The Income Tax Appellate Tribunal, Vishakhapatnam, in its recent order allowed Higher Depreciation since transportation business using Trailers, Dumpers & Motor Lorries is not an incidental to the business.
In instant case appeal preferred by revenue against the order of Commissioner of Income Tax (Appeals)-1, Visakhapatnam for the Assessment Year 2011-12.
The sole issue in the present appeal was that AO disallowed the higher depreciation of 30% on Trailers, Dumpers & Motor Lorries, which were used for transportation business and only granted normal depreciation at 15%.
Usually, higher depreciation is provided only in the case of vehicles, which are let out for hire and not in the case of vehicles used for internal purposes of the business. During the proceedings, assessee explained that its main business activity was to act as Clearing & Forwarding (C & F) agent as well as transportation.
The AO claimed that the activity of transportation is only incidental to the main activity of clearing and forwarding and disallowed the higher depreciation claimed by the assessee.
Later CIT (A) directed AO to allow higher depreciation claimed by the assessee. On being aggrieved, revenue carried the matter in appeal before the tribunal.
After hearing both the sides, the tribunal found that the only issue involved in this appeal is whether assessee is eligible for higher depreciation or not. The bench pointed out that the case of the Assessing Officer is that the main activity of the assessee is only C & F agency and transportation business carried out by the assessee by using Trailers, Dumpers & Motor Lorries is only incidental to the business of the assessee and he only allowed normal depreciation of 15%.
Before the CIT (A), the assessee has filed all the details of the business receipts and from that it is clear that Out of the gross business receipts of Rs.55,75,16,582/-, the assessee received Rs.22,99,64,332/- from its transport business. Thus, it is clear that transportation is not merely incidental to the assessee’s business as the receipts from transport business are also substantial.
Finally the bench including Judicial Member V. Durga Rao and Accountant Member D.S. Sunder Singh restored the order of CIT (A) and found no infirmity in their order and granted higher depreciation on assessee’s vehicles.
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