1983 (9) TMI 144 - AT - Income Tax

Tribunal upholds Commissioner's order on transport costs & crane depreciation for assessment year 1979-80

Narsimha & Sons. Versus Income-Tax Officer

Narsimha & Sons. Versus Income-Tax Officer - ITD 017, 532, Issues:- Appeal against the order of Commissioner under section 263 of the Income-tax Act, 1961 for the assessment year 1979-80.- Allowance of Rs. 50,000 as a revenue deduction and acceptance of depreciation at 30% on a second-hand crane purchased by the assessee.- Determination of whether the expenditure on transport of the crane and the depreciation rate on the crane were correctly allowed.Analysis:1. The appeal was filed by the assessee, a registered firm engaged in transport contracting, against the Commissioner's order under section 263 of the Income-tax Act, 1961 for the assessment year 1979-80. The Commissioner found the allowance of Rs. 50,000 as a revenue deduction and the acceptance of depreciation at 30% on a second-hand crane purchased by the assessee to be erroneous and prejudicial to the revenue. The Commissioner issued a notice under section 263 and enhanced the assessee's income by Rs. 75,000 based on these findings.2. The assessee contended that the expenditure on the transport of the crane should be treated as revenue expenditure, citing the need for the crane in their business operations. The representative for the assessee argued that the crane was necessary for unloading wagons and was a current business asset, justifying its treatment as a revenue deduction. The assessee also claimed that the crane could be classified as earth-moving machinery, entitling it to a 30% depreciation rate. However, the Commissioner disagreed with these arguments and enhanced the income of the assessee.3. The Tribunal analyzed the records and arguments presented. Regarding the transport cost of the crane, it was determined that the crane itself is a capital asset, and the transport cost is part of the overall cost of the asset. The Tribunal upheld the Commissioner's order, stating that such costs are generally treated as capital expenditure in accounting practice, irrespective of the tax implications. The Tribunal emphasized the importance of adhering to general accounting practices and relevant laws in determining the treatment of such expenditures.4. In terms of the depreciation rate on the crane, the Tribunal found that the ITO had not properly considered the arguments presented by the assessee. The Tribunal noted that the entries cited by the assessee to support their depreciation claim were not applicable to the specific nature of the crane's use. Despite the assessee's attempts to justify a higher depreciation rate based on the specialized nature of the machinery, the Tribunal concluded that no special rate had been prescribed for such equipment. Therefore, the Tribunal dismissed the appeal, upholding the Commissioner's decision on the depreciation rate.5. In conclusion, the Tribunal dismissed the appeal, affirming the Commissioner's order under section 263 of the Income-tax Act, 1961 for the assessment year 1979-80. The Tribunal upheld the disallowance of the revenue deduction for transport costs and the depreciation rate claimed by the assessee on the second-hand crane, emphasizing the importance of adhering to established accounting practices and relevant legal provisions in such matters.