2021 (12) TMI 138 - AT - Income Tax

Addition of the depreciation from contract income and Tripper income - claim not made by the assessee in his return of income since assessee had shown his income under the presumptive taxation u/s. 44AD and 44AE - CIT(A) had confirmed the depreciation added by the AO by stating that since the assessee had adopted contract income u/s. 44AD and tipper income u/s. 44AE of the Act, the assessee was not eligible to claim depreciation - HELD THAT - As assessee has not made any claim of depreciation as alleged by the AO as well as by the Ld. CIT(A). A perusal of the paper book page 13 from where computation of total income is placed it is discerned that the assessee has not claimed any depreciation on the leathe machinery and for the two tipper lorries. As noted that the assessee in his balance sheet placed at page 14 of the paper book has reflected the depreciation on these two items, however the assessee has not claimed the depreciation while computing tax in his return since he had adopted contract income u/s. 44AD and tipper income u/s. 44AE of the Act. However, the AO erroneously without application of mind has assumed that assessee has claimed depreciation which fact has not been examined properly by the Ld. CIT(A) while passing the impugned order. Ergo, the order of the Ld. CIT(A) is set aside and the depreciation added by the AO/Ld. CIT(A) is directed to be deleted. - Decided in favour of assessee.

Summary

Issues:
Appeal against order of Ld. CIT(A)-1, Guwahati for Assessment Year 2012-13 - Addition of depreciation from contract income and Tripper income - Eligibility to claim depreciation under sections 44AD and 44AE of the Income-tax Act, 1961.

Analysis:
1. The appeal was the second round before the Tribunal due to a previous order recall. The primary grievance was against the addition of depreciation by Ld. CIT(A)-1, Guwahati. The assessee had not claimed depreciation on contract income and Tripper income under presumptive taxation u/s. 44AD and 44AE.

2. The AO added depreciation amounts of &8377; 16,320 and &8377; 9,06,000 from contract income and Tripper income, respectively. Ld. CIT(A) upheld these additions based on the ineligibility to claim depreciation under sections 44AD and 44AE. The appeal challenged this decision.

3. The Ld. AR argued that the assessee did not claim depreciation, as evidenced by the computation of total income and balance sheet. The AO's additions were made erroneously, and the Ld. DR could not counter this argument. The Tribunal noted that the assessee had not claimed depreciation as assumed by the AO and Ld. CIT(A).

4. After a detailed review, the Tribunal found that the assessee had not claimed depreciation on the mentioned items while computing tax under sections 44AD and 44AE. The AO's assumption of claimed depreciation was incorrect. Consequently, the Tribunal set aside the Ld. CIT(A)'s order and directed the deletion of the added depreciation amounts.

5. Ultimately, the Tribunal allowed the appeal of the assessee, ruling in favor of deleting the depreciation additions. The order was pronounced on 12th October 2021.