Sri. C.V. Bhanumurthy Reddy, Bangalore V. DCIT, Bangalore

ITA 261/BANG/2014

• Counselvise Citation: 26121114 RSA 2014
• Duration Of Justice: 9 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-11-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 18-11-2014
• Assessment Year: 2009-2010
• Appeal Filed On: 21-02-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: BIJOY KUMAR PANDA
• Keywords: Business income; Depreciation; Question of law
• Section: 234B; 32

Judgement Text

ITA NO.261 & SP 101 OF 2014 CN BHANUMURTHY REDDY BA NGALORE PAGE 1 OF 7 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE A BENCH, BANGALORE BEFORE SHRI RAJPAL YADAV, JUDICIAL MEMBER AND SHRI JASON P. BOAZ, ACCOUNTANT MEMBER ITA NO.261/BANG/2014 & SP NO.101/BANG/2014 (ASSESSMENT YEAR: 2009-10) SHRI C.V. BHANUMURTHY REDDY, NO.8, 14 TH MAIN ROAD, VENKATESHWARA LAYOUT, BANGALORE PAN: ABWPB 5765 E VS. DY. COMMISSIONER OF INCOME TAX, CIRCLE 10(1) BANGALORE (APPELLANT) (RESPONDENT) ASSESSEE BY: SHRI SURESH MUTHUKRISHNAN, CA DEPARTMENT BY: SHRI BIJOY KUMAR P ANDA, (DR) DATE OF HEARING: 18/11/2014 DATE OF PRONOUNCEMENT: 21/11/2014 O R D E R PER RAJPAL YADAV, J.M. THE PRESENT APPEAL IS DIRECTED AT THE INSTANCE OF THE ASSESSEE AGAINST THE ORDER OF THE LEARNED CIT(A) DA TED 31.01.2014 PASSED FOR ASSESSMENT YEAR 2009-10. THE ASSESSEE HAS TAKEN FOUR GROUNDS OF APPEAL, BUT ITS GRIEVANCE REVOLVES AROUND A SINGLE ISSUE, WHEREBY IT HAS PLEADED THAT THE DEPRECIATION ON THE WRITTEN DOWN VALUE OF THE VEHIC LES USED IN THE BUSINESS OF TRANSPORTATION OF MUNICIPAL SOLID W ASTE OUGHT TO BE GRANTED @ 30% INSTEAD OF @15% GRANTED BY THE ASS ESSING OFFICER AND UPHELD BY THE LEARNED CIT (A). IT FURTH ER CONTENDS THAT THE LEARNED CIT (A) HAS ERRED IN UPHOLDING CHA RGING OF INTEREST U/S 234B AND 234C OF THE INCOME TAX ACT. ITA NO.261 & SP 101 OF 2014 CN BHANUMURTHY REDDY BA NGALORE PAGE 2 OF 7 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE FI LED RETURN OF INCOME ELECTRONICALLY ON 30.09.2009 DECLARING AN IN COME OF RS.1,16,71,500/-. THE CASE OF THE ASSESSEE WAS SELE CTED FOR SCRUTINY ASSESSMENT AND A NOTICE U/S 143(2) WAS ISS UED AND SERVED UPON THE ASSESSEE. IT EMERGES OUT FROM THE RECORD THAT THE ASSESSEE WAS RUNNING TWO PROPRIETARY CONCERNS N AMELY M/S C.V. BHANUMURTHY REDDY AND M/S SWACHATHA CORPORATIO N. SEPARATE P&L A/C AND BALANCE SHEETS WERE FURNISHED BEFORE THE ASSESSING OFFICER FOR BOTH THE CONCERNS. ON SCRUTIN Y OF THE ACCOUNTS, IT REVEALED TO THE ASSESSING OFFICER THAT THE ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF MU NICIPAL WASTE. IT HAD VARIOUS VEHICLES NAMELY WHEEL TIPPERS , PUSH CARTS AND LIGHT GOOD VEHICLES ETC. IT HAD CLAIMED DEPRECI ATION IN M/S SWACHATHA CORPORATION OF RS.55,22,756/- @ 30% AND I N M/S C.V. BHANUMURTHY REDDY ON SIMILAR VEHICLES DEPRECIA TIN HAS BEEN CLAIMED AT 41,41,793/- @ 30%. THE LEARNED ASSE SSING OFFICER CONFRONTED THE ASSESSEE AS TO WHY DEPRECIAT ION SHOULD NOT BE ALLOWED @ 15%. THE ASSESSEE HAS FILED A DETA ILED NOTE INDICATING HIS ACTIVITIES AND AS TO WHY DEPRECIATIO N IS APPLICABLE @ 30%. ASSESSING OFFICER WAS NOT SATISFIED WITH THE CONTENTION OF THE ASSESSEE. HE ALLWOED THE DEPRECIATION @ 15% AND MADE AN ADDITION OF RS.48,32,274/-. 3. DISSATISFIED WITH THE ACTION OF THE ASSESSING OF FICER, ASSESSEE CARRIED THE MATTER IN APPEAL BEFORE THE CI T (A). HE RELIED UPON THE CIRCULAR OF THE BOARD BEARING NO.652 AS WE LL AS THE JUDGMENT OF THE HON'BLE BOMBAY HIGH COURT IN THE CA SE OF URMILA AND CO. VS. DCIT REPORTED IN 20 TAXMAN.COM 3 24. THE LEARNED REVENUE AUTHORITIES ARE BASICALLY OF THE VI EW THAT HIGHER RATE OF DEPRECIATION HAS BEEN PROVIDED ONLY ON THOS E MOTOR ITA NO.261 & SP 101 OF 2014 CN BHANUMURTHY REDDY BA NGALORE PAGE 3 OF 7 VEHICLES WHICH ARE BEING USED FOR HIRE. THE LEARNED CIT (A) CONSIDERED THE CIRCULAR BUT OBSERVED THAT THIS CIRC ULAR TALKS OF THE ACTIVITY OF AN ASSESSEE WHERE HE USED THE VEHIC LES FOR TRANSPORTATION OF GOODS ON HIRE. THE LEARNED CIT (A ) REJECTED THE CONTENTIONS OF THE ASSESSEE. 4. WITH THE ASSISTANCE OF THE LEARNED REPRESENTATIV ES, WE HAVE GONE THROUGH THE RECORD CAREFULLY. TIME AND AGAIN T HIS CONTROVERSY WAS BEING FACED BY THE REVENUE AUTHORIT IES. THEREFORE, THE BOARD HAS ISSUED A CIRCULAR POINTING OUT AS TO HOW THIS CONTROVERSY IS TO BE SILENCED. THE CIRCULAR OF THE BOARD READ AS UNDER: CIRCULAR NO.609 DATED 29.7.1991 (S.NO.272).. WHERE A TOUR OPERATOR OR TRAVEL AGENT USES MOTOR BUSES OR MOTOR TAXIS 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 ASSESSEES BUSINESS OF TRANSPORTATION OF GOODS ON HIRE. THE HIGHER RATE OF DEPRECIATION, HOWEVER, WIL L NOT APPLY IF THE MOTOR BUSES, MOTOR LORRIES, ETC., ARE USED IN SOME OTHER NON-HIRING BUSINESS OF THE ASSESSEE. 5. THE DEPRECIATION U/S 32 OF THE INCOME TAX ACT HA S BEEN GRANTED ON THE ASSETS WHICH DETERIORATE DURING THE COURSE OF ITS USER IN THE BUSINESS. PART-A OF THE APPENDIX ANNEXE D WITH THE INCOME TAX RULES PROVIDE A TABLE EXHIBITING THE RAT E OF DEPRECIATION ON DIFFERENT NATURE OF THE MACHINERY. THE ASSESSEE HAD CLAIMED DEPRECIATION ON THE BASIS OF ENTRY NO.I II(3)(II) OF PART-A OF THE NEW APPENDIX-I TO THE I.T RULES, WHER EAS THE ASSESSING OFFICER WAS OF THE VIEW THAT THE ASSESSEE OUGHT TO HAVE ITA NO.261 & SP 101 OF 2014 CN BHANUMURTHY REDDY BA NGALORE PAGE 4 OF 7 CLAIMED DEPRECIATION IN TERMS OF ENTRY NO.III(I) OF PART-A OF THE NEW APPENDIX. THE RELEVANT ENTRIES READ AS UNDER: III. MACHINERY AND PLANT (1) (1) MACHINERY AND PLANT OTHER THAN THOSE COVERED BY SUB-ITEMS (2), (3) AND (8) BELOW: (2) MOTOR CARS, OTHER THAN THOSE USED IN BUSINESS OF RUNNING THEM ON HIRE, ACQUIRED OR PUT TO USE ON OR AFTER THE 1 ST DAY OF APRIL, 1990 (3) (I). (II) (III).. (IV).. (V).. (VI). (VIA) NEW COMMERCIAL VEHICLE WHICH IS ACQUIRED ON O R AFTER THE 1 ST DAY OF JANUARY, 2009 BUT BEFORE THE 1 ST DAY OF OCTOBER, 2009 AND IS PUT TO USE BEFORE THE 1 ST DAY OF OCTOBER, 2009 FOR THE PURPOSES OF BUSINESS O R PROFESSION (SEE PARAGRAPH 6 OF THE NOTES BELOW THIS TABLE) (VII).. (VIII). 6. THE ASSESSEE HAS FURTHER RELIED UPON THE DECISIO N OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. S. C. THAKUR & BROS. WHEREIN CIRCULAR NO.609 AND 652 DATED 29.7.91 AND 14.6.1997 HAVE BEEN INTERPRETED BY THE HON'BLE BOMB AY HIGH COURT. THE QUESTION BEFORE THE HON'BLE HIGH COURT W AS: (A) THE SUBSTANTIAL QUESTION OF LAW WHICH ARISES IN THE PRESET APPEAL IS REGARDING THE CORRECT INTERPRETATION OF SECTION 32 OF THE INCOME TAX ACT AND OTHER RELEVANT PROVISIONS OF THE ACT AND WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE HON'BLE TRIBUNAL ERRED IN CONFIRMING THE ORDER OF CIT (A) AND ALLOWING THE DEPRECIATION TO THE ASSESSEE @ 50% AND 40% ITA NO.261 & SP 101 OF 2014 CN BHANUMURTHY REDDY BA NGALORE PAGE 5 OF 7 RESPECTIVELY FOR ASSESSMENT YEAR 1991-92 AND 1996-97 ON THE VALUE OF TRUCKS/DUMPERS OWNED BY THE ASSESSEE AND FURTHER FAILED TO APPRECIATE THAT THE ASSESSEE WAS ONLY A CIVIL CONTRACTOR AND WAS NOT ENGAGED IN THE BUSINESS OF WISELY OUT ASSET I.E. TRUCKS/DUMPERS TRANSPORTATION. THE HON'BLE HIGH COURT ANSWERED THIS QUESTION AS UN DER: 2. ON BEHALF OF THE APPELLANT THE LEARNED COUNSEL SUBMITS THAT CONSIDERING THE JUDGMENT OF THE SUPREME COURT IN CIT VS. GUPTA GLOBAL EXIM (P) LTD. (2008) 216 CTR (SC) 368 : (2008) 171 TAXMAN 474 (SC) THE CORRECT TEST WHICH THE AUTHORITIES BELOW HAD TO APPLY WAS WHETHER THE APPELLANT WAS IN THE BUSINESS OF TRANSPORTATION AND WHETHER THE VEHICLES WERE USED IN THE SAID BUSINESS. 3. IN THE INSTANT CASE, THE LEARNED CIT(A) FOR THE ASST. YR. 1996-97 RECORDED A FINDING THAT THE APPELLANT WAS REQUIRED TO TRANSPORT THE EARTH FROM ONE PLACE TO ANOTHER FOR FILLING AND THE EARTH SO TRANSPORTED DID NOT BELONG TO THE ASSESSEE AND AS SUCH THE APPELLANTS BUSINESS RECEIPTS TO A LARGE EXTENT, CAN BE HELD TO BE PRICE OF THE CHARGES RECEIVED FOR TRANSPORTING THE GOODS FROM ONE PLACE TO ANOTHER. THE LEARNED TRIBUNAL ALSO RECORDED A FINDING THAT THE APPELLANT HAD ALSO SHOWN TRANSPORTATION INCOME FROM THIRD PARTIES SUCH AS BHARAT PETROLEUM LTD. IN ITS ASST. YR. 1996-97. CONSIDERING THESE FACTS THE LEARNED CIT(A) ARRIVED AT THE CONCLUSION THAT THE APPELLANT IS ENTITLED TO DEPRECIATION AT HIGHER RATE AS SET OUT IN ITS ORDER. 4. IN APPEAL THE LEARNED TRIBUNAL RELIED ON THE CIRCULAR NO. 652, DT. 14TH JUNE, 1993 [(1993) 112 CTR (ST) 14] ISSUED BY THE CBDT WHICH READS AS UNDER : 'SUBJECT : SEC. 32 OF THE IT ACT, 1961 RATE OF DEPR ECIATION ON MOTOR LORRIES USED IN THE BUSINESS OF TRANSPORTA TION OF GOODSREGARDING. UNDER SUB-ITEM 2(II) OF ITEM NO. I II OF APPENDIX 1 TO THE IT RULES, 1962, HIGHER RATE OF DEPRECIATION IS ADMISSIBLE ON MOTOR BUSES, MOTOR LO RRIES AND MOTOR TAXIS USED IN A BUSINESS OF RUNNING THEM ON ITA NO.261 & SP 101 OF 2014 CN BHANUMURTHY REDDY BA NGALORE PAGE 6 OF 7 HIRE. A QUESTION HAS BEEN RAISED AS TO WHETHER FOR DERIVING THE BENEFIT OF HIGHER DEPRECIATION, MOTOR LORRIES M UST BE HIRED OUT TO SOME OTHER PERSON AND WHETHER THE USER OF THE SAME IN THE ASSESSEES BUSINESS OF TRANSPORTATION O F GOODS ON HIRE WOULD SUFFICE. 2. IN BOARDS CIRCULAR NO. 609, DT. 29TH JULY, 1991 [(1992) 96 CTR (ST) 233], IT WAS CLARIFIED THAT WHERE A TOU R OPERATOR OR TRAVEL AGENT USES MOTOR BUSINESS OR MOT OR TAXIS OWNED BY HIM IN PROVIDING TRANSPORTATION SERVICES T O TOURISTS, HIGHER RATE OF DEPRECIATION WOULD BE ALLO WED ON SUCH VEHICLES. IT IS FURTHER CLARIFIED THAT HIGHER DEPRECIATION WILL ALSO BE ADMISSIBLE ON MOTOR LORRI ES USED FOR THE ASSESSEES BUSINESS OF TRANSPORTATION OF GO ODS ON HIRE. THE HIGHER RATE OF DEPRECIATION HOWEVER, WILL NOT APPLY IF THE MOTOR BUSINESS, MOTOR LORRIES ETC. ARE USED IN SOME OTHER NON-HIRING BUSINESS OF THE ASSESSEE.' 5. A PERUSAL OF THE SAID CIRCULAR WOULD MAKE IT CLEAR THAT THE HIGHER RATE OF DEPRECIATION IS ALSO ADMISSIBLE WHEN THE MOTOR LORRY IS USED BY THE ASSESSEE IN HIS OWN BUSINESS OF TRANSPORTATION OF GOODS ON HIRE. CONSIDERING THE FINDINGS RECORDED BY CIT(A) AND THE BOARDS CIRCULAR AND THE JUDGMENT OF SUPREME COURT IN GUTPA GLOBAL EXIM (SUPRA), IN OUR OPINION, NO ERROR CAN BE FOUND IN THE ORDERS OF THE CIT(A) AS ALSO THAT OF TRIBUNAL 7. IF WE PERUSE THE FACTS OF THE PRESENT CASE IN TH E LIGHT OF THE HON'BLE BOMBAY HIGH COURT DECISION AS WELL AS IN TH E LIGHT OF THE CIRCULARS OF THE BOARD, THEN IT WOULD REVEAL THAT T HE LEARNED CIT (A) HAS FAILED TO CONSTRUE THE CIRCULAR IN RIGHT PE RSPECTIVE. ACCORDING TO THE LEARNED CIT (A) THE CIRCULAR IS AP PLICABLE IF AN ASSESSEE HAS USED THE MOTOR VEHICLE FOR TRANSPORTIN G THE GOODS ON HIRE OR THE HIGHER RATE OF DEPRECIATION WOULD BE APPLICABLE OR GIVEN ON HIRE LIKE TAXIS. IN THE PRESENT CASE, THE ASSESSEE HAS BEEN TRANSPORTING THE SOLID WASTE OF MUNICIPALITY O N HIRE. THUS, THE VERY NATURE OF THE ASSESSEES BUSINESS IS SUCH WHICH BRING HIM IN THE AMBIT OF THE CIRCULAR. IT IS NOT THE CAS E WHERE A PERSON IS RUNNING ANY CONSULTANCY FIRM AND USED A MOTOR CA R FOR ITA NO.261 & SP 101 OF 2014 CN BHANUMURTHY REDDY BA NGALORE PAGE 7 OF 7 HIMSELF. HERE THE VEHICLES ARE USED FOR TRANSPORTIN G THE GOODS OF THIRD CONCERN BY VIRTUE OF A CONTRACT. THERE IS A C OMMERCIAL EXPLOITATION OF THE VEHICLES FOR TRANSPORTING THE G OODS ON HIRE. THEREFORE, THE ASSESSEE IS ENTITLED FOR HIGHER RATE OF DEPRECIATION. WE ALLOW THE APPEAL OF THE ASSESSEE AND DELETE THE DISALLOWANCE. AS FAR AS CHARGING OF INTEREST IS CONCERNED, NO ARG UMENTS WERE ADVANCED. THE INTEREST WOULD BE CONSEQUENTIAL, HENC E REJECTED. 8. SINCE WE HAVE DECIDED THE APPEAL IN FAVOUR OF TH E ASSESSEE, THE STAY PETITION FILED BY THE ASSESSEE IN S.P. NO. 101/BANG/2014 HAS BECOME REDUNDANT AND REJECTED. ORDER PRONOUNCED IN THE OPEN COURT ON 21 ST NOVEMBER, 2014. SD/- SD/- (JASON P. BOAZ) (RAJPAL YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER BANGALORE DATED 21 ST NOVEMBER, 2014. VNODAN/SPS COPY TO: 1. THE APPELLANT 2. THE RESPONDENT 3. THE CONCERNED CIT(A) 4. THE CONCERNED CIT 5. THE DR, ITAT, BANGALORE 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL, BANGALORE BENCHES, BANGALORE