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TMI Blog2018 (4) TMI 17X X X X Extracts X X X X X X X X Extracts X X X X ..... nditure. In the present case, direct expenditure has been incurred on the investment made in sister concern. Such expenditure has to be disallowed. Hence we do not find any infirmity in the order of the CIT(A) and confirm the same. In the present case, direct expenditure has been incurred on the investment made in sister concern. Such expenditure has to be disallowed. Hence we do not find any infirmity in the order of the CIT(A) and confirm the same. - Decided against revenue - I.T.A. No.492/Coch/2016 - - - Dated:- 21-3-2018 - Shri Chandra Poojari, AM And George George K., JM Assessee by Shri Radhesh Bhat, CA Revenue by Shri M.V. Rudran, ADCIT, Sr. DR ORDER Per Chandra Poojari, Accountant Member This appeal filed by the assessee is directed against the order of the CIT(A)-I, Kochi dated 20/09/2016 and pertains to the assessment year 2009-10. 2. The first ground is Ground No. 2 which reads as follows: 2. The ld. CIT(A) erred in confirming the order of the Assessing Officer (AO) and thereby restricting the depreciation on vehicles used by the appellant in the business of running on hire to 15%, instead of 30%. The CIT(A) erred in stating that run ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... plying on hire for tourists, which is a separate independent business. It was submitted that it is not necessary that running on hire must be the main business of the appellant and it can be incidental to the main business also. According to the Ld. AR, as per the said decision, there is no requirement to keep separate books to constitute the running of vehicles on hire to be a separate business. The Court also held that there is no bar on the assessee to combine many businesses. Therefore, it was contended that higher rate of depreciation should be allowed, even if the rent from hire of vehicles was not charged separately. In the case of the assessee, it was submitted that the income from running of vehicles on hire is also offered as business income and hence the assessee is eligible for higher rate of depreciation. 5.1 The Ld. AR relied on the decision of the Delhi Bench of ITAT in the case of ACIT vs. Hotel Marina (112 ITD 159) wherein it was held that rent for running the vehicles to transporting tourists were not even charged separately. Still, it was submitted that the Tribunal held that the assessee was eligible for higher depreciation, since there was nothing on record ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . During the course of appeal proceedings, the assessee has filed copies of a few work orders issued by the Railways where the nature of work has been mentioned as collection and supply of approved quality machine crushed track ballast as per latest revised specification from outside the Railway limit and stacking for measurements at ballast depot in Wadakancheri station yard with all lead and lifts, loading and unloading, conveyance from the place of availability, crossing the track where ever required etc. complete using contractor s labour, vehicle and consumables. (payment by stack measurements without any deduction for voids) 9. The work order shows that the appellant has to supply material and stock it at Railway site. The assessee has also stated that he is in the business of supplying metal to the railways and public. It is not the case of the assessee that the material owned by Railways was transported from its quarry to the railway ballast. The delivery of goods takes place at the ballast site of Railways, therefore as per Sale of Goods Act also the sale takes place only when the material is handed over to the Railways. In fact it is a case of transportation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the test..... In our view, the entire approach of the Commissioner of Income tax (Appeals) was erroneous when he has stated that the transportation income of ₹ 12,50,639 by way of running the subject vehicles on hire is an integral part of the appellant s business and its inclusion in the head Business income is not disputed by the Assessing officer. In our view, mere inclusion of ₹ 12,50,639/- in the total business income is not the determinative factor for deciding whether trucks were used by the assessee during the relevant year in a business of running them on hire. In our view, the Commissioner of Income tax (Appeals) had erred in relying upon the accrual of income as a determinative factor for coming to the conclusion that the trucks were used in a business of running them on hire. Since the assessee is collecting transport charges from the Railways, it is contended that the assessee is in the business of transportation of goods. However, the Hon ble Supreme Court in the above cited case, has clearly expressed the view that the mere receipt of transport charges is not determinative factor. Thus the real test is whether the assessee has used the veh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ules, 1962 higher rate of depreciation is admissible on motor buses, motor lorries and motor taxis used in a business of running them on hire. A question has been raised as to whether, for deriving the benefit of higher depreciation, motor lorries must be hired out to some other person or whether the user of the same in the assessee s business of transportation of goods on hire would suffice. 2. In Board s Circular No. 609, dated 29th July 1991, it was clarified that where a tour operator or travel agent uses motor buses or motor taxies owned by him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles. It is further clarified that higher depreciation will also be admissible on motor lorries used in the assessee s business of transportation of goods on hire. The higher rate of depreciation, however, will not apply if the motor buses, motor lorries, etc. are used in some other non-hiring business of the assessee. 3. This may be brought to the notice of all the officers in your charge. 12. We have already noticed that the assessee is not engaged in the business of running the vehicles on hire. The facts prevail ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Learned CIT (A) confirmed the decision of the AO relying on the ratio decision of Bombay HC in the case of Godrej Boyce Mfg Co. Ltd v. CIT (328 ITR 81) and on the CBDT circular no. 5/2014 dt 11.02.2014. 8.3 Against this, the assessee is in appeal before us. The Ld. AR submitted that the investments made were not meant to earn exempt income. It was submitted that out of the share capital comprising of 15000 shares, the assessee s investment amounts to 14970 shares, i.e., 99.80%, as a result, Harmonia was a subsidiary of the assessee-company. It was submitted that investment in shares of Harmonia were made out of the loan from Axis Bank and the proportionate interest paid towards investment made was ₹ 24,22,223/-. According to the Ld.AR the said investment has been classified as 'Trade' Investments, meaning that the investments made were in relation to the business of the assessee. It was submitted that the assessee was to make addition to fixed assets by purchase of all the assets and liabilities of an existing Hotel at Kovalam owned by a company (Harmonia). The Ld. AR submitted that instead of purchasing the fixed assets of Harmonia, so as to reduce ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SOT 44 (URO) Chennai (Trib.) The Ld. AR submitted that in the above decision, the Tribunal held that the intention of the assessee cannot be treated as irrelevant. In the case of assessee, the purpose of making investment was to ensure synergy of having hotel properties in all important tourist destinations in Kerala and the above decisions are applicable. The ld. AR also relied on the on the decision of ITAT Mumbai, in the case of Garware Wall Ropes Ltd v. ACIT (46 Taxmann.com 18), which was relied upon by the Tribunal in MSA Securities case. d) No disallowance u/s.14 A if the investment made is. a strategic investment in subsidiary. The Ld. AR submitted that in the case of Cheminvest v. CIT, the Delhi High Court has, relying on the decision of CIT v. Holcim India (P.) Ltd. [2015] 57 taxmann.com 28 (Delhi), held that in the case of an assessee who has made strategic investment in shares of another company and no exempted income was earned by the assessee in the relevant assessment year and the genuineness of the expenditure incurred by the assessee is not in doubt, no disallowance u/s.!4A, r.w.r 8D can be made. The Ld. AR submitted that in the assessee s case, the inv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 02.05.2016 The Ld. AR submitted that the CBDT circular dt 02.05.2016, which amended Rule 8 D has no application to the assessee s case, relating to AY 2009-10. The Ld. AR submitted that the decision relied upon by the CIT(A) in the case of Godrej Boyce Mfg Co. Ltd was rendered in the context of exempt actually earned by the assessee and for the AY 2002-03, i.e., for an year prior to introduction of provision of Rule 8 D. It was submitted that in the case of the assessee, there was no dividend income and hence the said decision was not applicable. Hence it was submitted that following the above decisions, the disallowance is to be deleted. 8.5 The Ld. DR relied on the order of the lower authorities. 8.6 We have heard the rival contentions and perused the material on record. The contention of the assessee is that there is no exempted income earned by the assessee. However it seems from the facts of the case that the assessee incurred direct expenditure on the investments made in exempted income yielding asset. Since the assessee incurred direct expenditure which was identified by the Assessing Officer and it is not disputed by the assessee, in our opinion, Rule 8D(2(i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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