2005 (1) TMI 605 - AT - Income Tax

Jurisdiction to tax income in the second round of appeal - On remand - Disallowance of repair expenses - ownership of assets - hire charges and late fee charges in respect of trucks - additional ground - Addition of license fee - HELD THAT - There is no denying fact that the power of the CIT(A) in the course of its appellate jurisdiction are co-terminous with the powers of the Assessing Officer and the CIT(A) can do what the Assessing Officer could does but has not done this applies in a reverse way as well. In other words the CIT(A) cannot do what the Assessing Officer could not have done. He does not get the jurisdiction to do certain act for which the Assessing Officer did not have the jurisdiction. In the present case in second round the jurisdiction of the Assessing Officer was limited to the issue of ownership of assets and nothing else. In the present case nothing prevented the department to initiate revision proceeding u/s 263 or to initiate action u/s 147 if it was of the view that notional truck hire income was also liable to be taxed which had not been taxed by the Assessing Officer in the original assessment. Thus we hold that the CIT(A) had no jurisdiction to give direction to the Assessing Officer to tax the hire charges income and late fee income in the hands of the assessee. We therefore hold that on merit no addition is called for on account of such hire charges income. As a result the first ground taken by the assessee is allowed. Allowed Deprecation on leased truck and prove the ownership of truck - The lessee stopped paying the rent and they did not return the trucks as well. Due to this reason the assessee did not offer any lease rental income in its return. However since the assets continued to remain employed in leasing business the assessee continued to claim depreciation on the said leased trucks amounting to Rs. 14, 48, 353. The learned Departmental Representative read over the relevant portion of the order of the Assessing Officer to support his argument. At this stage attention of the learned Departmental Representative was drawn by the Bench to the apparent contradiction in the stand taken by the department more specifically by the Assessing Officer and by the CIT(A). While the Assessing Officer denied the claim of depreciation on the reasoning that there were no trucks in existence and there were no users of the trucks during the year the CIT(A) in fact enhanced the assessment by seeking to tax the hire income supposed to have been accrued to the assessee due to user of such trucks. On our query how to reconcile the two different stands taken by the department the learned Departmental Representative submitted that he sticks to the decision of the Assessing Officer. The assessee has submitted the lease agreement before the Assessing Officer and has submitted registration certificate before CIT(A) in the name of the assessee to prove that its ownership over the trucks. Unfortunately the learned CIT(A) after accepting these evidence and recording this fact did not conclude the matter further. Under these circumstances we are of the view that the issue should go back to the CIT(A) to decide the ground taken by the assessee. Accordingly we set aside the matter back to the file of the CIT(A) to adjudicate the same. Repairs damage - Whether any liability/loss could said to have arisen in the previous year by the assessee on account of repairs/damage keeping in view the litigation between the assessee and M/s. ITC - We must first make it clear that the disallowance of the claim by the Assessing Officer and CIT(A) is not on the basis that the liability was of capital nature. Thus so far as the nature of expenditure is concerned the liability was on the revenue field. On perusal of the suit filed by M/s. ITC against the assessee it becomes clear that not only ITC had flatly denied having anything to do with the liability for the repairs but the assessee itself had agreed to carry out the repairs. This is clear from the fact as reflected in the suit more specifically. This fact is duly supported by the actual correspondences exchanged between the assessee and M/s. ITC. We have also perused such correspondences which are annexed as various Exhibits in the said plaints. What emerges on perusal of all these record is that it was purely to safeguard its own business interest that the assessee had volunteered to undertake the work of repairs so as to avoid any delay and loss of profit. In any case the legal position of allowability of a liability on its accrual even if not paid or extactly quantified during the year is too well settled to necessitate citing plethora of judgments which have been relied and mentioned in the legal note submitted by the learned counsel of the assessee. The assessee has also referred to numerous judgments and various aspects especially the judgment of the Hon ble Supreme Court in the case of Calcutta Co. Ltd. v. CIT 1959 (5) TMI 3 - SUPREME COURT is worth mentioning. Thus expenditure for repairs is clearly allowable. Accordingly the Assessing Officer is directed to allow the same. We may make it clear that if at all subsequently the liability of the assessee is found to be less than claimed and allowed in this year the department will be free to bring to tax the difference in accordance with the law. In this way interest of the revenue is adequately safeguarded. Addition on account of licence fee - Assessing Officer is not competent to raise a new issue while giving effect to a specific direction given by the CIT(A). We are of the opinion that this issue requires examination on merit also. Therefore issue was set aside and restored back to the file of the CIT(A) to decide afresh. In the result for statistical purposes the appeal is treated as allowed.

Summary

Issues Involved:
1. Taxability of hire charges and late fee for trucks given on lease.
2. Disallowance of depreciation on trucks.
3. Disallowance of repair expenses for bomb blast damage.
4. Addition of license fees receivable from ITC.

Summary:

1. Taxability of Hire Charges and Late Fee for Trucks Given on Lease:

The assessee objected to the CIT(A)'s direction to tax hire charges and late fees for trucks given on lease. The assessee argued that due to disputes, lessees stopped paying rent and did not return the trucks, leading to non-offering of lease rental income. The CIT(A) issued a notice u/s 251 to tax this income, which was beyond the jurisdiction as the issue was not raised in the original assessment. The Tribunal held that the CIT(A) had no jurisdiction to direct the taxation of such income in the second round of appeal. The first ground was allowed in favor of the assessee.

2. Disallowance of Depreciation on Trucks:

The assessee claimed depreciation on leased trucks, which was disallowed by the Assessing Officer due to lack of details. The CIT(A) accepted evidence of ownership but did not conclude the matter. The Tribunal set aside the matter back to the CIT(A) for adjudication, directing to decide based on ownership evidence.

3. Disallowance of Repair Expenses for Bomb Blast Damage:

The assessee claimed Rs. 9,87,32,500 for repair expenses due to bomb blast damage, which was disallowed as capital in nature and not incurred during the year. The Tribunal had set aside the issue for fresh examination. The CIT(A) upheld the disallowance, citing unresolved liability. The Tribunal held that the liability had arisen and was quantified scientifically, thus allowable. The Assessing Officer was directed to allow the claim, with a provision to tax any difference if the actual liability was less.

4. Addition of License Fees Receivable from ITC:

The Assessing Officer added Rs. 92,27,566 as license fees receivable from ITC in the fresh assessment. The assessee argued that the Assessing Officer exceeded his jurisdiction. The CIT(A) did not address this ground. The Tribunal set aside the issue back to the CIT(A) for fresh adjudication on merit.

Conclusion:

The appeal was treated as allowed for statistical purposes, with specific directions for each issue to be addressed by the CIT(A) or Assessing Officer as per the Tribunal's findings.