Income Tax Appellate Tribunal - Agra
Anamay Construction Co., Gwalior vs Department Of Income Tax on 31 July, 2012
IN THE INCOME TAX APPELLATE TRIBUNAL
AGRA BENCH, AGRA
BEFORE SHRI BHAVNESH SAINI, JUDICIAL MEMBER AND
SHRI A.L. GEHLOT, ACCOUNTANT MEMBER
ITA No.387/Agr/2011
Assessment Year: 2008-09
Asstt. Commissioner of Income Tax, vs. M/s Anamay Construction Co.,
Circle-3(1), Gwalior. 502, Suresh Nagar,
Thatipur, Gwalior.
(PAN: AALFA 1185 F)
(Appellant) (Respondent)
Appellant by : Shri A.K. Sharma, Jr. D.R.
Respondent by : Shri Anurag Sinha, Advocate
Date of Hearing : 31.07.2012
Date of Pronouncement of order : 31.08.2012
ORDER
PER A.L. GEHLOT, ACCOUNTANT MEMBER:
This is an appeal filed by the Revenue against the order dated 26.07.2011 passed by the ld. CIT(A), Gwalior for the A.Y. 2008-09 on the following grounds:-
"1. On the facts and in the circumstances of the case the CIT (Appeals) has erred in deleting the addition of Rs.9,39,312/- on account of disallowed of excess depreciation.
2. On the facts and in the circumstances of the case the CIT (Appeals) has erred in deleting the addition of Rs.7,77,658/- on account of disallowance of purchase of materials.2 ITA No.387/Agr/2011
A.Y. 2008-09.
3. On facts and in the circumstances of the case the CIT (Appeals) has erred in deleting the addition of Rs.5,30,446/- on account of disallowance of labour charge."
2. The brief facts relating to ground no.1 are that the assessee claimed depreciation of Rs.18,78,623/- @ 30% on the dumpers and trucks purchased during the previous year relevant to A.Y. under consideration. The A.O. rejected the claim of the assessee of higher depreciation on the reasoning that special rate of 30% is attracted only in case of Motor Vehicles used in the business of running them on hire. Whereas, in the instant case, the assessee was engaged in the business of civil construction. Therefore, considering the main objects of the business, the A.O. did not find the claim of depreciation @ 30% on the trucks as tenable as the assessee was not engaged in the business of running the truck on hire. He, therefore, allowed 15% of depreciation and added the excess claim of depreciation of Rs.9,39,312/- to the total income of the assessee. In appeal before the CIT(A), the contention of the assessee has been that Dumper, JCB, Truck, Excavators etc., were used for transportation of earth and material to various sites and these vehicles could not be used as Motor Vehicles. Therefore, the depreciation claimed @ 30% was acceptable. Reliance was placed on the decision in the case of CIT vs. S.C. Thakur & Brothers, 180 Taxman 348, CIT vs. Gaylord Constructions 190 Taxman 406 (Kerala) and CIT vs. Gujarat Tube well 206 CTR (Guj) 14. The CIT(A) after considering the contentions of the assessee and the 3 ITA No.387/Agr/2011 A.Y. 2008-09.
case laws relied upon by him observed that the assessee is required to transport the earth from one place to another and since the earth so transported did not belong to the assessee, the buses receipts of the assessee to the large extent shall be deemed to have been received for transpiration of goods from one place to another. He further observed that the JCB, Dumpers, Trucks etc. used in the business of assessee are registered as Motor Vehicles and they serve as a transport equipment. He also relied upon C.B.D.T. Circular no.652 dated 14.06.1993 wherein it has been clarified that high depreciation is admissible on vehicles and motor lorries used in the assessee's business of transpiration of goods on hire. Having considered the decisions riled upon by the assessee, the CIT(A) concluded that the assessee is entitled to deprecation @ 30% and thus deleted the disallowance of deprecation of Rs.9,39,312/-.
3. We have heard the ld. Representatives of the parties and records perused. We find that on identical set of facts, I.T.A.T., Agra Bench has decided the issue against the assessee in ITA Nos.42 & 58/Agr/2012 in the case of Bhole Baba Milk Food Industries Limited vide order dated 20.07.2012. The relevant finding of I.T.A.T. is reproduced as under:-
"14. After hearing the ld. Representatives of the parties, we find that the issue is squarely covered in favour of the Revenue by the judgment 4 ITA No.387/Agr/2011 A.Y. 2008-09.
of Hon'ble M.P. High Court in the case of CIT vs. Anupchand & Co., 239 ITR 466 (M.P.) wherein it has been held as under :-
"The assessee was a registered firm deriving income from contract work. The assessee claimed depreciation allowance at the rate of 40 per cent. on trucks used for its business purpose. The Income Tax Officer allowed only 30 per cent. allowance on the ground that the vehicles were used for the assessee's own business of transporting goods. On a reference :
Held, that the benefit of 40 per cent. depreciation allowance was admissible only for vehicles used for business of hire in view of the provisions of Entry No.III(ii)E(1-A) of Part I of Appendix I to the Income-tax Rules, 1962, and since the assessee used the vehicles for its own business of transporting its goods only 30 per cent. depreciation was allowable.
15. Respectfully following the above order of the Hon'ble High Court of M.P., the order of the CIT(A) is confirmed."
4. Since the facts are identical, therefore, to maintain consistency, we follow the above order of I.T.A.T. in ITA Nos.42 & 58/Agr/2012 in the case of Bhole Baba Milk Food Industries Limited. In the light of the above, order of CIT(A) is set aside and order of the A.O. is restored.
5. The brief facts relating to ground no.2 are that the assessee has shown the purchase of material worth Rs.2,22,34,239/-. During the course of assessment proceedings, the A.O. found that most of the purchase vouchers supporting the 5 ITA No.387/Agr/2011 A.Y. 2008-09.
purchase of materials were self-made vouchers without supporting bills. He, therefore, made disallowance of Rs.10,00,000/- out of total purchase of material and added the same to the total income of the assessee. Before the CIT(A), the contention of the assessee was that the A.O. has accepted the audited books of account without pointing out any defect therein or bringing any instance of vouchers without supporting bills on record. Therefore, the disallowance out of purchase of material made by the A.O. is not sustainable at all. The CIT(A) after considering the explanation of the assessee, restricted the disallowance to Rs.2,22,342/- i.e. to the extent of 1% of the total purchases worth Rs.2,22,34,239/- as against the disallowance of Rs.10,00,000/- made by the A.O. thereby giving a relief of Rs.7,77,658/-. While doing so, the CIT(A) has taken into account the turnover and net profit rate declared in the preceding two years and the fact that all the purchases were not found supported by authentic bills.
6. We have heard the ld. Representatives of the parties and records perused. We notice that the A.O. has made adhoc disallowance of Rs.10,00,000/- out of purchase of material on the ground that purchases vouchers supporting the purchase of materials were self-made vouchers. The CIT(A) restricted the disallowance to the extent of 1% of which calculation comes to Rs.2,22,342/- and allowed relief of Rs.7,77,658/-. We notice that the disallowance made by the A.O. 6 ITA No.387/Agr/2011 A.Y. 2008-09.
on lump sum is without any basis. Such disallowance is not sustainable in law. The CIT(A) has rightly appreciated the facts of the case by rightly considering various aspects of the business transaction, turnover, net profit, profit rate declared in previous year and found that to cover up petty deficiencies and in maintenance of vouchers, disallowance to the extent of 1% is reasonable. The Revenue has failed to point out any contrary material to the finding of the CIT(A). In the light of above discussion, we do not find any infirmity in the order of CIT(A). Order of the CIT(A) is accordingly confirmed.
7. The facts relating to ground no.3 are that the assessee debited Rs.1,39,36,110/- under the head labour charges. The assessee produced muster roll to support his claim. On examination, it was found that some of the bills were missing and vouchers were not maintained by the assessee. Payments were made in cash. The signatures and thump impression at many places in the muster roll were found inscribed in the same handwriting. Since the assessee did not produce complete bills and vouchers and failed to furnish satisfactory reply on the deficiencies pointed out by A.O., disallowance of Rs.6,96,806/- representing 5% of the total labour charges was made and added to the income of the assessee. The CIT(A) restricted the disallowance to Rs.1,39,360/- @ 1% of the total expenses on the ground that the A.O. did not bring on record any material to show that the 7 ITA No.387/Agr/2011 A.Y. 2008-09.
expenses were not incurred for the purpose of business or outside the assessee's books of count. He further observed that the A.O. has accepted the declared turnover of the assessee but has disallowed 5% of the labour charges mainly on the basis of presumption. He has also considered the decrease in turnover and lower net profit ratio of 1.52% as compared to the earlier years while restricting the disallowance to 1% of the total labour expenses.
8. We have heard the ld. Representatives of the parties and records perused. We find that the A.O. has disallowed 5% out of total labour expenses on the ground that there are certain discrepancies and mistakes in maintenance of the vouchers which were produced in support of claim of labour charges. The CIT(A) restricted the disallowance to the extent of Rs.1,39,360/- being 1% of the total expenses on the ground that the A.O. did not appreciate the facts of the case. However, the CIT(A) considered the other aspect of the business and also considered the profit rate and found that 1% disallowance is sufficient to cover up the lapses pointed out by the A.O. In the light of the detailed discussion made above while deciding ground no.2 in respect of disallowance out of purchase of material, following the said discussion, we do not find any infirmity in the order of CIT(A). Order of the CIT(A) is accordingly confirmed.
8 ITA No.387/Agr/2011
A.Y. 2008-09.
9. In the result, appeal of the Revenue is partly allowed.
(Order pronounced in the open Court)
Sd/- Sd/-
(BHAVNESH SAINI) (A.L. GEHLOT)
Judicial Member Accountant Member
PBN/*
Copy of the order forwarded to:
1. Appellant
2. Respondent
3. CIT (Appeals) concerned
4. CIT concerned
5. D.R., ITAT, Agra Bench, Agra
6. Guard File.
By Order
Sr. Private Secretary
Income-tax Appellate Tribunal, Agra
True Copy