2014 (12) TMI 185 - HC - Income Tax

Disallowance u/s 40(a)(ia) Effect of amendment, retrospective or prospective Held that - It is accepted by revenue that the tax deducted at source was deposited before the due date of the filing of the return in Commissioner of Income Tax Vs. Naresh Kumar 2013 (9) TMI 275 - DELHI HIGH COURT it has been held that amendment to Section 40(a)(ia) by Finance At, 2010 has retrospective effect thus, the assessee would be entitled to benefit of the proviso added to Section 40(a)(ia) vide Finance Act, 2010 the disallowance u/s 40(a)(ia) cannot be sustained. Rate of depreciation on trucks Held that - The Tribunal rightly recorded that the assessee had entered into contracts with the third parties for the transportation of coal, iron etc. - the assessee was plying the motor lorries for hire - Transportation of goods was the business of the assessee, and was generating revenue/income in Commissioner of Income Tax Vs. Gupta Global Exim (Pvt.) Ltd., 2008 (5) TMI 7 - SUPREME COURT wherein it has been held that the true test which should be applied, is whether the assessee was in the business of transportation and the vehicles were used for the said business - This would show whether the vehicles were run on hire. The said test has been rightly applied the order of the Tribunal is upheld Decided against revenue.

Summary

Issues:
1. Addition under Section 40(a)(ia) of the Income Tax Act, 1961.
2. Rate of depreciation on trucks.

Analysis:

Issue 1:
The first issue pertains to the additions made by the Assessing Officer under Section 40(a)(ia) of the Income Tax Act, 1961. The dispute revolves around the timing of depositing tax deducted at source with the government. While the revenue argued that the tax was deposited after the end of the relevant Assessment Year, it was admitted that the deposit was made before the due date of filing the return. Citing a previous decision in Commissioner of Income Tax Vs. Naresh Kumar, the court held that the amendment to Section 40(a)(ia) by Finance Act, 2010 has retrospective effect. Consequently, the respondent assessee was deemed entitled to the benefit of the proviso added to Section 40(a)(ia) by the Finance Act, 2010, leading to the disallowance under this section being unsustainable.

Issue 2:
The second issue raised in the appeal concerns the rate of depreciation on trucks. The Tribunal relied on Circular No. 652 dated 14.06.1993 issued by the Central Board of Direct Taxes (CBDT) to determine the applicable rate of depreciation. The circular clarified that higher depreciation is admissible on motor lorries used in the business of transportation of goods on hire. The Tribunal's factual findings indicated that the assessee had contracts with third parties for transporting coal and iron, demonstrating that the motor lorries were indeed used for hire and revenue generation. This aligns with the Supreme Court's stance in Commissioner of Income Tax Vs. Gupta Global Exim (Pvt.) Ltd., emphasizing that the crucial test is whether the assessee was in the business of transportation and if the vehicles were used for that purpose. Given the Tribunal's factual findings, the court saw no reason to entertain further proceedings on this issue, leading to the dismissal of the appeal.