The Income Tax Appellate Tribunal ( ITAT ), Ahmedabad Bench, has recently, in an appeal filed before it, held that higher rate of depreciation at 50% is allowable on commercial vehicles only.
The aforesaid observation was made by the Ahmedabad ITAT when cross-appeals by the Revenue and as well as the assessee, were filed before it, as against the order of the Commissioner of Income Tax (Appeals), Ahmedabad [CIT(A)], dated 14.3.2013, passed under section 250(6) of the Income Tax Act, 1961.
The brief background relating to the present appeal was that the assessee firm was engaged in the business of construction work as a developer of buildings, commercial complex, residential complex, bungalows, road projects etc., who, during the year under consideration, had constructed a commercial complex named, “Shital Varsha- V” at Shivranjani Cross Road, Ahmedabad, and shown gross receipt of Rs.3.75 crores, on which net profit was declared, before remuneration to partners, was Rs.23,70,039/.
The total income returned to tax being Rs.9,18,841/, during the assessment proceedings, several additions were made to the income of the assessee, totalling in all to Rs.13,15,38,617/, which majorly included addition of Rs.11,86,87,480/- being current liabilities reflected in the books of the assessee, added for the reason that the genuineness of the credit balance remained unexplained. Minor additions were also made on account of the disallowance of building construction expenses & depreciation on motor cars amounting to Rs.59,10,574/-& Rs.14,79,549/- respectively.
The matter was carried in appeal before the CIT(A), who deleted the entire addition made on account of unexplained credit balance of Rs.11.86 crores, except for an amount of Rs.70,000/-.
With respect to the disallowance made of building construction expenses, the CIT(A) deleted the majority of the disallowance of Rs.50,46,501 and confirmed only the balance of Rs.8,64,073/. And with respect to the disallowance of car depreciation the CIT(A) deleted the disallowance of Rs.8,63,961/- and upheld the balance of Rs.4,67,633/-. And it is being aggrieved by this order of the CIT(A), that both the Revenue and the assessee, have come up in appeal before the Ahmedabad ITAT.
The grounds of the assessee’s appeal being that the CIT(A) has erred in upholding that the Toyoto Motor car was not a commercial vehicle within the meaning of Rule-5 r.w. Appendix-1, so that higher depreciation was not admissible, and further that in the facts and circumstances of the case the CIT(A) ought to have held that Toyoto Motor car a commercial vehicle and higher depreciation was admissible on it, Shri S.N. Divetia, the counsel for the assessee, vehemently argued that the addition upheld was un-justified, while Shri Rakesh Jha, the Sr. DR, on the other hand supported order of the CIT(A).
Hearing the opposing contentions of either side and thereby perusing the materials available on record, the Ahmedabad ITAT Bench comprising of Siddhartha Nautiyal, the Judicial Member, along with Annapurna Gupta, the Accountant Member, noted:
“On going through the above, we find that the Ld. CIT(A) had confirmed the disallowance of depreciation on cars of Rs.4,67,633/- finding that the assessee was unable to establish with evidence that the motor vehicle was wholly and exclusively used for the purpose of the business of the assessee and also for the reason that the assessee had claimed depreciation at a higher rate of 50% on Toyota car, for which the rate of depreciation is allowable only on commercial vehicles and the assessee was unable to establish that the said vehicle was a commercial vehicle. The ld. AR was unable to controvert the factual finding of the ld. CIT(A).”
Thus, partly allowing the appeal of the Revenue, while dismissing the appeal of the assessee, the Ahmedabad ITAT held:
“In view of the same we see no reason to interfere in the order of the Ld. CIT(A) upholding the disallowance of depreciation of Rs.4,67,633/-.The ground raised by the assessee in this regard is dismissed. In effect the appeal of the assessee is dismissed.”
Subscribe Taxscan Premium to view the JudgmentSupport our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
