2018 (6) TMI 882 - AT - Income Tax

Higher depreciation rate claimed on transmit complete mixer and loaders and lower loader machine - whether Assessing Officer had rightly deleted assessee s higher depreciation claimed on both mixer as well as loader machine(s) in question? - Held that - We find no substance in its instant plea as it has already come on record that lower appellate finding(s) have duly considered the types of plant and machinery / vehicles in light of the relevant case law deciding the very issue in assessee s favour. There is no distinction on facts or law being pointed out in Revenue s pleadings. TDS u/s 194A - Disallowance of interest paid to finance companies u/s. 40(a)(ia) without deducting TDS - Assessing Officer mentioned that the purchase was on basis of a hire purchase agreement and assessee is liable to deduct tax at source on interest payment - Held that - We find that the CIT(A) has considered the entire issue in light of hon ble apex court s decision in ICDS case 2013 (1) TMI 344 - SUPREME COURT as well as the relevant hire purchase agreement as per CBDT s Circular 647/1993 dated 22.03.1993 deals with application of section 194 on Hire Purchase agreements. Hire Purchase is a system by which a buyer pays for a thing in regular installments while enjoying the use of it. During the repayment period, ownership (title) of the item does not pass to the buyer. Upon the full payment of the loan, the title passes to the buyer. If, directly or indirectly, it is apparent that the lessor has agreed to a permanent beneficial enjoyment of the asset by the lessee, the lessee may be treated as a hire-purchase transaction. Hire Purchase agreement is to be examined and decided whether the asset has been obtained under a true Hire Purchase agreement.

Summary

Issues:
1. Higher depreciation rate claimed on transmit complete mixer and loaders.
2. Disallowance of interest paid without deducting TDS.

Analysis:

Issue 1: Higher Depreciation Rate
The Revenue appealed against the CIT(A)'s order deleting disallowance/additions of ?39,94,137 pertaining to higher depreciation rate claimed on transmit complete mixer and loaders. The CIT(A) allowed the higher depreciation based on judicial decisions citing the nature of assets and manner of usage. The Revenue contended that the Assessing Officer rightly deleted the higher depreciation claimed. However, the Tribunal found no substance in the Revenue's plea as the lower appellate findings favored the assessee based on relevant case law. The Tribunal upheld the CIT(A)'s decision, stating that no distinction on facts or law was pointed out in the Revenue's arguments.

Issue 2: Disallowance of Interest Paid without TDS
The Revenue's second substantive ground concerned the disallowance of interest paid without deducting TDS. The CIT(A) considered the issue in light of the apex court's decision in the "ICDS" case and Circular 647/1993. The Assessing Officer noted that interest was paid to finance companies without TDS, violating Section 194A. The CIT(A) directed a detailed examination of the Hire Purchase/Lease agreements to determine if the assets were obtained under a true Hire Purchase agreement. The CIT(A) overruled the argument that Section 36(1)(iii) applied instead of Section 40(a)(ia), emphasizing the special nature of Section 40(a)(ia). The Tribunal found no merit in the Revenue's grievance against the CIT(A)'s direction, leading to the dismissal of the Revenue's appeal.

In conclusion, the Tribunal upheld the CIT(A)'s decisions on both issues, dismissing the Revenue's appeal.