2018 (3) TMI 1526 - HC - Income Tax

Disallowance of assessee s claim of depreciation on truck - assessee has shown hire charges of ₹ 24,000/per truck per annum and also claimed depreciation - Held that - The Commissioner Appeals and the Tribunal have concurrently held that, hire charges were low was not relevant since assessee had received substantial interest free huge deposits for hire of truck. The assessee owned fifteen trucks, nine from Akola unit and six from Daman unit. The Tribunal has observed that, the assessing officer could not have termed the transaction of hire of trucks as sale of truck. It is observed that, the hire charges were less was not relevant since assessee has received substantial interest free deposit, which helped assessee to reduce his dependence from the interest bearing funds. The reasonings adopted by the Commissioner Appeals and the Tribunal is plausible one - No substantial question of law.

Summary

Issues:
Disallowance of depreciation claimed by the assessee for assessment year 1998-1999.

Analysis:
The appellant filed an appeal challenging the disallowance of the addition made on account of depreciation claimed by the assessee for the assessment year 1998-1999. The substantial questions of law raised in the appeal included whether the ITAT was justified in deleting the addition made by the Assessing Officer on account of disallowance of the assessee's claim of depreciation on trucks, whether the ITAT ignored crucial facts regarding the agreements made for hiring out the trucks, and whether the ITAT disregarded the alleged tax avoidance by the assessee. The appellant's counsel argued that the transaction of hiring trucks at a lower rate and claiming depreciation was legitimate, but the assessing officer doubted the details provided by the assessee under Section 44AE of the Income Tax Act, raising concerns about the transaction's authenticity.

Upon reviewing the judgments of the Assessing Officer, Commissioner Appeals, and the Tribunal, it was noted that the assessing officer disallowed the depreciation claimed by the assessee on the grounds that the hire charges were low compared to the claimed depreciation. The assessing officer accused the assessee of taking advantage of tax provisions and giving a colorable shape to the transaction. However, the Commissioner Appeals and the Tribunal held that the hire charges being low was not relevant as the assessee had received substantial interest-free deposits for hiring the trucks. The Tribunal emphasized that the transaction was for hire and not sale of trucks, and the interest-free deposits helped the assessee reduce dependence on interest-bearing funds.

In conclusion, the Commissioner Appeals and the Tribunal's reasoning was deemed plausible, leading to the dismissal of the appeal as no substantial question of law was found to arise. The judgment upheld the decision to allow the depreciation claimed by the assessee and emphasized the importance of considering all aspects of the transaction, including the nature of the agreements and deposits received.