2016 (6) TMI 167 - AT - Income Tax

Allowability of en route expenses - Held that - AR before us submitted that such expenses were also claimed in earlier years and in this regard no such disallowances were made by Authorities Below. We also find that these expenses are commensurate with the sales declared by the assessee in comparison to earlier years. We also further find that AO has disallowed the claim on ad hoc basis without bringing out any defect and deficiency in the submission of assessee with regard to such expenses claimed by assessee. we also cannot ignore this fact that the assessee has been claiming such expenses since the last several many years and no disallowance was made on account of this. So we are of the view that the consistency should be maintained. In this view of this matter, we are inclined to reverse the orders of Authorities Below on the basis that assessee has been claiming these expenses consistently for the last many years and such expenses have not been disallowed. - Decided in favour of assessee Addition on account of sale of scraped / old and discarded trucks - Held that - Assessee has reduced the WDV of the relevant block of vehicle from the sale price of the trucks. However, Authorities Below has treated the sale price as ₹ 50,000/- of the truck and the difference of ₹ 35,000/- has been treated as income of the assessee as income which is incorrect as per the provision of Income Tax Act. In case of any sale of the assets pertaining to the block of assets then the sale price should be reduced from the relevant block by the amount of sale price and when the block ceased to exist after adjusting the sale price then the excess amount shall be treated as income under the head capital gains and that cannot be taken as business income . In the instant case, the Authorities Below without understanding the provision of Income Tax have taken a view that the amount of ₹ 10.50 lakh as income from its business which is incorrect - Decided in favour of assessee

Summary

Issues:
1. Disallowance of en route expenses
2. Addition on account of sale of scraped/old and discarded trucks

Issue 1: Disallowance of en route expenses
The appeal arose from the Commissioner of Income Tax (Appeals)'s order sustaining the disallowance of ?2.50 lakh against the assessee's claim of ?95,74,607 for en route expenses. The Assessing Officer disallowed a portion of the claimed expenses due to lack of proper bills and vouchers, resulting in an addition of ?4,78,730 to the total income. The CIT(A) partly confirmed the disallowance, limiting it to ?2,50,000. The Tribunal reversed the decision, noting the consistency of the expenses being claimed over the years without prior disallowance. The Tribunal emphasized the lack of defects or deficiencies in the assessee's submissions and allowed the appeal on this ground.

Issue 2: Addition on account of sale of scraped/old and discarded trucks
The second ground of appeal related to the addition of ?10.50 lakh for the sale of 30 trucks at ?15,000 each, where the Assessing Officer estimated the price per truck at ?50,000 due to lack of buyer details and certain trucks showing nil or ?1 in the books. The CIT(A) upheld the addition, stating that all old trucks with registration numbers should be sold as scrap with proper documentation. The Tribunal disagreed with the lower authorities, noting that the sale price was correctly reduced from the Written Down Value (WDV) of the assets. The Tribunal found the treatment of the sale price difference as business income incorrect, as per the Income Tax Act provisions. Consequently, the Tribunal reversed the decision, allowing the appeal on this ground.

In conclusion, the Tribunal allowed the assessee's appeal on both issues, emphasizing the consistency of expense claims and the correct treatment of sale proceeds from the trucks.