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2020 (2) TMI 1401 - AT - Income TaxHigher rate of depreciation on dumpers - appellant, engaged in the business of heavy earth moving equipments and vehicles for excavation of over burden (earth) and minerals and transporting the same to the specified place and also transportation of minerals from mines to power plants, transportation of ash from power plant to outside the plant - HELD THAT - We have carefully considered the judgment passed by the Co-ordinate Bench in the case of DCIT vs. M/s. National Construction Co. 2015 (8) TMI 571 - GUJARAT HIGH COURT wherein the identical set of facts particularly where the assessee is having identical mode of business depreciation @30% has been allowed by the Ld. CIT(A) have been upheld. Lumpsum disallowance of non-verifiable expenses - HELD THAT - As it appears from the records that no specific defects in those vouchers of payment have been pointed out by the AO. He has only made reference to the fact that these expenses are in cash, vouchers are not reflecting complete details or that the rate or weight or that the name and address of the payee is not legible. While doing so, the Ld. AO failed to consider the nature of expenses which were made in cash particularly when those vouchers are prepared by the appellant for on-site expenses for the contractual hiring of machineries for removal of excavation and removal of earth materials. Neither it has been pointed out that claim of such expenses has distorted the profit ratio of the appellant in comparison to the earlier years, which particular aspect of the matter, has been duly taken care of the Ld. CIT(A) while deleting such addition which according to us, is just and proper and without any ambiguity so as to warrant interference. Hence, the order is passed in the affirmative i.e. in favour of the assessee.
Issues Involved:
1. Higher rate of depreciation on dumpers 2. Deletion of addition on account of lump-sum disallowance of non-verifiable expenses Detailed Analysis: Higher Rate of Depreciation on Dumpers: The primary issue in this appeal was the appellant's claim for a higher rate of depreciation at 30% on dumpers. The appellant, engaged in the business of heavy earth-moving equipment and vehicles for excavation and transportation, claimed depreciation of ?2,02,01,944/-. The Assessing Officer (AO) contended that the depreciation should be limited to 15%, asserting that the appellant's primary business was mining, not transportation. The AO reasoned that the income from transportation was minimal (less than 0.75% of total receipts), thus not qualifying for the higher depreciation rate meant for vehicles used in the business of transportation of goods on hire. The appellant cited several judgments, including the Bombay High Court's decision in CIT vs. S.C. Thakur & Co., which supported the claim for higher depreciation based on the CBDT Circular No. 652 dated 14.06.1993. The Circular clarified that trucks/dumpers used for transporting earth by civil contractors amounted to the use of vehicles in the business of transportation of goods on hire. The CIT(A) allowed the appellant's claim for higher depreciation, relying on similar cases like DCIT vs. M/s. National Construction Co., where the higher rate of depreciation was upheld for identical business activities. The Tribunal, after reviewing the relevant materials and judgments, upheld the CIT(A)'s decision. It concluded that the appellant's business involved hiring out equipment and vehicles for transportation, thus qualifying for the higher depreciation rate. The Tribunal dismissed the Revenue's appeal, finding no merit in the AO's arguments. Deletion of Addition on Account of Lump-Sum Disallowance of Non-Verifiable Expenses: The second issue involved the AO's addition of ?10 lakh on account of non-verifiable expenses. The AO noted that various expenses, such as mining work expenses, transportation expenses, and staff welfare expenses, were made in cash and some vouchers were defective or not fully verifiable. To check the cash payments, the AO made a lump-sum addition. The CIT(A) deleted this addition, noting that the AO did not point out specific defects in the vouchers. The nature of the expenses, being on-site and related to contractual hiring of machinery, justified cash payments. The CIT(A) also observed that these expenses did not distort the profit ratio compared to previous years. The Tribunal agreed with the CIT(A)'s findings, emphasizing that the AO failed to provide concrete evidence of unverifiable expenses. The deletion of the addition was deemed just and proper, leading to the dismissal of the Revenue's appeal on this ground as well. Conclusion: In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues: 1. The appellant was entitled to a higher rate of depreciation at 30% on dumpers used in the business of transportation of goods on hire. 2. The deletion of the ?10 lakh addition for non-verifiable expenses was justified due to a lack of specific defects and the nature of the expenses. All the appeals of the Revenue were dismissed, and the judgment was pronounced in favor of the assessee.
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