Income Tax Appellate Tribunal - Delhi
J.J. Earthmovers Pvt. Ltd.,, New Delhi vs Department Of Income Tax on 17 May, 2011
IN THE INCOME TAX APPELLATE TRIBUNAL
DELHI BENCH `D': NEW DELHI
BEFORE SHRI C.L.SETHI, JUDICIAL MEMBER AND
SHRI A.N. PAHUJA, ACCOUNTANT MEMBER
I.T. A. No.3621/Del/2011
Assessment Year : 2006-07
Asstt. Commissioner of Income-tax, M/s. J.J. Earthmovers Pvt. Ltd.,
Circle 4(1), New Delhi. Vs. South Apartment, FF-5,
Sri Aurbindo Marg, New Delhi.
PAN: AABCJ5300L
(Appellant) (Respondent)
Appellant by : Ms. Y. Kakkar, DR.
Respondent by : None.
ORDER
PER C.L. SETHI, JUDICIAL MEMBER:
The revenue is in appeal against the Commissioner of Income-tax (Appeals)'s order dated 17.05.2011 passed by him in the matter of an order passed by the Assessing Officer under sec. 154 of the Income-tax Act, 1961 (the Act), dated 31.01.2011 for the Assessment Year 2006-07.
2. The main effective grounds raised by the revenue are as under:-
"02. On the facts and in the circumstances of the case and in law, the learned CIT(Appeals) has erred in deleting the addition of Rs.32,32,571/- made on account of excessive depreciation on Volvo FM-9.
2.1. The Ld. CIT(A) ignored the finding recorded by the AO and the fact that the vehicles in question have been used by the 2 assessee for its own business and are entitled for depreciation @ 15% and not 30% as claimed by the assessee."
3. We have heard the learned Departmental Representative and perused the material on record.
4. In this case, the assessee filed its return of income on 11.11.2006 declaring total income at Rs.46,78,318/-. The case was selected for scrutiny and thereafter, after hearing the assessee, an assessment order under sec. 143(3) of the Act was passed on 18.12.2008 whereby the returned income of Rs.46,78,318/- was accepted by the AO. Thereafter, the AO had issued a notice under sec. 154/155 on 27.07.2010 proposing to rectify the assessment order by disallowing depreciation to the extent of Rs.32,32,571/- in respect of Volvo FM 9 Tipper. The assessee submitted its reply dated 10.05.2010 and after considering the assessee's reply, the AO passed a rectification order under sec. 154 of the Act, dated 31.01.2011, where he disallowed depreciation amounting to Rs.32,31,571/- by applying rate of depreciation at 15% as against 30% claimed in the return.
5. Being aggrieved, the assessee preferred an appeal before the leaned CIT(A), who cancelled the AO's order passed under sec. 154 by concluding as under:-
"5.5 The perusal of the depreciation table reproduced above reveals that in respect of commercial vehicles purchased during the accounting year relevant to assessment year 2006- 3 07, no special rate of depreciation has been prescribed therein. There is also no dispute over the fact that the assessee company is engaged in the business of hiring of machines (which include tippers also) to Western Coal Fields (WCL), a subsidiary of coal India Ltd. (CIL) and it has received hiring charges (which has been shown as transportation charges in the profit and loss account) to the extent of Rs.8,58,87,323/- during the year under consideration. This means that the tippers were used by the assessee in its business of running them on hire. Under sub- item 3(ii) of Item III, higher rate of depreciation is admissible on motor buses, motor lorries and trucks used in a business of running them on hire. What is relevant for consideration under sub-item 3(ii) of Item III of New Appendix I to the Income-tax Rules, 1962 is whether the assessee was engaged in the business of hiring out its motor buses, motor lorries and trucks. The supporting evidences such as letter of intent & award of work for the hiring of HEMM, Tippers, Drills and Dozers etc. clearly indicate that the assessee was engaged in the business of hiring out its tippers and the tippers were used in the said business. In view of the aforesaid, it is held that the appellant is entitled to depreciation at the rate of 30% which is admissible on motor buses, motor lorries and motor taxis used in a business of running them on hire. As a result, Grounds of appeal No.2 to 6 are allowed."
6. In this case, we find that the AO has reduced the rate of depreciation from 30% to 15% on Volvo FM 9 Tipper by way of rectification order passed under sec. 154 of the Act. It is well settled that a mistake, which is apparent from record, can only be rectified by way of an order under sec. 154 of the Act. The question as to whether Volvo FM 9 Tipper are classified under the items (motor buses, motor lorries and motor taxis) used in a business of running them on hire, in respect of which depreciation @ 30% is prescribed in the Act, is a debatable and can only be decided after a 4 due process of reasoning in the light of the facts and circumstances of the given case. In the present case, the assessee claimed depreciation @ 30% and in the assessment order u/s 143(3), the assessee's claim was accepted. The AO has stated in the order under sec. 154 of the Act that since the assessee, being a transport contractor, was using the vehicle for its own use, it would not be entitled to the higher rate of depreciation, which is available to the cases of vehicles used in a business of running them on hire. In the present case, the assessee company is engaged in the business of transportation and loading of coal and allied material with Western Coal Fields, a subsidiary of Coal India Ltd. The transportation work has been done with the help of tippers/trucks attached with hydraulic jack. The Ld. CIT(A) has examined the letter of intent and award of work for the hiring of HEMM, Tippers, Drills and Dozers etc. and has come to a conclusion that the assessee was engaged in the business of hiring out its tippers and the tippers were used in the said business. In these circumstances, the question as to whether the assessee used tippers in a business of running them on hire or the assessee used them for its own use, is a matter of debate, and can only be decided after due process of reasoning. This aspect of the matter cannot, by any stretch of imagination, be considered to be a matter covered by expression `mistake apparent from record'. In this view of the matter, we 5 are, therefore, of the considered view that the order under sec. 154 of the Act, passed by the AO, was beyond the scope and ambit of the provisions contained in sec. 154 of the Act and is liable to be cancelled. We, therefore, cancel the AO's order passed under sec. 154 and dismiss this appeal filed by the revenue.
7. In the result, the appeal filed by the revenue is dismissed.
8. This decision was pronounced in the Open Court on 21st September, 2011 immediately after the hearing was over.
Sd/- Sd/-
(A.N. PAHUJA) (C.L. SETHI)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated: 30th September, 2011.
Copy of the order forwarded to:-
1. Appellant
2. Respondent
3. CIT
4. CIT(A)
5. DR
By Order
*mg Deputy Registrar, ITAT.