M/S. Manchukonda Prakasham Industries ... vs Department Of Income Tax
- CitationI.T.A. No. 514/HYD/2014
Ratio decidendi
The rule this decision rests on
On the depreciation ground: where the assessee uses trucks to transport its own customers' goods for transport charges received, the trucks are "given on hire" within the meaning of the depreciation provision, so the higher rate of 30% applies; the word "hire" is construed in its ordinary dictionary sense as compensation for the use of a thing or for services, and the fact that the assessee also uses the vehicles in its own manufacturing business does not defeat that conclusion where the vehicles are exclusively so used for remunerated carriage. On the written-down value ground: for computing the closing written-down value of a block of assets, only the depreciation actually allowed in the earlier year is deducted, and the Assessing Officer cannot substitute the depreciation that might have been allowed under a different rate or half-year computation. On the section 14A ground: where the Assessing Officer has made a disallowance without giving any basis for the computed figure, the appellate authority should not delete the addition in toto when the assessee has earned exempt income and has made no disallowance itself; instead the matter is to be remitted to the Assessing Officer to recompute the disallowance under section 14A read with Rule 8D, after affording the assessee a fair opportunity of hearing.
Written by Miss Lucy from the judgment below, not taken from a headnote.
Judgment
As delivered
Deputy Commissioner M/s. Manchukonda of Income Tax, Vs Prakasham Industries India Circle-16(2), Pvt. Ltd., HYDERABAD HYDERABAD
[PAN: AAFCM8584K]
(Appellant) (Respondent)
For Revenue : Shri Rama Krishna, Bandi, DR For Assessee : Shri T. Chaitanya Kumar, AR
Date of Hearing : 06-05-2015 Date of Pronouncement : 08-05-2015
ORDER
PER Smt. P. MADHAVI DEVI, J.M. :
In this appeal, the Revenue has raised the following Grounds of Appeal:
" 1. The order of the CIT(A) is erroneous in law and on facts of the case.
2. The CIT(A) ought to have appreciated the addition towards depreciation as the assessee company is entitled for a depreciation @ 15% where the trucks were used for own business and not hired out.
3. The CIT(A) erred in allowing excess depreciation of Rs. 5,32,630/- on trucks in excess of maximum entitled depreciation on trucks @ of 50%.
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4. The CIT(A) ought to have appreciated the addition towards disallowance u/s. 14A.
5. Any other ground(s) that may be urged at the time of hearing".
2. Ground No.1 is general in nature and needs no adjudication. As regards ground No.2, the brief facts are that, assessee-company filed its return of income for the relevant assessment year on 14-10-2010 declaring income of Rs. 21,69,37,458/-. During the assessment proceedings u/s. 143(3) r.w.s. 144A of Income Tax Act [Act], Assessing Officer (AO) observed that the assessee-company has claimed depreciation on trucks @30%. He held that assessee would be eligible for depreciation @ 30% only if the trucks are given on hire and since the assessee was using the trucks for its own business, he held that the depreciation is allowable only at 15%. Aggrieved, assessee preferred appeal before the CIT(A), who allowed the same by following the decision of the Tribunal in assessee's own case for the Assessment Year (AY) 2007-08. Aggrieved, Revenue is in appeal before us.
3. The Ld. DR supported the order of AO while Ld. Counsel supported the order of CIT(A) and has filed a copy of the order of this Tribunal in assessee's own case for the AY. 2007-08, wherein after discussing the issue at length, the Tribunal has held as under:
"17. Ground No.11 relates to disallowance of claim of depreciation at the rate of 30% on trucks. It was claimed before the AO in course of assessment proceedings that the assessee is using trucks for transportation of manufacture poles from the factory to various customers. The assessee is maintaining a separate account towards transport charges received from customers towards transportation of goods and has also claimed expenditure towards cost of transportation. The AO however disallowed the claim of depreciation at 30% on the ground that the assessee was using trucks in his own business and therefore restricted depreciation to 15%. The AO held that as the assessee is not in the business of running trucks on hire, it is not eligible for claiming depreciation at 30%. Before CIT(A), the assessee reiterated its stand as was taken before the AO. The CIT(A) found that the assessee had maintained a separate account :- 3 -:
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showing receipts from transportation and has shown relevant expenditure separately. However, the CIT(A) came to conclusion that on that basis it cannot be said that the trucks were being used for providing them on hire to others. The CIT(A) observing that the transportation was being used by the appellant in his own business of manufacturing poles which include transportation from the business premises to the customers, therefore, the claim of depreciation as provided for trucks running on hire cannot be allowed to the assessee.
18. We have heard the rival contentions on the issue. The word 'hire' has not been defined in the Act. The dictionary meaning of 'hire' means 'compensation for the use of thing or for labour or services'. From the aforesaid meaning of word 'hire', it is quite clear that even in case of goods having transported from one place to another for consideration, it has to be held that the vehicle has been given on hire for transporting goods of the customer. Since in the present case, it has been found on record that the trucks were exclusively used for transportation of goods of the customers on receipt of transportation charges, it can be said that the trucks have been given on hire to the customers and as such is eligible for depreciation at the rate of 30%. In view of the above, this ground of the assessee is allowed".
Since, the facts and circumstances are similar for the relevant assessment year before us, we do not see any reason to interfere with the order of CIT(A) and Revenue's ground is rejected.
4. As regards ground No.3, the brief facts are that, the assessee had purchased six new trucks during the AY.2009-10 and thus made addition of Rs. 1,06,52,614/- and claimed depreciation @ 15% (half of 30%), since assets were used for less than 180 days and the closing WDV was shown at Rs. 90,54,722/-. In the AY. 2010-11, the assessee- company had claimed depreciation on the block of assets at 50% on the opening WDV. The AO held that the assessee was eligible for depreciation @ 25% (half of 50%) in the year of purchase and therefore the depreciation to be allowed in AY. 2009-10 was Rs. 26,63,153/-. He therefore adopted the opening WDV of AY. 2010-11 at Rs. 79,89,461/- and allowed 50% as depreciation thereon. Aggrieved, assessee preferred an appeal before CIT(A), who held that the AO cannot substitute another figure for depreciation allowed for the AY. 2009-10 and that only the actual depreciation allowed while computing the total income for the :- 4 -:
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relevant assessment year should be considered. He therefore re-worked the depreciation by reducing the actual depreciation allowed for the AY. 2009-10 from the total cost of new trucks to arrive at the opening WDV as on 01-04-2009 at Rs. 90,54,722/- and allowed depreciation thereon at 50%. Aggrieved, the Revenue is in appeal before us. While the Ld. DR supported the order of AO, the Ld. Counsel for the assessee supported the order of CIT(A).
5. We find that the assessee had claimed depreciation @ 30% instead of 50% in the AY.2009-10 and therefore closing WDV was worked out after reducing the said depreciation @ 15% since the assets were used for less than 180 days. As rightly held by the CIT(A), only the actual depreciation allowed should be considered for arriving at the closing WDV and it cannot be substituted with another figure. Closing WDV has to be worked out after reducing the actual depreciation allowed and not what was to be allowed. Therefore, we see no reason to interfere with the order of CIT(A) on this issue. Hence, this ground is rejected.
6. As regards ground No.4, we find that the assessee had earned dividend income during the relevant assessment year but did not make any disallowance u/s. 14A r.w.r. 8D of the Act. The AO therefore worked out the disallowance u/s. 14A r.w.Rule 8D of I.T. Rules at Rs. 3,77,083/- and disallowed the same u/s. 14A. Aggrieved, the assessee preferred an appeal before the CIT(A), who allowed the same holding that the AO has not given any basis for computing the figure at Rs. 3,77,083/-. Against such relief given by CIT(A), the Revenue is in appeal before us.
7. While Ld. DR supported the order of AO and Ld. Counsel for the assessee supported the order of CIT(A).
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8. Having regard to the rival contentions, we find that assessee had claimed dividend income as exempt u/s. 10(34) of the Act, but did not make any disallowance u/s. 14A of the Act nor did it claim that no expenditure was incurred for earning of such exempt income. We agree with the findings of CIT(A) that the AO has not given any basis for computing the figure at Rs. 3,77,083/-. However, we are of the opinion that in such circumstances, the CIT(A) ought to have directed the AO to furnish the computation of disallowance u/s. 14A instead of deleting the said addition in toto. There is no dispute that the provisions of Section 14A r.w.r. 8D are applicable to the relevant assessment year. In view of the same, we deem it fit and proper to remit this issue to the file of AO with a direction to re-compute the disallowance u/s. 14A in accordance with law. Needless to mention that assessee should be given a fair opportunity of hearing. In the result, this ground is treated as allowed for statistical purposes.
9. In the result, the Revenue's appeal is partly allowed for statistical purposes.
Order pronounced in open Court on 8th May, 2015
Sd/- Sd/- (P.M. JAGTAP) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER
Hyderabad, Dated 8th May, 2015
TNMM :- 6 -: I.T.A. No. 514/Hyd/2014
M/s. Manchukonda Prakasham Industries India Pvt. Ltd
Copy to :
1. Deputy Commissioner of Income Tax, Circle-16(2), Room No. 611, 6th Floor, Aayakar Bhavan, Basheerbagh, Hyderabad.
2. M/s. Manchukonda Prakasham Industries India Pvt. Ltd., Manchukonda House, 6-3-347/12/A/12/3, Dwarakapuri Colony, Punjagutta, Hyderabad.
3. CIT(Appeals)-V, Hyderabad
4. CIT-IV, Hyderabad
5. D.R. ITAT, Hyderabad
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