme Court in case of Mahalaxmi Sugar Mills Co Ltd. Vs CIT (SC) 123 ITR 429 (SC), wherein the Hon'ble Supreme Court had pronounced that interest charged on late deposit of taxes, is compensatory in nature and hence allowable u/s 37. 9.2.3 The appellant has further relied on the following judicial pronouncement, which are as under: - (i) The decision of the Hon'ble ITAT, Kolkata in the case of DCIT vs. M/s. Narayani Ispat Pvt. Ltd. (ITA No. 2127/Kol/2014 for A.Y. 2010-11). (ii) The decision of the Hon'ble ITAT, Kolkata in the case of M/s. Emdee Digitronics Pvt. Ltd vs. Pr. CIT-4, Kolkata (ITA No. 361/Kol/2019). (iii) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... VAT, GST and entry tax amounting to Rs. 4,31,63,343/-. 9.3 I have gone through the submission of the appellant as well as the assessment order. The issue here is that the appellant has paid interest on service tax of Rs 3,58,72 326/-, VAT interest of Rs. 21,719/-, GST interest Rs 72,10,068/- and entry tax interest of Rs 59,230/-. The main contention of the appellant is that as the expenses of Service Tax, VAT, GST etc. are of compensatory in nature, therefore any interest paid on that sum is also allowable as the tax amount is itself allowable. The appellant has further relied on the decision of the Hon'ble Supreme Court in the case of Mahalaxmi Sugar Mills Co. Ltd. v. Commissioner of Income-tax, wherein the Hon'ble Supreme Court had pronounced that interest charged on late deposit of taxes, is compensatory in nature and hence allowable u/s 37 (reproduced supra), The head note and facts of the judgement are as under- "Section 10(2)(xv) of the Indian Income-Tax Act, 1922 [Corresponding to section 37(1) of the Income-tax Act, 1961] Business expenditure Whether interest paid on arrears of cess under section 3(3) of the U.P. sugarcane cess act, 1956 was a permis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pensatory in nature and, if on verification it was found that assessee had actually paid interest in impugned assessment year, same was to be allowed as deduction to assessee-Held, yes 9.3.2 Further, reliance is place on the decision of the Hon'ble Bangalore Tribunal in the case of Velankani Information Systems Ltd. v. Deputy Commissioner of Income-tax, Circle 7(1)(2), Bangalore [2018] 97 taxmann.com 599 (Bangalore - Trib.) wherein it is held that :- II. Section 37(1) of the Income-tax Act, 1961-Business expenditure Allowability of (Penal interest) Assessment year 2012-13 Disallowance of interest paid on delayed remittances of service tax was made by Assessing Officer being of view that expenditure was in nature of penalty and was hit by Explanation to section 37(1) - Whether payment of interest was only compensatory in nature and would not be in nature of penalty which would be hit by Explanation to Section 37(1) Held Yes Whether thus, interest paid on delayed remittances of service tax was allowable as deduction under section 37(1)-Held, yes [Para 20] (in favour of assessee) 9.4 I find from the above decisions that interest on Service Tax, VAT interest, GST Interest ..... X X X X Extracts X X X X X X X X Extracts X X X X
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