2015 (10) TMI 1406 - AT - Income Tax

Tribunal allows higher depreciation rate on vehicles, emphasizes actual business activities over declarations.

The Tribunal allowed the appeal, directing the Assessing Officer to allow depreciation on vehicles at the higher rate of 30%. The Tribunal found that the ... Disallowance of part of depreciation claimed on vehicles - Held that:- Since the financial statements clearly prove that the assessee has received rental receipts on hiring of vehicles, we are of the view that the assessee is entitled to higher rate of depreciation at the rate of 30 per cent. Accordingly, we set aside the order of the learned Commissioner of Income-tax (Appeals) on this issue and restore the issue to the file of the Assessing Officer with a direction to allow depreciation on vehicles at the rate of 30 per cent. - Decided in favour of assessee for statistical purposes. Issues:Challenge to disallowance of depreciation claimed on vehicles at a higher rate.Analysis:The appeal was filed by the assessee challenging the order of the Commissioner of Income-tax (Appeals) confirming the disallowance of a part of depreciation claimed on vehicles for the assessment year 2006-07. The Assessing Officer had disallowed the excess claim of depreciation as she believed the assessee was not entitled to a higher rate of 30% depreciation meant for vehicles running on hire. The main contention was whether the vehicles were used for hire or for the main business activities of road construction and trading.During the hearing, the assessee's counsel presented the profit and loss account, highlighting that the assessee earned a significant income of Rs. 7.47 crores from hire/rental receipts, indicating that the vehicles were indeed used on hire. The Departmental representative, however, supported the decision of the Commissioner of Income-tax (Appeals).The Tribunal analyzed the facts and contentions of both parties. It noted that the rental receipts constituted a substantial portion of the total income, indicating that the assessee primarily earned income from hiring vehicles. The Assessing Officer had not properly examined the actual activities of the assessee and had relied on the declaration in the return of income. The Tribunal agreed with the assessee's counsel that the hiring of vehicles was evident from the rental receipts, which the tax authorities had overlooked. Therefore, the Tribunal set aside the Commissioner's order and directed the Assessing Officer to allow depreciation on vehicles at the higher rate of 30%.Conclusively, the appeal was allowed for statistical purposes, and the order was pronounced in open court on February 5, 2015, at Chennai.