2011 (2) TMI 1290 - AT - Income Tax

Summary

Issues Involved:
1. Validity of the CIT's order under section 263.
2. Disallowance of interest paid on deposits.
3. Addition under section 68 for unexplained cash credits.
4. Disallowance of Charter Hire Charges under section 40(a)(i).
5. Depreciation rate on vehicles and trawlers.
6. Disallowance of ocean freight charges under section 40(a)(i).

Issue-Wise Detailed Analysis:

1. Validity of the CIT's order under section 263:
- The assessee appealed against the CIT's order setting aside the assessment for the year 1993-94. The Tribunal confirmed the CIT's order, noting that the issue of disallowance of ocean freight and hire charges under section 40(a)(i) was not examined by the Assessing Officer. The Tribunal dismissed the appeal, sustaining the CIT's order.

2. Disallowance of interest paid on deposits:
- The assessee contested the disallowance of Rs. 30,000 interest on a deposit. The Tribunal upheld the disallowance, noting that the issue was covered against the assessee by earlier orders.

3. Addition under section 68 for unexplained cash credits:
- The assessee challenged the addition of Rs. 60,000 under section 68. The Tribunal found that the assessee provided sufficient evidence, including confirmation letters and banking details, proving the genuineness of the deposit. The Tribunal set aside the CIT(A)'s order and directed the deletion of the addition.

4. Disallowance of Charter Hire Charges under section 40(a)(i):
- The Tribunal addressed multiple appeals concerning the disallowance of charter hire charges. The primary contention was whether the hire charges paid to non-residents were subject to TDS under section 195 and thus disallowable under section 40(a)(i). The Tribunal concluded that only the sum chargeable under the Act should be disallowed, not the entire payment. The Tribunal estimated 10% of the total receipt as the sum chargeable under the Act and remitted the matter to the Assessing Officer for recalculation.

5. Depreciation rate on vehicles and trawlers:
- The Tribunal examined the issue of higher depreciation on vehicles used for hire and depreciation on trawlers. It upheld the CIT(A)'s decision to allow higher depreciation, noting that the vehicles were used in the business of hire and the trawlers were in the assessee's possession. The Tribunal followed earlier decisions in the assessee's favor, confirming the CIT(A)'s orders.

6. Disallowance of ocean freight charges under section 40(a)(i):
- The Tribunal addressed the disallowance of ocean freight charges paid to foreign companies without TDS. The CIT(A) had deleted the disallowance, citing that payments were made to agents in India and were not subject to TDS under Chapter XVII-B. The Tribunal confirmed the CIT(A)'s order, agreeing that the payments were not made outside India and thus did not attract section 40(a)(i).

Conclusion:
- The Tribunal dismissed the appeals of the assessee in ITA Nos. 287 and 65, partly allowed ITA No. 21, dismissed the revenue's appeals in ITA Nos. 317, 49, and 105, and partly allowed ITA Nos. 150 and 64. The key issues revolved around the applicability of sections 40(a)(i), 68, and the appropriate rate of depreciation on assets used in the business.