TaxTMI 
TaxTMI 
2020 (1) TMI 769
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....r during the hearing of this appeal." 2. The only issue in dispute in the present appeal before us is whether the assessee is eligible for higher rate of depreciation at the rate of 30% or the normal rate of depreciation at the rate of 15% on the vehicles used by the assessee in the business of promotional activities in rural markets of India. 3. During assessment proceedings, the Assessing Officer raised a query about this issue, in response to which, the assessee submitted justification. However, the Assessing Officer did not accept the assessee's justification for higher rate of depreciation at the rate of 30% and restricted the depreciation to 15%. The relevant portion of the assessment order is reproduced as under :- '"2. During the assessment proceedings the detailed submissions filed by the assessee have been duly perused and it was noticed that assessee has charged depreciation @ 30% p.a. amounting to Rs. 34,19,477/- and Rs. 4,95,796/-respectively on commercial video vans and commercial vans body instead of 15% as prescribed by the Income Tax Rules, 1962. The AR of the assessee was specifically asked about the same vide note sheet entry, dated 06/11/2....
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....ix-I, to the Income-tax Rules, 1962. The said table gives rates at which depreciation is admissible. Under sub-item 2(ii) of Item III, higher rate of depreciation is admissible on motor trucks used in a business of running them on hire. Therefore, the user of the same in the business of the assessee of transportation is the test. In the present case, none of the Authorities below (except the AO) has examined the matter by applying the above test. The AO has given his findings that the assessee was not in the business of trading in timber logs. That, the burden was on the assessee to establish that it is the owner of motor lorries and that it used the said motor lorries/trucks in the business of running them on hire. In our view the entire approach of CIT(A) was erroneous when he has stated that the transportation income of Rs. 12,50,639/- by way of running the subject vehicles on hire is an integral part of the appellant's business and its inclusion in the head "business income" is not disputed even by the AO. In our view, mere inclusion of Rs. 12,50,639/- in the total business income is not the determinative factory for deciding whether trucks were used by th....
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....CIT(A) is as under :- "8.1 The AO has disallowed depreciation @ 30% on commercial vehicles vans and commercial vans though the depreciation has been allowed @ 15% as prescribed by the I.T. Rules. The assessee is in the business of rural marketing promotion, roadshows, display advertising etc. The key ingredient of the billing to clients includes the vehicle hire charges for which a separate ledger account is also being maintained by the assessee. It was contended that the vehicles are used by the assessee for its clients and proper hire charges are collected. Reliance has been made on two cases of Apex Court. However, it is seen that the case of SREI Infrastructure is about claim of depreciation of motor vehicles given on lease and the debate mainly was about the ownership of the assets and therefore the facts of the case are not same at all. In the case of ICDS Ltd., the debate is on whether the asset are used for the purpose of business and again about the leasing company which lease out the trucks. There is no dispute about the claim of depreciation on the vehicles owned by the assessee which has also been allowed by the AO. The only issue is whether depreciation is all....
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....f Appeal 4 Power of Attorney 5 Copy of the Order by Commissioner of Income Tax-(Appeals)-36, dated 02-12-2016 6 Copy of Order by DCIT, 21(2) u/s 143(3), dated 29-01-2016 7 Relied upon cases 8 Relied upon documents 7. At the time of hearing before us, the learned Authorized Representative of the assessee fairly conceded that the business of the assessee was rural marketing, promotions, roadshows, display advertising etc., and further that the assessee was not in the business of running vehicles on hire. However, he drew our attention to the paper book which contained copy of invoices raised by the assessee. He highlighted that invoices raised by the assessee included, inter alia, charges for vehicles used by the assessee, and termed it as hire charges for the vehicles. Further, the learned AR submitted that in addition to vehicles owned by the assessee, the assessee was also taking vehicles on hire from outside parties for use in assessee's business of rural marketing, promotions, roadshows, display advertising etc. The learned AR also submitted that the vehicles used by the assessee in the assessee's business of rural marketing, promotions, ....
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....ody". However, depreciation is charged at the same rate as for Commercial Vehicles as these essentially form part of the "Commercial Video Vans". A vehicle is actually incomplete without body part of it. 3. That the A.O. disallowed higher rate of depreciation on "Commercial Vehicles" and "Commercial Vans Body" @ 30% on the premise that these vehicles are not used in the business of hiring and that the main activity of the assessee-company is that of Rural Marketing, promotions, roadshows, display advertising etc. Further, there is no evidence that the vehicles are used for earning Business Income. He also quoted that the assessee is not carrying on the business of Transportation. In order to substantiate his argument, he also quoted the case of CIT v. Gupta Global Exim Pvt. Ltd. 305 ITR 132 (SC) 2008 and another case of CIT v Pradip N. Desai (HUF)(2012) 341 ITR 277 (Guj). The AO calculated the allowable depreciation @ 15% instead of 30% and disallowed an amount of Rs. 19,57,837/- on this account. He also initiated a penalty u/s 271(1)(c) for concealment of true particulars of income. 4. The Assessee filed appeal before CIT (Appeals)-36 with all the facts ....
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...... (2) Motor cars, other than those used in a business of running them on hire, acquired or put to use on or after the 1st day of April, 1990 15 (3) (i) ............. (ii) Motor buses, motor lorries and motor taxis used in a business of running them on hire 30 ................" 10. Therefore, it is obvious from a perusal of the bare provisions in law that the normal rate of depreciation on vehicles is 15% as per Part A of S.No.III(2) of New Appendix I. The higher rate of 30% is admissible to an assessee, under S.No.III(3)(ii) of Part A of New Appendix I only if the vehicles are used in the business of running them on hire. Before us, it was admitted by the learned AR of the assessee that the business of the assessee is rural marketing, promotions, roadshows, display advertising etc. and that the assessee is not in the business of running the vehicles on hire. In view of this undisputed fact, we are not persuaded by the contention raised on behalf of the assessee that the assessee is eligible for higher rate of depreciation at the rate of 30%. Merely because the invoices raised by the as....