2015 (3) TMI 223 - AT - Income Tax

Disallowance of depreciation - Non maintenance of logbook - Held that - When the assessee has given vehicles on hire through hire agreement, there is no question of maintenance of any logbook or vouchers for expenses as is noted by the authorities below. The details have to be verified from the hire agreements before arriving at the just decision in the matter. The ld. CIT(A) failed to consider the same and also failed to pass any reasoned order. We, accordingly, set aside the order of the ld. CIT(A) and restore this issue to his file with the direction to re-decide this issue by passing speaking order and giving finding on the hire agreements. The ld. CIT(A) shall give reasonable sufficient opportunity of being heard to the assessee. Disallowance of interest - assessee claimed interest as revenue expenditure against vehicle receipts - no evidence of interest payment was furnished - Held that - Since the assessee is using these taxis for hire, therefore, interest was allowable deduction. The ld. CIT(A) without giving any reasons for decision, confirmed the addition, holding that no evidence has been filed. It, therefore, appears that this issue also requires re-consideration at the level of ld. CIT(A). The assessee is using taxis for hiring and claimed interest paid to the bank for loan taken against purchase of vehicle given on hire. Therefore, these facts should have been verified from the record and the hiring agreements etc. The ld. CIT(A) did not pass any speaking order on this issue and no reasons have been given for confirming the addition. We accordingly, set aside the order of the ld. CIT(A) and restore this issue also to his file with direction to re-decide this issue by verifying the fact and by giving reasons for decision in the appellate order. Disallowance of rent paid for vehicle - Disallowance on the reasons that though the assessee paid rent but no single penny has been debited against fuel expenses - Held that - The AO did not realize the fact that the assessee has handed over the keys of these taxis to the hirers and all the expenses are born by the hirers. Since the rental income is accepted, therefore, the rent paid should not have been disallowed. Similarly, the ld. CIT(A) without giving any reasons for decision rejected the claim of assessee. The AO also without any reasons should not have mentioned the agreement to be sham. When vehicles have been given on hire, there is no question of maintaining the records as was claimed by the AO. The ld. CIT(A), therefore, should have verified all the transactions in detail and the agreements in question and should have pass the reasoned order on the same. We accordingly, set aside the order of the ld. CIT(A) and restore this issue also to his file with direction to re-decide this issue by verifying all the facts and by giving reasons for decision in the appellate order. Assessee challenged the addition of ₹ 1,50,000/-. The AO noted that the assessee has received ₹ 1,50,000/- being Sahmatikarta No. 2 in respect of one property deal between Raj Kumar Samadhiya and Others and Smt. Priti Pawaiya and others (seller and purchaser) plot No. 28/2505 size of 2850 sq. feet. The sellers paid entire amount of ₹ 24 lacs during the year and as such, ₹ 1,50,000/- were received by the assessee in the year under appeal, but has not offered for taxation. The addition of ₹ 1,50,000/- was accordingly made. The assessee claimed before the ld. CIT(A) that the addition of ₹ 1,50,000/- relates to assessment year 2009-10. Therefore, no addition could be made in the assessment year under appeal. The ld. CIT(A) on examination of the material before him found that the assessee has received the income during the assessment year under appeal, i.e., 2008-09 and accordingly, the addition was confirmed. - Therefore, the assessee being party to the deal and the agreement, would have received ₹ 1,50,000/- being Samatikarta No. 2. Since the receipt of ₹ 1,50,000/- relates to the assessment year under appeal, therefore, the addition of the same was correctly made in the assessment year under appeal - Decided partly in favour of assessee.

Summary

Issues:
1. Disallowance of depreciation for vehicles.
2. Disallowance of interest claimed as revenue expenditure.
3. Disallowance of rent paid for a vehicle.
4. Addition of income received from a property deal.

Issue 1 - Disallowance of Depreciation for Vehicles:
The assessee challenged the disallowance of depreciation amounting to Rs. 42,741 for vehicles due to lack of logbooks and diesel expenses. The Appellate Tribunal found that as the vehicles were given on hire, maintaining logbooks was unnecessary. The Tribunal directed the CIT(A) to re-decide the issue by considering the hire agreements and giving the assessee a reasonable opportunity to present their case. The order of the CIT(A) was set aside, and the appeal was allowed for statistical purposes.

Issue 2 - Disallowance of Interest Claimed as Revenue Expenditure:
The assessee contested the disallowance of Rs. 51,875 as interest claimed against vehicle receipts. The Tribunal noted that the CIT(A) did not provide reasons for confirming the addition and directed a re-consideration of the issue. The Tribunal instructed the CIT(A) to verify the facts from records and hiring agreements, and to provide a reasoned decision in the appellate order. The appeal was allowed for statistical purposes.

Issue 3 - Disallowance of Rent Paid for a Vehicle:
The assessee disputed the disallowance of Rs. 1,08,000 paid as vehicle rent for a Mahindra Scorpio. The Tribunal observed discrepancies in the AO's reasoning and directed the CIT(A) to re-examine the issue by verifying all transactions and agreements. The Tribunal emphasized the need for a detailed verification before passing a reasoned order. The appeal was allowed for statistical purposes.

Issue 4 - Addition of Income from a Property Deal:
The AO added Rs. 1,50,000 received by the assessee from a property deal to the income for the assessment year 2008-09. The assessee argued that the amount related to the subsequent assessment year. The Tribunal upheld the addition, stating that since the sellers paid the entire amount during the relevant year, the income was rightly added to the assessment year under appeal. The appeal on this ground was dismissed.

In conclusion, the Tribunal partially allowed the appeal for statistical purposes, directing the CIT(A) to re-examine and provide reasoned decisions on the issues related to depreciation, interest disallowance, and rent paid for a vehicle. The addition of income from the property deal was upheld.