Court rules in favor of assessee on Section 40(a)(ia) proviso, disallowance unsustainable. Depreciation appeal dismissed for hire use.

The court held that the respondent assessee was entitled to the benefit of the proviso added to Section 40(a)(ia) by the Finance Act, 2010, making the disallowance under this section unsustainable. Regarding the rate of depreciation on trucks, the court dismissed the appeal as the motor lorries were found to be used for hire and revenue generation in the business of transportation of goods, aligning with relevant precedents.

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Issues:
1. Addition under Section 40(a)(ia) of the Income Tax Act, 1961.
2. Rate of depreciation on trucks.

Analysis:

Issue 1:
The first issue pertains to the additions made by the Assessing Officer under Section 40(a)(ia) of the Income Tax Act, 1961. The dispute revolves around the timing of depositing tax deducted at source with the government. While the revenue argued that the tax was deposited after the end of the relevant Assessment Year, it was admitted that the deposit was made before the due date of filing the return. Citing a previous decision in Commissioner of Income Tax Vs. Naresh Kumar, the court held that the amendment to Section 40(a)(ia) by Finance Act, 2010 has retrospective effect. Consequently, the respondent assessee was deemed entitled to the benefit of the proviso added to Section 40(a)(ia) by the Finance Act, 2010, leading to the disallowance under this section being unsustainable.

Issue 2:
The second issue raised in the appeal concerns the rate of depreciation on trucks. The Tribunal relied on Circular No. 652 dated 14.06.1993 issued by the Central Board of Direct Taxes (CBDT) to determine the applicable rate of depreciation. The circular clarified that higher depreciation is admissible on motor lorries used in the business of transportation of goods on hire. The Tribunal's factual findings indicated that the assessee had contracts with third parties for transporting coal and iron, demonstrating that the motor lorries were indeed used for hire and revenue generation. This aligns with the Supreme Court's stance in Commissioner of Income Tax Vs. Gupta Global Exim (Pvt.) Ltd., emphasizing that the crucial test is whether the assessee was in the business of transportation and if the vehicles were used for that purpose. Given the Tribunal's factual findings, the court saw no reason to entertain further proceedings on this issue, leading to the dismissal of the appeal.

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