TaxTMI 
TaxTMI 
2024 (5) TMI 1530
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.... disposed of by this common order for the sake of convenience. ITA No. 484/Ahd/2023 for A.Y. 2015-16 3. Deletion of disallowance on higher depreciation of Rs. 8,71,10,768/- on plant and machinery, tippers are the subject matter before us. 4. The appellant, a Private Limited Company, engaged in the business of hiring of heavy earth moving machineries and mining services for mining and other contract works and having income from business, filed the return of income for the year under consideration on 30.09.2015 declaring total income at Rs. 32,21,69,740/-. Upon selection of the case under scrutiny notice under Section 143(2) of the Act dated 21.03.2016 followed by different notices in terms of the provisions of law including 142(1) r.w.s. 129 of the Act dated 20.09.2016 etc. were issued. Such assessment was finalized upon restricting the disallowance @15% instead of higher rate @ 30% on depreciation of Dumper & Tripper to the tune of Rs. 8,71,10,768/-. 5. The facts of the case is this that the assessee claimed higher rate of depreciation on dumpers and Trippers @30%. It is the further case made out by the assessee that their contract is for hire for mo....
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.... Eastern Coalfields Ltd. (Rajmahel) The nature of work is Loading of coal into tippers by excavators at quarry face of Rajmahal OCP and transportation to Main/Interim CHP within lead range of 6-7 km at Rajmahal Area. 2.2.2 Eastern Coalfields Ltd. (Sonepur) The nature of work is transportation of coal 41.701. Te. 2.2.3 Bharat Coking Coal Ltd. (Chaptaria) The nature of work Transportation of coal from 1-11, 10, Salemper and katapur seams of Chaptoria OC Patch of Domaporia cottery of CV. Area. 2.2.4 Bharat Coking Cond (Katras) The nature of work a AXWM Collery of Kutres Arvo transportation of cool coal from Seams of Kumarijere Patch of 2.2.5 Bharat Coking Coal Ltd. (Lada) The nature of work transportation of coal from LT) & I seams of patch T of NT-ST colliery of Ladna Area. 2.2.6 Bharat Coking Coal Ltd. (Old) The nature of work is ...............transportation of coal from Laikdih(Top) Laikdih (Middle), Laikdih(Bottom), L-10, Salanpur 'C' and Salanpur 'D' seoms of Borira OC Patch of Damagoria colliery of CV. Area. 2.2.7 Mahanadi Coalfields Limited: The nature of wor....
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....or any other purpose except to transport or shifting of materials from one place to another. Now if they are not used for transportation of any materials belongs to us and same are used for transportation of goods of third party for hire than naturally such usage be defined as that they are used in the business of running them on hire. 2.4 Basically, the use of motor vehicles is need to be looked in to whether they have been used for own other business such as trading, manufacturing etc. or otherwise. 2.5 It may please be noted that in respect of all the contracts ● Mine is not owned by us. ● Neither overburden nor extracted minerals belongs to us. 2.6 The operations are scheduled/controlled by the principal/principal contractor 2.7 In the contracts for earth work and mining work we are required to transport the over burden (earth) and extracted minerals from one place to another. We were paid the rates per unit or based on quantity extracted and transported to the specified location. But from this fact, it cannot be denied that the amount thus payable consists of the hire (use) of the tippers, excavators etc. in the....
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....e, and use of motor vehicles for Transportation is a key to claim higher depreciation, Circular No. 652. Motor Lorries must be hired out to some other person and whether the use of the same in the assessee's business of transportation of goods on hire would suffice. Circular No. 609-It is further clarified that higher depreciation will also be admissible on motor lorries used in the our business of transportation of goods on hire Before applying above principles, we request to draw your kind attention on brief fact of the case referred above vise a vise present case as under:- In the instant case, the learned CIT for the assessment year 1996-97 recorded a finding that the appellant was required to transport the earth from one place to another for filling and the earth so transported did not belong to tile assessee and as such the appellants business receipts to a large extent, can be held to be price of the charges received for transporting the goods from one place to another. This Fact of the case is totally and identically applicable to us as we are required to transport excavated earth as per instruction for filling etc ....
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....e is leased to other parties. The assessee is basically a mining contractor and it carries out the all allied activities for mining viz. blast hoe drilling, excavation, loading, transportation, dumping spreading and leveling of overburden. The nature of assessee work being carried out at different sites is similar. It is not the case that it was awarded separate and exclusive transportation contract. 7.3 The AR vide his submission has only mentioned above transportation work as the nature and scope of work enders received for different sites. Therefore the nature and scope of work carried out by the assessee is analyzed from these copies of work order/LOI submitted by the assessee for different sites as under i) Eastern Coalfields Ltd. (Raimahel)-W.O date 25.02.2012 The nature of work is loading of coal into tippers by excavators at quarry face of Rajmahel OCP and transportation main/interim CHP within lead range of 4-5 km, 5-6 km and 6-7 km at Rajmahel area. ii) Eastern Coalfields Ltd. (Sonepar)-W.O date 28/29.06.2012 The scope of work envisages (i) excavation and removal of 0B 262.10 L.Cum (i) extraction and transportation of coal 41.7....
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....vation of all types of over burden material, drilling, excavation, loading, transportation, dumping, dozling, leveling at dump site at different levels at mine xii) Nevvell lignite Corp. Ltd. (Mine-(A) WO date 02.02.2012 Scope of work is excavation of all types of over burden material, drilling, excavation, leading transportation, dumping, dozling, leveling at dump site at different levels at mine-LA 7.4 In fact on analysis of scope of work awarded by different principals for various sites is found that the assessee has been awarded composite work which includes blast hole, drilling excavation, blasting, removal of overburden, dumping the overburden at dumping site and transporting the mined mineral from mines to stocking place and leveling of the same. The only difference in some work orders claimed by the assessee is that in some cases separate rates for lignite mining and lignite transportation has been mentioned. Whereas the nature of work for all the sites are similar. So in no way it is all the established that the assessee has been awarded exclusively transition work and its dippers and tippers were exclusively used for earning transportation incom....
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....burden (earth) and extracted minerals from one place to another. We were paid the rates per unit or based opportunity extracted and transported of the specified location. But from this fact, it cannot be denied that the amount thus payable consists of the hire (use) of the tippers, excavators etc. in the process of excavation of and transportation of over burden (earth) and minerals. Although the rates may have been determined for a consolidated package for various activities and scope of work, the element of hire charges or charges for use of the assets like tippers ore embedded therein as no separate charges therefore are payable. Thus it can be seen that there is merely a presumptive element of hire charges and on such presumption assessee is claiming higher rates of depreciation which should be disallowed. 7.7 It is a matter of fact that Hon'ble Supreme Court in case of Gupta Global exim 305 ITR 132 laid down the real test for claiming depreciation at higher rates applicable for "motor lorring used in business of running them on hire. In this decision the Hon'ble Apex Court has decided that real test is the user of the same in the business of the asses....
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....s the assessee is not eligible for depreciation @30%. By no stretch of imagination it can be said that assessee is in the business of transportation on hire. Thus in presence of the facts and discussions made above it is clear that; (a) The asset either should be Motor buses or motor lorries or motor taxis: Dumpers/tippers cannot be categorized as motor bus, taxis, lorry and hence not eligible for higher rate of depreciation, (b) Such assets should be used in a business of running them on hire: 7.10 I hold that assessee is not in business of running motor lorries on hire and thus in view of the above, the claim of depreciation is restricted to Rs. 8,71,10,768/- as against the depreciation claimed by the assessee at Rs. 17,42,21,537/- on plant & machinery, tipper etc. Therefore excess depreciation claimed on plant & machinery, tipper etc. of Rs. 8,71,10,765/- is added back to the total income of the assessee. I am satisfied that the assessee has furnished inaccurate particulars of income and thereby concealed the income. Penalty proceedings u/s. 274 r.w.s. 271(1)(c) are initiated for furnishing inaccurate particulars of Inc....
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....an High Court in case of CIT vs. Sardar Stone, reported in 215 ITR 350 and judgment passed by the Hon'ble Karnataka High Court in the case of Veener Mills vs. CIT, reported in 201 ITR 764. Finally, the Ld. AO attempted to distinguish the judgment passed by the Hon'ble Apex court in the case of Gupta Global Exim (supra) to this effect that as the Hon'ble Supreme Court has allowed depreciation at higher rates for motor lorry used in the business of running them on hire. The basic test would be whether the assessee is having the transportation business whereas the assessee is having mining business not from transportation as the year under consideration and even in earlier year wherein mining contract which is also reflecting from the audit report from A.Ys. 2014-15 & 2015-16 has shown being mining and civil contractor rather than transportation. The assessee fails the test laid down by the Hon'ble Supreme Court and found not eligible for depreciation at higher rate. Addition thereon to the tune of Rs. 8,71,10,768/- was made by the Ld. AO in the hands of the assessee. 8. In appeal, apart from all this explanation, the assessee further relied upon the Circular being No. 65....
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....which the assessee's claim could be considered with a positive note. As it is evident from the records before us and the orders passed by the authorities below which had not been able to be controverted by the Ld. DR that the assessee engaged in the activities of excavation of over burden, mining of minerals, transportation of such excavated over burden material, excavation of minerals, transportation of minerals from mines to Pit head and transportation of minerals from Pit head to Lignite handling system/power plant, where the motor lorries used for the transportation of goods on hire. The condition under the zone of consideration for claiming higher rate of depreciation at 30% on dumpers and tippers have been fulfilled by the assessee and, therefore, having regard to the entire aspect of the matter i.e. the business activities of the assessee qua the claim of the assessee, particularly, when the fact of composite contract awarded to the assessee of mining and transportation has not been able to be controverted by the Ld. DR. We do not find any reason to interfere with the order passed by the Ld. CIT (A) in granting relief by deleting the addition made by the Ld. AO by restrictin....
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....d 17.01.2021 filed by the assessee is as follows: "A) Explanation Regarding Interest On TDS As per section 37(1) Any expenditure laid out or expended wholly and exclusively for the purpose of the business or profession shall be allowed in computing the income chargeable under the head "Profit and gains of business or profession Explanation 1: Any expenditure incurred by an assessee for any purpose which is an offence or which is prohibited in law shall not be deemed to have been incurred for the purpose of business or no deduction of allowance shall be made in profession and no respect of such expenditure. The assessee claims the specified expenses of certain amount in its profit & loss account and thereafter the assessee from the payment to the party deducts certain percentage as specified under the Act as TDS and pays to the Government Exchequer The amount of TDS represents the amount of income tax of the party on whose behalf the payment was deducted & paid to the Government Exchequer. Thus the TDS amount does not represent the tax of the assessee but it is the tax of the party which has been paid by the assessee. Thus any delay in the payment....
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....fence in general terms is a breach of Law or Act or any illegal act and penalty is means the punishment for committing an offence. The section provides that expense incurred for non-deduction for any offence or violation of law is not allowed as business expenditure u/s 37 of the act. While interest is paid for delay in compliance of law and not for non compliance or violation of law. Interest is not paid for a purpose which is an offence or prohibited under any law of land. In fact, Interest are paid for the purpose of the compliance with the Act. Interest is paid for mitigating the time value of money of delay in deposit of original tax due to the respective department of government. Payment of Interest on tax dues is migratory and compensatory in nature. Hence, it is allowable under Section 37 as it is not an offence or prohibited under any law. In case of M/s. Emdee Digitronics Pvt. Ltd vs. Pr. CIT-4, Kolkata, Hon'ble ITAT Kolkata in its order dated 28.06.2019 (ITA No 361/Kol/2019), it was decided that interest on late deposit of VAT, service tax, TDS etc. are allowable expenditure under section 37(1) of the Income Tax Act, 1961. Copy of ....
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.... amounting to Rs. 33,11,027/ 9.2.2 Further, for the remaining addition of similar nature to disallowance of Rs 4.31,63.343/- (Interest on Service tax of Rs. 3,58,72,326 VAT interest of Rs. 21.179+ GST Interest of Rs. 72, 10,068 + Entry Tax Interest of Rs. 59,230), the appellant has stated that provisions of S.37 of the Act allows deduction of expenditure which are not in the nature described in sections 30 to 36 and not being in the nature of capital expenditure or personal expenses of the assessee and are expended wholly and exclusively for the purposes of the business or profession shall be allowed in computing the income chargeable under the head, "Profits and Gains of Business or Profession The interest is paid for delay in payment of taxes collected on behalf of government and there is no violation of law. Interest is not paid for a purpose which is an offence or prohibited under any law of land. In fact, Interest is paid for the purpose of the compliance with the Act. Interest is paid for mitigating the time value of money of delay in deposit of original service tax, GST, VAT and entry tax due to the respective department of government. Payme....
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.... business expenditure u/s 37(1). In this regard, the appellant submits that any expenditure not of the nature as described in sections 30 to 36 of the Act, is revenue in nature, not been incurred for any purpose which is an offence or which is prohibited by law and incurred wholly and exclusively for the purpose of business then same shall be allowed u/s 37. In present case, as pointed above, interest expense is incurred for business purpose and is not incurred for any offence or prohibited by law, then it shall be allowed u/s. 37. Further, it is essential principle laid down in case of Lachmandas Mathuradas Vs, CIT for determining nature of expense being compensatory or penal, is essentially required to be considered so as to determine whether expense incurred for any purpose which is an offence or which is prohibited by law or not w.r.t. allowability u/s 37. Thus, the appellant has requested to delete the disallowance of interest on service tax, VAT, GST and entry tax amounting to Rs. 4,31,63,343/-. 9.3 I have gone through the submission of the appellant as well as the assessment order. The issue here is that the appellant has paid interest on service tax of Rs 3,58....
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....ty as a civil liability has been made under section 3(5) and for penalty as a criminal offence under section 4 of the Cess Act. 3. The High Court proceeded entirely on the basis that the interest bore the character of a penalty and it was "penal interest It failed to notice sections 3(5) and 4 and the other provisions of the Gess Act. 4. The interest paid under section 3(3) of the Cess Act cannot be described as a penally paid for an infringement of the law and the same was accordingly admissible under section 10(2)(xv) of the 1922 Act 9.3.1 Similarly, reliance is placed on the decision of the Hon'ble Mumbai Tribunal in the case of Go Airlines (India) Ltd. v. Deputy Commissioner of Income Tax-5(1)(1), Mumbai. [2021] 126 taxmann.com 152 (Mumbai - Trib.)/[2021] 188 ITD 9...wherein it is held that Section 37(1) of the Income-tax Act, 1961 Business expenditure Allowability of (Interest) Assessment your 2012-13 Whether interest paid by assessee on delayed payment of service tax is compensatory in nature and, if on verification it was found that assessee had actually paid interest in impugned assessment year, same was to be allowed as deduction to ....
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....he judgment relied upon by the Learned CIT (A) in the case of Mahalaksmi Sugar Mill Company Ltd. vs CIT (supra) passed by the Hon'ble Supreme Court decided the issue in favour of the assessee. However, whether interest on service tax, VAT interest, GST interest and entry tax interest paid by the assessee is compensatory in nature or in the nature of penalty has to be examined by Learned Assessing Officer in the case in hand. This issue has also been considered by the Mumbai Bench in the case of Gini and Jony Ltd. in ITA No. 1892/Mum/2017 by order dated 21st August, 2018. In that view of the matter, at the time of hearing of the instant appeal, we have expressed our mind for setting aside the issue to the file of the Learned AO for verification of the same which has been agreed by both the parties. 20. Thus having regard to the facts and circumstances of the case, we restore the issue to the file of Learned AO for examination of the same and to pass order strictly in accordance with law. 21. This ground of appeal preferred by Revenue is, thus, allowed for statistical purposes. 22. In the combined result, ITA Nos. 484 & 485/Ahd/2023 are dismissed and ITA No. 4....
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....andaveswar Area. Removal of all type of materials in all kinds of strata by hiring of equipments such as HEMM, tippers, drills, dozers, graders, and water sprinklers including its drilling, excavation, loading, transportation, dumping, spreading, dozing, grading and water sprinkling at specified place as per instruction of Engineer in charge at New Majri OC-II (A) Expansion of Majri Area. 27 आयà¥à¤•à¥à¤¤ CENTRAL 26 No. CITA), Rajkot-3/10376/2017-18 11. 12. Neyveli Lignite Corporation Neyveli Lignite Corporation 13 Mahalaxmi Saakar (JV) 14. Mahalaxmi Nilkanth JV 15. VPR Mining Infrastructure Pvt Ltd 16. Mahanadi Coalfields Ltd. 17. Western Coalfield Ltd. A.Y.2015-16 The scope of work covers Removal of Overburden/inter burden (consisting of all kinds of overburden strata) of 72 MM3 and includes forward preparation of excavation & dump sites, excavation, loading, transportation, dumping, dozing, grading, leveling at dump/ excavation sites, formation & maintenance of multiple haul roads, dust suppression by sprinkling of ....