TaxTMI 
TaxTMI 
2020 (1) TMI 500
X X X X Extracts X X X X
X X X X Extracts X X X X
....in deleting depreciation disallowance of Rs.84,86,809/- made by the Assessing Officer in assessment order dated 31.03.2015. The assessee's depreciation claim was on its commercial depreciation @ 30% on hire and other vehicles which stood restricted to 15% only during the course of assessment. The CIT(A)'s detailed discussion deleting the impugned depreciation disallowance reads as under:- "Ground No.3 is regarding disallowance of depreciation at the rate of 30% to the extent of Rs. 8486809/- claimed by the appellant. The basic facts are that the assessee is carrying on the business of civil construction in the North Eastern region. The assessee is using vehicles like Tippers, Tractor etc. For construction work. The appellant has been using the tippers both for own work and for hire. On such vehicles the company has charged depreciation at the rate of 30%. However the Assessing Officer has allowed depreciation at the rate of 15% only. it has been argued that the issue is covered by the orders of my predecessors in AY 2007-08 and AY 2010-11. In the AY 2007-08 in appeal No.754/CIT(A)-16/Kol/2014-15/C- 15(1)/Kol order dated 20/07/2016 it has been held as under:- 'I ha....
X X X X Extracts X X X X
X X X X Extracts X X X X
....o the AO. This method of accounting has been followed by the AO in previous year and no doubt were raised by the AO even in scrutiny assessment. In this connection reference may be made to the decision of the Apex Court in CIT vs. Excel Industries 358 ITR 295, where the court reiterated that the principal of consistency should be followed. The AO could not bring any material on record, to dispute the appellant's claim, that the vehicles and other equipments were deployed in difficult areas and therefore, entitle tougher rate of depreciation. The Assessing Officer's contention, that the explanation given by the A/R of the appellant, is an afterthought, and that no hiring charges have bee received, is not supported by facts. The tippers used by the appellant in its business are registered under the Motor Vehicles Act, 1988. They met the functional test as the basis for grant of 30% depreciation, and also on the ground that the higher depreciation is on account of rigorous and hard use of commercial vehicles, in comparison to the stationery and permanently installed machinery. These views find support in the decision of the Punjab and Haryana High Court in the ca....
X X X X Extracts X X X X
X X X X Extracts X X X X
....f 180 days or more to the tune of Rs. 32,78,346/- and deletion of Rs. 2,50,000/-. Apart from this, an amount of Rs. 4,22,77,628/- is declared as additions to the block for a period less than 180 days. In serial No. 12 and 13 of that Schedule, assessee clearly declared 'Additional depreciation', if any as Nil. Therefore, AO was of the view that that the assessee willfully misled the department by over claiming depreciation for the plant and machinery for which it is eligible to claim at the rate of 15%,depreciation only. In an exceptional nature of usage, it should mention the claim on the return itself by showing the amount of additional depreciation. The AO noted that in course of the assessment proceedings, the assessee came up with new claim of partial usage to show a part of its motor vehicles for hiring purpose to justify its claim of excess depreciation. 6. In response, the assessee submitted the written reply to the assessing officer as follows: "........ the assessee company is carrying on business of civil construction and manufacturing of construction material. It is doing civil construction in various places in India particularly in North E....
X X X X Extracts X X X X
X X X X Extracts X X X X
....been claiming depreciation @ 30% on vehicles used in their business on the grounds of them been deployed in difficult areas including North East. The assessee had made the same claim in assessment year 2009- 10, which was disallowed by the A.O. The CIT(A)-16, Kolkata had deleted the addition and allowed depreciation at higher rate in A.Y.2009-10. Thus, clearly shows that the assessee in past assessment orders, have also been claimed depreciation at higher rate. The contention of the A.O., that explanation given is an afterthought, which is offered only after discovery of excess depreciation by the department, is not correct, and not supported by the facts. Regarding hire charges, the Counsel for the assessee has submitted before us that the Assessing Officer had not asked for details of hire charges received against the tippers given on hire. Such details could have been provided if asked for. The Counsel of the assessee also submitted that the vehicles were given on hiring to person against whom the assessee received services in the form of goods, labour supply etc. The hiring charges receivable are adjusted against payments to be made to these persons. These facts have b....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he assessee in its business are registered under the Motor Vehicles Act, 1988. They met the functional test as the basis for grant of 30% depreciation, and also on the ground that the higher depreciation is on account of rigorous and hard use of commercial vehicles, in comparison to the stationery and permanently installed machinery. These views, find support in the decision of the Punjab & Haryana High Court in the case of CIT vs. Rakesh Jain [2013] 350 ITR 230 (P&J). Therefore, taking into account the submission of the Counsel and relevant assessment records, the addition of Rs. 85,17,966/-, made by AO, on account of additional depreciation claim on higher rate, should be deleted. That being so, we decline to interfere with the order of Id. CIT(A) in deleting the aforesaid addition. His order on this addition is, therefore, upheld and the grounds of appeal of the Revenue is dismissed." We adopt the judicial consistency in this backdrop of facts to affirm the CIT(A)'s findings under challenge deleting the impugned depreciation disallowance. This first substantive grievance is rejected. 6. Next comes section 2(22)(e) deemed dividend addition of Rs.1,22,47,57....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ort from the decision of the Hon'ble Jurisdictional High Court in the case, of Pradip Kumar Malhotrat (supra), which had been relied upon by the }d. CIT(A) in deleting the addition made by the At). The facts of such case [in the case of Pradip Kumar Malhotra] are reproduced herein below for die sake of convenience; - " 338 ITR 538(Cal) in the case o(Pradip Kumar Malhotra "The assesses had substantial shareholding in a company. He had mortgaged his valuable immovable property with the hank as a security for the loan facility enjoyed by that company. Consequently, the company passed a resolution authorising the assessee to obtain interest fixe deposit up to Rrs.50 lakhs as and when required from it When the assessee required funds for his personal needs, he requested the said company to purchase the said property or to release the same so that he could sell it to some other person The company was unable to purchase the property or to release same from mortgage. It, therefore, gave a Sum of &.20,75,000 to the assessee as security deposit. While making assessment, the Assessing Officer added said sum to the assessee's income as deemed dividend On appeal, the C....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e impugned order of the Ld. CIT(A), who has rightly deleted the addition made by the AO. We uphold the same. Ground nos. 1 & 2 s of revenue's appeal are dismissed. " It is observed that in the case of Zenon India (Supra) the loan was given at the rate of 9%.The Hon'ble Tribunal has held that since the loan has been taken on the basis of a commercial consideration which is beneficial to the company therefore such advance cannot be treated as deemed dividend within the amendment of section 2(22)(e). In the impugned case also the facts are similar and the loan carries an interest @ 9% per annum. Therefore, section 2(22)( e) would not apply. Respectfully following the decision in Zenon India (Supra) the .addition made by the Assessing Officer of Rs. 12247571/- is hereby deleted." 7. Learned departmental representative vehemently contends during the course of hearing that the CIT(A) has erred in law and on facts in deleting the impugned deemed dividend addition despite the fact that the assessee's case satisfies the minimum shareholding benchmark in case of both the entities. He fails to rebut the clinching fact that the assessee has paid interest @ 9% to M/s Capital....
X X X X Extracts X X X X
X X X X Extracts X X X X
....2(22)(e), but the Id. CIT(Appeals) did not approve the action of the Assessing Officer after having noticed that interest at the rate of 9% per annum was paid by the assessee on such loan, which, according to him, was a consideration received from her shareholders, which was beneficial to the Company and the order of the Id. CIT (Appeals) giving relief to the assessee was upheld by the Tribunal vide its order dated 29.06.2015 passed in ITA No. 1124/KOL/2012 by relying on the decision of the Hon'ble Calcutta High Court in the case of Pradip Kumar Malhotra (supra). Keeping in view the said decision of the Hon'ble Calcutta High Court which has been followed by the Coordinate Bench of this Tribunal in the case of M/s. Zen on (India) Pvt. Limited (supra), we hold that the addition made by the Assessing Officer and sustained by the Id. CIT(Appeals) under section 2(22)(e) on account of loan received by the assessee from M/s. Surya Business Pvt. Limited on which consideration in the form of interest was paid by the assessee to the benefit of the Company is not sustainable. We, therefore, delete the same and allow Grounds No. 1 & 2 of the assessee's appeal." We adopt the fore....