2015 (7) TMI 282 - AT - Income Tax

Payment of royalty to Govt - addition made on account of undisclosed investment in the expenses under the head of transportation and labor charges for obtaining illegal stock - CIT(A) allowed part relief - Held that - On vigilant reading of the order of the Tribunal in the case of M/s Swastik Stone Enterprises (2013 (1) TMI 737 - ITAT DELHI), we observe that in the similar facts and circumstances, the issue of expenses under the head of transportation and labour charges for obtaining illegal stock was remitted to the file of AO for a fresh consideration in accordance with the appellate orders of the District Magistrate, Nainital on this issue. Thus remit the issue to the file of AO to consider the same afresh after examining and considering the appellate orders of the higher authorities on this issue. The matter for adjudication is pending before the Divisional Commissioner, Nainital. Both the authorities have totally relied upon the order of the DM, Nainital. Since the same is pending before the DM, Nainital, the same cannot be said to be final and conclusive. - Decided in favour of revenue for statistical purposes. Disallowance of depreciation on vehicle - whether the depreciation cannot be allowable merely because the assessee has acquired the vehicle during the year but it should have been put to use for business for availing the depreciation - CIT(A) allowed claim - Held that - The asset was undisputedly purchased and came in the possession of assessee within the financial year relevant to assessment year under consideration in this appeal. The AO has not disputed this fact that the vehicle was purchased during the financial year under consideration for the purpose of business of the assessee and in this situation, it can safely be presumed that the vehicle was put to use and ready for use in the assessee s business organization and hence, CIT(A) was right in allowing depreciation to the assessee deleting the impugned addition made by the AO - Decided against revenue.

Summary

Issues Involved:
1. Allowance of relief on account of royalty payment against undisclosed investment in expenses.
2. Allowance of depreciation on a vehicle acquired during the year.

Issue 1 - Relief on Royalty Payment:
The appeal by the revenue challenged the order of the CIT(A) granting relief on account of royalty payment against undisclosed investment in expenses. The revenue contended that the payment of royalty to the government has no relation to expenses of transportation and labor charges. The CIT(A) granted relief to the assessee based on the District Authorities' findings regarding illegal mining. The Tribunal noted that a similar case was remitted to the AO for fresh consideration in accordance with appellate orders. The Tribunal remitted the issue to the AO to consider it afresh after examining the appellate orders of higher authorities, ensuring the assessee's right to be heard. The Tribunal deemed the revenue's ground allowed for statistical purposes.

Issue 2 - Allowance of Depreciation:
Regarding the allowance of depreciation on a vehicle acquired during the year, the revenue argued that depreciation should not be allowed if the asset was not put to use for business. The CIT(A) allowed depreciation to the assessee, stating that once an asset was used for business, it was presumed ready for use in the business setup. The Tribunal upheld the CIT(A)'s decision, noting that the asset was purchased and came into the possession of the assessee within the relevant financial year. As the vehicle was acquired for the business and presumed ready for use, the CIT(A) correctly allowed depreciation, leading to the dismissal of the revenue's ground on this issue.

In conclusion, the appeal by the revenue was partly allowed for statistical purposes, with the Tribunal remitting one issue to the AO for fresh consideration and upholding the allowance of depreciation on the acquired vehicle.