TaxTMI 
TaxTMI 
2018 (4) TMI 17
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....n by the appellant, wherein the H'ble High Court had held that it is not necessary that running on hire must be the main business of the appellant; it can be incidental to the main business also. The Court also held that higher rate of depreciation should be allowed, even if the rent from hire of vehicles are not charged separately; whereas in the case of appellant, the rent is charged separately. 3. The facts of the issue are that the assessee owns certain vehicles (i.e., Mahindra Logan and Omni Cargo and Tata Ace Pickup), which are running on hire. On such vehicles the assessee claimed higher rate of 30% which is the rate of depreciation applicable for vehicles running on hire, for the reasons given below: a) Mahindra Logan is used by the assessee to transport tourist guests staying in the Hotel. The income derived from the above activity is grouped under the head 'Travel Assistance and Taxi' and offered to tax. b) Similarly Omni Cargo and TATA Ace pick up van are used in catering business of the assessee, the income of which is included under the head 'Restaurant income' and offered to tax. However the Assessing Officer restricted the depreciation on vehicles used by the a....
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....ted that the CIT(A) had in assessee's own case accepted the above decisions and allowed the increased depreciation claimed by the assessee for the AY 2007-08 and the same should be allowed in the AY 2009-10 also. Hence, it was submitted that the claim of increased depreciation is to be allowed. 6. The Ld. DR relied on the orders of the lower authorities. 7. We have heard the rival submissions and perused the material on record. A similar issue came up for consideration before the Co-ordinate Bench of this Tribunal in the case of The Baliapatam Tile Works Limited vs. DCIT in ITA No. 147/Coch/2014 dated 04/07/2014 wherein the Tribunal after considering the Judgment of the Jurisdictional High Court in the case of CIT vs. Dr. KR Jayachandran (supra) held as under: "7. We have heard both the parties and perused the record. In this case, we have come across a co-ordinate bench decision in the case of Mathew Abraham vs. ACIT in I.T.A. No. 92/Coch/2013 vide order dated 16/08/2013 wherein it was held that the assessee being not engaged in the business of running the vehicles on hire, the assessee is not entitled for a higher rate of depreciation on the vehicles used in his own business.....
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....d by the appellant on the observations of the Hon'ble Supreme Court that the true test is "the user of the same in the business of the assessee of transportation" is misplaced. What the Hon'ble Supreme Court has said is that the vehicles should be used in the business of transportation of the assessee i.e.. the business of assessee should be transportation. Since in this case the assessee is not in the business of transportation and transportation of metal is just incidental to the business of sale of metal to Railways/Public, the reliance placed by the appellant is not correct. During the appellate proceedings as noted vide order sheet entry dated 26-11-2012, the Council of the appellant stated that no vehicle was given on hire to any party. In view of the above, it is held that assessee is not in the business of running of vehicles on hire". 8. Admitted facts are that the assessee is engaged in the business of selling of metals and the assessee has used his own vehicles for transporting the metals mainly to Railway yard. According to the assessee, the transportation charges are paid separately by the Railways and hence the Vehicles should be considered as run on hire. 9. The ....
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....ansport the metals to the place specified by the Railways. Since the assessee was required to transport the metals to different places, it was advantageous for both the assessee as well as for the Railways to fix a price for the 'metals' and to fix transport charges separately. Hence, the transportation of metals in the vehicles owned by the assessee is part of the business carried on by the assessee, viz., operating a quarry and supplying crushed metals. Hence, we agree with the view expressed by the Ld. CIT(A) that the transportation is incidental to the business of sale of metal to Railways/public. Accordingly, we concur with the view of Ld CIT(A) that the assessee was not engaged in the business of running the vehicles on hire. 11. We notice that a similar view has been expressed by the Hon'ble Madhya Pradesh High Court in the case of Kailash Chand Bagaria Vs. CIT and Another (249 ITR 720). In the said case, the assessee therein was engaged in the business of manufacture and trading in limestone. He also used trucks for transporting limestone and claimed a higher rate of depreciation. The Hon'ble High Court held that the dominant purpose for which the assessee used the trucks....
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....e confirm his order. 13. In the result, the appeal filed by the assessee is dismissed." 7.1 In view of the order of the Co-ordinate Bench, we are inclined to dismiss Ground No. 2 taken by the assessee. 8. Ground no. 3 is with regard to disallowance U/S.14A of the IT Act which reads as follows: The ld. CIT(A) erred in confirming the disallowance made by the Assessing Officer u/s. 14A of the IT Act, r.w.s. 8D in respect of the investments made by the appellant in the shares of Harmonia Ayurveda Health Gardens Pvt. Ltd. The Learned CIT(A) ought to have noted that the appellant had not earned any dividend from the above investments. The Learned CIT(A) omitted to note that provisions of sec. 14A of the IT Act, r.w.r. 8D has not application in appellant's case since the investments made by the appellant were not for the purpose of earning exempt income, but for getting the advantage of synergy of having hotel properties at various tourist locations. The Learned CIT(A) erred on holding that the purpose and mode of making the investments are not relevant while applying the provisions of sec. 14A of the IT Act. 8.1 The facts of the case are that the assessee-company is engaged in the....
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....ent during the year. 8.4 The Ld. AR relied on the following case laws in support of its stand: a) No disallowance if there is no exempt income The ITAT Cochin Bench in the case of PTL Enterprises Ltd (ITA No. 200/Coch/2015 held relying on various settled judicial decisions that disallowance u/s 14A cannot exceed exempt income and since there was no exempt income declared and claimed by the said assessee, the disallowance made by AO and sustained by CIT (A) was deleted. The Ld. AR submitted that this case was identical to the assessee's case. It is not disputed that the assessee has not earned exempt income from investments in Harmonia. Hence, it was submitted that the disallowance made is against the settled law and hence requires to be deleted. b) No disallowance u/s.14 A if the investment made is not meant to earn any exempt income The ITAT Chennai Bench held in the case of L & T Infrastructure Development Projects Ltd. v. ITO (58 Taxmann.com 165 -2015) that expenses and interest attributable to investments made by the assessee in Special Purpose Vehicles (SPV) could not be disallowed u/s.14A r.w.r 8D of the IT Act, as it could not be termed as expenses incurred fo....
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....the decision of the Mumbai Tribunal in the case of JM Financial Ltd .v. ACIT (Mum.)(Trib.) wherein the Tribunal held that no disallowance shall be made u/s. 14A in respect of strategic investment in the absence of tax free income. e) No disallowance U/S.14A, r.w.r. 8D in respect of borrowed funds, if the assessee has not received exempt income The Ld. AR relied on the judgment of the Gujarat High Court in the case of CIT v. Corrtech Energy Pvt Ltd (272 CTR 262/223 Taxman 130) where it was held that no disallowance u/s 14A, r.w.r 8D can be made in respect of interest expenditure if the assessee has not earned any exempt income. The Ld. AR also relied on the decision of the ITAT Chennai Bench in the case of SIVA Industries Holding Ltd v. ACIT (145 TTJ 497) wherein it was held that if the investments made by the assessee had generated any dividend income which had been claimed by the assessee to be not to form part of total income, no disallowance u/s.14A could be made, even towards interest borrowed funds used for making investments. The Ld. AR also relied on the judgment of the P&H High Court in the case of CIT v. M/s. Lakhani Marketing Inc. (272 CTR 265) wherein i....