Saravana Mandhiram, CHENNAI V. ITO, CHENNAI

ITA 1172/CHNY/2014

• Counselvise Citation: [2015] 140 COUNSELVISE.COM (IT) 96477 (ITAT-CHENNAI)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 20-11-2015
• Appeal Filed By: Assessee
• Bench Allotted: A
• Next Hearing Date: 03-11-2015
• Assessment Year: 2010-2011
• Appeal Filed On: 05-05-2014
• Court: TRIBUNAL
• Department Lawyers: A B KOLI
• Assessee Lawyers: S SRIDHAR
• Keywords: Business income; Depreciation
• Section: 32

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI , . ! ' , # '$ BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI G. PAVAN KUMAR, JUDICIAL MEMBER ./ ITA NO. 1172/MDS/2014 / ASSESSMENT YEAR : 2010-11 SHRI SARAVANAN MANDTHIRAM, NO.169, KARANEESHWARAR KOIL PAKODA STREET, II FLOOR, MYLAPORE, CHENNAI 600 004. PAN ALJPM2132M ( /APPELLANT) V. THE INCOME-TAX OFFICER. BUSINESS WARD-V(1), CHENNAI. RESPONDENT) / APPELLANT BY : SHRI S. SRIDHAR, ADVOCATE / RESPONDENT BY : SHRI A.B.KOLI, JCIT ! / DATE OF HEARING : 02.11.2015 '# ! / DATE OF PRONOUNCEMENT: 20.11.2015 % / O R D E R PER CHANDRA POOJARI, ACCOUNTANT MEMBER THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX(APPEALS) DA TED 24.2.2014 FOR THE ASSESSMENT YEAR 2010-11. - - ITA 1172/14 2 2. THE FIRST ISSUE IN THIS APPEAL IS WITH REGARD TO THE DISALLOWANCE OF ADDITION OF DEPRECIATION ON TRUCK N OS.2 & 3 OF ` 3,16,894/-. 3. THE FACTS OF THE CASE ARE THAT THE ASSESSEE CLAI MED DEPRECIATION ON TRUCK NOS.2 & 3 AT ` 3,16,894/- EACH AT THE RATE OF 30% AND THE AO ALLOWED ONLY 15% OF DEPRECIATION ON THE ABOVE TRUCKS ON THE GROUND THAT MOTORS BUSES, MOTOR LORRIES AND MOTOR TAXIES USED IN A BUSINESS OF RUNNING THEM ON HIRE IS ELIGIBLE FOR DEPRECIATION OF 30% ACCORDING TO III(3 )(II) OF NEW APPENDIX I OF THE INCOME TAX ACT AND ALSO STATED T HAT IN THE CASE OF CIT VS. GUPTA GLOBAL EXIM PVT. LTD., (2008) REPORTED IN 305 ITR 32, THE SUPREME COURT HELD THAT HIGHER DEPR ECIATION SHOULD BE ALLOWED ONLY IF THERE IS EVIDENCE THAT TH E ASSESSE WAS IN THE BUSINESS OF HIRING OUT MOTOR VEHICLES. IN TH E CASE OF CIT VS. PARDIP N. DESAI (2012) REPORTED IN 341 ITR 277 (GUJ), THE ASSESSE PURCHASED A TRUCK AND GAVE IT ON LEASE. ON APPEAL BY THE REVENUE, THE COURT HELD THAT THE ASSESSE WAS NO T CARRYING ON THE BUSINESS OF HIRING THE VEHICLE AND HENCE NOT ENTITLED TO HIGHER RATE OF DEPRECIATION. ON THIS FOOTING, EXCES S DEPRECIATION CLAIMED BY THE ASSESSE BEING ` 3,16,894/- ( ` 1,58,477/- EACH FOR - - ITA 1172/14 3 TWO TRUCKS) WAS DISALLOWED AND BROUGHT TO TAX. THE ASSESSE CONTENDED BEFORE THE CIT(APPEALS) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE ASSESSING OFFICER ERRED IN ASSESSMENT WITHOUT APPRECIATING THE FACTS AND RELYING ON THE JUDGMENTS OF THE SUPREME COURT IN THE CASES CITED SUPRA. THE ASSESSE RELIED ON THE DECISION OF THE KARNATAKA HIGH COURT IN THE CASE OF PRAKASH LEASING LTD. V. DCIT, IN ITA NOS.301, 302 & 491 OF 2007, WHEREIN MERELY BECAUSE THE VEHIC LES WERE USED BY THE LESSEES IN THEIR BUSINESS, THE ASSESSE CANNOT BE DENIED THE DEPRECIATION @ 40%. HENCE, THE ASSESSEE BEFORE THE CIT(APPEALS) PRAYED THAT THE DISALLOWANCE OF ` 3,16,894/- MADE IN RESPECT OF DISALLOWANCE ON TRUCK 2 AND 3 MA Y BE DELETED. HOWEVER, THE CIT(APPEALS) CONFIRMED THE FINDING OF THE ASSESSING OFFICER AND DISMISSED THIS GROUND OF APPEAL. AGAINST THIS, THE ASSESSEE IS IN APPEAL BEFORE US. 4. THE CONTENTION OF THE LD. AR IS THAT THE ASSESSE E IS ENGAGED IN THE BUSINESS OF LETTING OUT TRUCKS FOR C ARRYING THE GARBAGE TO THE CLEARING CONTRACTORS AND THE ASSESSE E ITSELF IS NOT A CONTRACTOR SO AS TO GRANT NORMAL DEPRECIATION AT 15%. ACCORDING TO THE ASSESSEE, THE ASSESSEE HAS RECEIVE D HIRE - - ITA 1172/14 4 CHARGES, WHICH HAS BEEN TREATED AS BUSINESS INCOME OF THE ASSESSEE. THE PLYING OF TRUCKS ON HIRE FOR CLEARIN G THE GARBAGE THROUGH CONTRACTORS CANNOT BE CONSTRUED AS THE ASSE SSEE USED THE TRUCK BY HIMSELF AND THE BUSINESS OF THE ASSESS EE IS ONLY GIVING THE TRUCKS FOR HIRE. ACCORDING TO THE ASSES SEES COUNSEL, WHEN THE HIRE CHARGES ARE CHARGEABLE AS BUSINESS IN COME, THERE IS NO REASON TO DISALLOW HIGHER RATE OF DEPRECIATIO N ON PLYING OF TRUCKS ON HIRE CHARGES. THE LD. DR CONTENDED THAT THE ASSESSEE IS NOT IN THE BUSINESS OF PLYING OF TRUCK S ON HIRE. IT IS ONLY AN ARRANGEMENT BETWEEN THE ASSESSEE AND THE CO NTRACTORS FOR CLEARING OF GARBAGE AND THE ASSESSEE RECEIVED T HE INCOME FOR CLEARING THE GARBAGE AND NOT FOR HIRE CHARGES O F TRUCKS SUPPLIED BY THE ASSESSEE. THAT BEING SO, HIRE DEPR ECIATION CANNOT BE ALLOWED. 5. WE HAVE HEARD BOTH THE PARTIES AND GONE THROUGH THE ORDER OF THE COPY OF PROFIT AND LOSS ACCOUNT FILED BY THE ASSESSEE BEFORE US. THE ASSESSEE HAS SHOWN THE GROSS INCO ME RECEIVED AT ` 3,04,67,347/- AS AGAINST THE EXPENSES INCURRED INTER ALIA DIESEL EXPENSES OF ` 1,90,06,815/-, FUEL EXPENSES OF ` 1,99,300/- UNDER REPAIRS AND MAINTENANCE ` 15,64,125/-/- AND - - ITA 1172/14 5 DRIVER BATTA OF ` 35,59,440/-. THAT MEANS THE ASSESSEE WAS RUNNING THE TRUCKS FOR HIMSELF AND INCURRED DIESEL EXPENSES. THE ASSESSEE IS NOT ENGAGED IN THE BUSINESS OF LETT ING OUT THE VEHICLES FOR HIRE BUT ENGAGED IN THE BUSINESS OF GA RBAGE CLEARING. FOR THIS WORK, THE ASSESSEE UTILIZED HIS OWN VEHICLES AND EARNED INCOME. THE SUPREME COURT IN THE CASE O F CIT V. GUPTA GLOBAL EXIM (P) LTD. (305 ITR 132), HELD THAT THE USER OF THE TRUCK IN THE BUSINESS OF TRANSPORTATION IS THE TEST FOR ALLOWING HIGHER DEPRECIATION UNDER ITEM III(2)(II) APPENDIX I TO THE IT RULES; THE MATTER HAVING NOT EXAMINED FROM THE POIN T OF VIEW TRUCKS ON HIRE FOR CONSIDERATION. IN OTHER WORDS, ONLY WHEN THE ASSESSEE WAS IN THE BUSINESS OF HIRING OUT TRUCKS F OR RUNNING THEM TO EARN BUSINESS INCOME, THE ASSESSEE IS ENTIT LED FOR HIGHER DEPRECIATION. IN THE PRESENT CASE, THE BUSI NESS OF THE ASSESSEE CANNOT BE CONSIDERED AS GIVING VEHICLES ON HIRE. ON THE OTHER HAND, THE ASSESSEE IS USING HIS OWN TRUCK FOR GARBAGE CLEARING FOR HIS OWN BUSINESS AS A SUB-CONTRACTOR A ND NOT GIVING THE VEHICLE FOR HIRE TO ANYBODY. HENCE, IN OUR OPI NION, THE ASSESSEE CANNOT BE GRANTED HIGHER RATE OF DEPRECIAT ION. 6. WE ALSO PLACE RELIANCE ON THE CBDT CIRCULAR NO.6 52 - - ITA 1172/14 6 DATED 14.6.1993 (202 ITR (ST.) 55), WHICH READS AS UNDER: 'CIRCULAR NO. 652, DATED 14TH JUNE, 1993 TO. ALL CHIEF COMMISSIONERS OF INCOME-TAX/ALL DIRECTORS GENERAL OF INCOME-TAX SIR, SUBJECT: SECTION 32 OF THE INCOME-TAX ACT, 1961 RATE OF DEPRECIATION ON MOTOR LORRIES USED IN THE BUSINESS OF TRANSPORTATION OF GOODS REGARDING. UNDER SUB-ITEM 2(II) OF ITEM NO. III OF APPENDIX I TO THE INCOME-TAX RULES, 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 QUEST ION HAS BEEN RAISED AS TO WHETHER, FOR DERIVING THE BENEFI T OF HIGHER DEPRECIATION, MOTOR LORRIES MUST BE HIRED OUT TO SO ME OTHER PERSON OR WHETHER THE USER OF THE SAME IN THE ASSES SEE'S BUSINESS OF TRANSPORTATION OF GOODS ON HIRE WOULD S UFFICE. 2. IN BOARD'S CIRCULAR NO. 609, DATED 29TH JULY 199 1, IT WAS CLARIFIED THAT WHERE A TOUR OPERATOR OR TRAVEL AGEN T USES MOTOR BUSES OR MOTOR TAXIES OWNED BY HIM IN PROVIDI NG TRANSPORTATION SERVICES TO TOURISTS, HIGHER RATE OF DEPRECIATION WOULD BE ALLOWED ON SUCH VEHICLES. IT IS FURTHER CLARIFIED THAT HIGHER DEPRECIATION WILL ALSO BE ADM ISSIBLE 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-HIRI NG BUSINESS OF THE ASSESSEE. 3. THIS MAY BE BROUGHT TO THE NOTICE OF ALL THE OFF ICERS IN YOUR CHARGE.' IN VIEW OF THE ABOVE, WE ARE OF THE OPINION THAT TH E ASSESSEE IS NOT ENTITLED HIGHER DEPRECIATION AT 30% BUT ONLY EN TITLED TO 15% OF W.D.V. OF TRUCKS. - - ITA 1172/14 7 7. AT THE TIME OF HEARING, GROUND NOS.6 TO 13 ARE N OT PRESSED AND THE SAME IS DISMISSED AS NOT PRESSED. 8. THE NEXT ISSUE IS WITH REGARD TO GROUND NO.14, W HEREIN THE ASSESSEE CONTENDED THAT THE ASSESSEE WAS NOT GI VEN PROPER OPPORTUNITY TO REPRESENT HIS CASE. 9. THE ASSESSEES COUNSEL SUBMITTED THAT THE ASSESS EE IS DEPRIVED PROPER HEARING BEFORE THE LOWER AUTHORITIE S. 10. WE FIND NO MERIT IN THIS GROUND ON THE REASON T HAT THE ASSESSEE HAS GIVEN SUFFICIENT OPPORTUNITIES BY BOT H THE AO AND THE CIT(A) AND THE GROUND IS MIS-CONCEIVED AND THE SAME IS DISMISSED. 11. THE LAST ISSUE FOR OUR CONSIDERATION IS WITH RE GARD TO DISALLOWANCE OF DEPRECIATION ON TRUCK NO.4 AMOUNTIN G TO ` 2,97,263/-. 12. THE FACTS OF THE ISSUE ARE THAT THE ASSESSEE H AS ALSO CLAIMED DEPRECIATION ON TRUCK-4 AT ` 2,97,263/- AT THE RATE OF 30% AND ALSO CLAIMED INTEREST PAYMENT OF ` 52,355/- ON THE LOAN - - ITA 1172/14 8 TAKEN FOR PURCHASE OF THIS TRUCK. THE AO HAS NOTIC ED ON THE BASIS OF PURCHASE INVOICE THAT THE TRUCK IS REGISTE RED IN THE NAME OF MRS. BEENA PALANI. THE ASSESSEE IN HIS SUBMISS IONS STATED THAT THE VEHICLES COULD NOT BE REGISTERED IN THE AS SESSEE S NAME DUE TO THE REPAYMENT OF LOAN TAKEN ON THE VEHICLE A ND THAT THEY HAVE MADE AN AGREEMENT BETWEEN THEM ABOUT OF THE OW NERSHIP OF THE VEHICLE AND THE ASSESSEE WHO HAS PAID THE L OANS AND UTILIZED HIS VEHICLES FOR HIRING BUSINESS. HOWEVE R, THE ASSESSEE HAS NOT FURNISHED ANY EVIDENCE OF SETTLEMENT OR ANY EVIDENCE OF LOAN REPAYMENT MADE BY THE ASSESSEE. ACCORDING TO SEC.32 OF THE ACT, TO CLAIM DEPRECIATION THE ASSESSEE SHOULD BE THE OWNER OF THE ASSET AND IT SHOULD BE USED FOR THE PURPOSE OF BUSINESS. IN THE CASE UNDER CONSIDERATION THE ASSESSEE IS NO T THE OWNER OF THE ASSET, HENCE DEPRECIATION CLAIMED AT ` 2,97,263/- ON TRUCK -4 IS NOT ALLOWABLE AND THUS AO HAS DISALLOWED THE CLAIM OF THE ASSESSEE AND EVEN DISALLOWED INTEREST CLAIMED OF ` 52,355/-. ACCORDINGLY, THE CIT(APPEALS) AGREED WITH THE FINDI NG OF THE AO AND CONFIRMED THE DISALLOWANCE MADE BY THE AO. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THOUGH THE ASSESSEE USED T HE VEHICLE FOR - - ITA 1172/14 9 THE PURPOSE OF BUSINESS BUT THE ASSESSEE IS NOT THE OWNER OF THE VEHICLE. UNLESS THE ASSESSEE IS THE OWNER, THE DE PRECIATION CANNOT BE GRANTED AND THE ASSESSEE HAS NOT FULFILLE D THE CONDITIONS LAID DOWN IN SEC.32 OF THE ACT AND THE L D. AR RELIED ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF M YSORE MINERALS LTD. V. CIT (239 ITR 775), WHEREIN IT WAS HELD THAT ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE E XERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS B EING EXCLUDED THEREFROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USUFRUCT IN HIS OWN RI GHT WOULD BE THE OWNER OF THE BUILDING. FOR SEC.32(1) THOUGH A FORM AL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED, AND HE W OULD BE ENTITLED TO DEPRECIATION THEREON. 14. WE HAVE GONE THROUGH THE AFORESAID JUDGMENT. I N THAT CASE, THE PART PAYMENT OF PRICE TOWARDS THE CONSIDE RATION MADE BY THE ASSESSEE AND POSSESSION WAS GIVEN TO THE ASS ESSEE SO AS TO ENABLE THE ENJOYMENT OF THE PROPERTY. EXECUTI ON OF DOCUMENTS TRANSFERRING TITLE IS DELAYED ONLY WITH T HE IDEA OF COMPELLING THE ASSESSEE TO OBSERVE THE SCHEDULE OF PAYMENT, IN THAT CIRCUMSTANCES, THE SUPREME COURT HELD THAT THE ASSESSEE - - ITA 1172/14 10 IS ENTITLED FOR DEPRECIATION. THE ASSESSEE NOT BEI NG THE LEGAL OWNER IS NOT ENTITLED TO DEPRECIATION. WE PLACE R ELIANCE ON THE JUDGMENT OF THE SUPREME COURT IN THE CASE OF (LATE) NAWAB SIR MIR OSMAN ALI KHAN V. CWT (162 ITR 888). BEING SO , WE ARE OF THE OPINION THAT THE JUDGMENT RELIED ON BY THE LD. AR CANNOT BE APPLIED. 15. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS DI SMISSED. ORDER PRONOUNCED ON FRIDAY, THE 20 TH OF NOV., 2015 AT CHENNAI. SD/- SD/- ( $% & ) ( ' ( ) $ ) *%+,-,./01,2345,.62,+778,293 : ;< /JUDICIAL MEMBER ! ;<=>>70.?,.?@A1BA2 ': /CHENNAI, C; /DATED, THE 20 TH NOV., 2015. MPO* ;D EFGF /COPY TO: 1. /APPELLANT 2. /RESPONDENT 3. H3 /CIT(A) 4. H /CIT 5. FIJ K /DR 6. JLM /GF.