2018 (10) TMI 284 - AT - Income Tax

Depreciation on a higher rate - commercial vehicle - Held that - As per the notification no.10/2009 dated 19 January 2009 issued by the CBDT a vehicle purchased during the specified period and put to use before the 1st October, 2009 is eligible for depreciation at higher rate i.e. 50%. In the CBDT Circular there is no mentioned that the vehicle needs to be registered with the RTO under the category of commercial vehicles. Therefore, we are of the view that the assessee is eligible for the depreciation on a higher rate. We also note that in the identical facts and circumstances this Tribunal in the case of Shree Balaji Products (2016 (11) TMI 443 - ITAT AHMEDABAD) has decided the issue in favour of the assessee. Disallowance of interest expenses - sufficiency of own funds - Held that - From the submission of the assessee it appears that own fund of the assessee exceeds the amount of money advanced/invested without any interest income. Therefore, inference can be drawn that the own fund has been invested as discussed aforesaid. However, we feel that the balance sheet for the year under consideration is essential for adjudicating the issue on hand. Therefore we are inclined to sent back issue to the file of AO for fresh adjudication with the direction to check whether the own fund of the assessee exceeds the amount of money advanced/invested without charging any interest income. - Decided in favour of assessee for statistical purposes.

Issues Involved:
1. Depreciation claim on new commercial vehicle.
2. Addition of ?2,00,000/- treated as additional agricultural expenses from alleged undisclosed sources.
3. Disallowance of ?7,58,565/- out of total interest claimed.

Issue-wise Detailed Analysis:

1. Depreciation Claim on New Commercial Vehicle:
The primary issue raised was whether the assessee was entitled to claim depreciation at the rate of 50% on a new commercial vehicle, specifically a Mercedes, acquired during the specified period. The assessee argued that under CBDT notification no.10/2009, the vehicle qualified for higher depreciation as it was purchased and put to use within the stipulated timeframe and weighed below 6000 kg. However, the Assessing Officer (AO) disagreed, stating that the vehicle was not registered as a commercial vehicle with the RTO, thus only qualifying for 15% depreciation. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO’s decision, noting the vehicle was not registered as a commercial vehicle despite being used for business purposes.

Upon appeal, the Tribunal found that the CBDT notification did not mandate RTO registration for higher depreciation eligibility. The Tribunal referenced similar cases where higher depreciation was allowed without such registration, including the case of Shree Balaji Products vs. ITO. Consequently, the Tribunal ruled in favor of the assessee, allowing the depreciation at 50%.

2. Addition of ?2,00,000/- Treated as Additional Agricultural Expenses:
The assessee initially contested the addition of ?2,00,000/- treated as additional agricultural expenses from alleged undisclosed sources. However, during the proceedings, the assessee’s counsel chose not to press this ground. Consequently, the Tribunal dismissed this ground as not pressed.

3. Disallowance of ?7,58,565/- Out of Total Interest Claimed:
The AO disallowed ?7,58,565/- out of the total ?15,14,087/- interest claimed by the assessee on the grounds that interest-bearing funds were diverted to non-interest-bearing investments, such as investments in firms, LIC, and flat booking advances. The CIT(A) upheld this disallowance, agreeing with the AO’s observation that the funds were not utilized for business purposes.

The assessee contended that sufficient own funds were available to cover these investments, citing an income of ?1,04,56,940/- for the year, and referenced the Bombay High Court judgment in CIT vs. Reliance and Utilities and Power Ltd. The Tribunal noted that the balance sheet for the relevant financial year was crucial to verify the claim. Therefore, the Tribunal remanded the issue back to the AO for fresh adjudication, directing verification of whether the assessee’s own funds exceeded the amount invested without earning interest.

Conclusion:
The Tribunal allowed the appeal partly for statistical purposes, permitting the higher depreciation claim on the vehicle and remanding the interest disallowance issue for further verification, while dismissing the unpressed ground regarding additional agricultural expenses.

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