2015 (10) TMI 2368 - AT - Income Tax

Depreciation at higher rates on hydraulic crane - CIT(A) allowed the claim - not the commercial vehicle as held by the AO - Held that - Similar issued has been decided by this Bench in the case of M/s. Narayani Cranes vs. DCIT (2014 (2) TMI 662 - ITAT JAIPUR) wherein this Bench has allowed depreciation @ 30% on Hydraulic Cranes - Decided against revenue. Disallowance of crane operating expenses and wages - CIT(A) allowed part relief - Held that - It is observed that the assessee had claimed ₹ 18,60,539/- under the head crane operating expenses. The AO observed that the assessee had made payment of wages in cash and no supporting bills were available. The assessee did not maintain the wages register. The AO observed that only self made vouchers were available which were not subject to verification. Thus in the absence of proper records and primary records the AO made a lump sum addition of ₹ 1.50 lacs which has been reduced by the ld. CIT(A) to ₹ 1.00 lac by considering all the aspects in this case and we find no infirmity in the order of ld. CIT(A) on this issue.- Decided against revenue. Disallowance of conveyance, telephone, advertisement and general expenses - CIT(A) allowed part relief - Held that - The percentage of conveyance and telephone expenses claimed against the turnover has increased while the turnover has declined as compared to previous assessment year. Therefore, the disallowance of conveyance expense is restricted to 10% of ₹ 2,17,006/- depreciation has not been included in this disallowance. This results in a confirmation of disallowance from conveyance expenditure of ₹ 21,700/-. Similarly, the disallowance on account of telephone expenses is restricted to 10% of the claim resulting in a confirmation of disallowance of ₹ 14,340/-. Regarding the advertisement and general expenditure, it is seen that the percentage of expenses have decline since last year and so ad hoc disallowance of ₹ 10,449/- is not sustained under the head advertisement and general expenses - CIT(A) has taken into consideration all the aspects with regard to claim of the assessee as referred in the above Grounds - Decided against revenue.

Summary

Issues:
1. Depreciation rate on hydraulic cranes
2. Disallowance of crane operating expenses and wages
3. Disallowance of telephone and vehicle expenses
4. Disallowance of conveyance, telephone, advertisement, and general expenses

Issue 1: Depreciation rate on hydraulic cranes:
The Revenue challenged the allowance of depreciation at higher rates on hydraulic cranes by the ld. CIT(A). The AO argued that the cranes should be considered as machinery eligible for 15% depreciation instead of 30% claimed by the assessee. The ld. CIT(A) allowed depreciation at 30% based on precedents and evidence presented by the assessee. The ITAT Jaipur upheld the decision, citing evidence such as RTO registration and certificates supporting the claim that the cranes were used for commercial purposes, thus justifying the 30% depreciation rate.

Issue 2: Disallowance of crane operating expenses and wages:
The AO disallowed a lump sum amount of expenses under crane operating charges due to lack of proper records and verification. The ld. CIT(A) partially allowed relief by reducing the disallowance amount. The ITAT Jaipur upheld the ld. CIT(A)'s decision, considering the lack of proper records and primary evidence for the expenses incurred, ultimately dismissing the Revenue's appeal on this ground.

Issue 3: Disallowance of telephone and vehicle expenses:
The AO disallowed a portion of telephone, conveyance, advertisement, and general expenses due to insufficient supporting evidence and unverifiable expenditures. The ld. CIT(A) granted relief by restricting the disallowance percentages for various expenses. The ITAT Jaipur concurred with the ld. CIT(A)'s findings, noting the considerations made in the assessment of the expenses and sustaining the decision to dismiss the Revenue's appeal on these grounds.

In conclusion, the ITAT Jaipur upheld the ld. CIT(A)'s decisions on all issues raised by the Revenue, including the depreciation rate on hydraulic cranes, disallowance of crane operating expenses and wages, and disallowance of telephone, conveyance, advertisement, and general expenses. The appeal of the Revenue was ultimately dismissed, and the decisions pronounced in the open court on 24/09/2015.