Mere transporting goods to customers not enough to claim higher depreciation unless assessee is in business of transportation or running trucks on hire
ABCAUS Case Law Citation:
ABCAUS 2925 (2019) (05) ITAT
The appeal was filed by the Department (the Revenue) against the order of the Commissioner of Income Tax (Appeals) in deleting the addition made by the Assessing Officer (AO) on account of depreciation and in allowing the depreciation @30% on dumpers which were used for in own business by the assessee.
The assessee was a Private Limited Company engaged in the business of mining and crushing of stones. The case was picked up for scrutiny followed by serving of notices u/s 143(2) and 142(1) of the Income Tax Act, 1961 Act (the Act).
Various details were called for and duly replied by the assessee. The assessee had claimed depreciation @30% applicable for vehicles running on hire but the AO was of the view that the assessee was eligible to only 15% depreciation.
The AO disallowed the excess depreciation along with other additions and assessed the income.
Aggrieved assessee preferred an appeal before the CIT(A) who deleted the disallowance for depreciation rate.
The revenue was in appeal before the Tribunal raising sole issue of deleting disallowance of depreciation by the CIT(A).
It was argued that the assessee was not into the business of transportation and therefore, addition of depreciation claimed on vehicles for running them on hire should not be allowed.
The Tribunal noted that the grievance of the revenue was confined to deletion of disallowance of depreciation claimed by the assessee @ 30% on dumpers/trucks used by the assessee for its own business.
Under the provision of the Act, depreciation @ 30% is allowed on the cost/WDV of motor buses, motor lorries and motor taxies used in a business of running them on hire.
The Tribunal further observed that the CIT(A) allowed the assessee’s claim of 30% depreciation treating the vehicles as having been used for hire and transportation by taking a view that where the goods were transported from one place to another and there may be one person who may take the service of one vehicle for transportation or there may be many, it does not make any difference.
The Tribunal opined that from the finding of the CIT(A) it did not transpire as to whether the assessee who was mainly into the business of quarrying, crushing and sale of stones, earned or received any amount towards freight on transportation charges for providing the services of transporting stone to site of the customers by use of its dumpers.
The Tribunal was of the view that just because the assessee was transporting the excavated stones to the site of the customers, it cannot be presumed that the assessee was into business of transportation or running the dumpers on hire.
The Tribunal opined that the CIT(A) ought to have examined this fact by calling necessary details from the assessee including sales bills or other receipts which could prove that transportation or freight charges were charged by the assessee to its customers for sending the goods to the site of the customer which may prove that business of hiring or transportation was parallely carried by assessee.
Accordingly, the Tribunal set aside the issues to the file of the CIT(A) for afresh adjudication.