2017 (3) TMI 1235 - AT - Income Tax

Deduction for depreciation from the rental income of loader - Held that - In considered opinion under the Income tax Act, income of the assessee is chargeable to tax and not the gross receipts. The gross receipts from loader during the year was ₹ 4,18,711/- as evidenced by the copy of Profit and Loss account filed before me. Hence the assessee is entitled to deduction of depreciation of ₹ 9,94,050/- from the rent of loader of ₹ 4,18,711/-. After deducting rent of loader of ₹ 4,18,711/- from the depreciation of ₹ 9,94,050/-, there will remain unabsorbed depreciation of ₹ 5,75,339/- . The same is deductible u/s.70 of Income tax Act, from the income determined from gross bills at ₹ 3,39,265/- and the balance amount of depreciation is adjustable against income from other sources of ₹ 5,92,565/- as per provisions of section 70(1) of the Act. Hence, set aside the orders of lower authorities and direct the Assessing Officer to allow deduction for depreciation of ₹ 9,94,050/- from the rental income of loader to the assessee and thereafter determine the income of the assessee as per law. Thus, the grounds of appeal of the assessee are partly allowed.

Summary

Issues:
Appeal against CIT(A) order for assessment year 2010-2011.

Analysis:
1. The assessee challenged the assessment order passed under section 144 of the Income Tax Act, claiming it to be legally flawed and untenable due to compliance with notices and maintenance of audited accounts.
2. The dispute arose from the Assessing Officer's estimation of income from works contract at 8% without discrepancies in the accounts, along with the addition of unexplained investment in a vehicle and the disallowance of depreciation claimed on a loader used for hiring.
3. The CIT(A) upheld the Assessing Officer's actions, leading to the appeal before the ITAT.
4. During the proceedings, the Authorized Representative argued that the Assessing Officer failed to allow depreciation on the loader, impacting the total income calculation significantly.
5. The ITAT analyzed the submissions and evidence, noting that income tax liability applies to the assessee's income, not gross receipts, and allowed the depreciation claimed on the loader to be deducted from the rental income.
6. Consequently, the ITAT set aside the lower authorities' orders and directed the Assessing Officer to adjust the depreciation against the income from other sources, resulting in a revised determination of the assessee's income.
7. The ITAT partially allowed the grounds of appeal raised by the assessee, emphasizing the correct application of tax laws in determining the taxable income.
8. As a result, the appeal filed by the assessee was partly allowed by the ITAT, with the decision pronounced in the open court on 21/03/2017.