Bothra Shipping Services, Kolkata V. CIT, - XII, Kolkata, Kolkata

ITA 586/KOL/2010

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 2462 (ITAT-KOLKATA)
• Duration Of Justice: 3 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-07-2010
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2006-2007
• Appeal Filed On: 22-03-2010
• Court: TRIBUNAL
• Department Lawyers: B N VARMA
• Keywords: Depreciation
• Section: 2(14); 263; 2

Judgement Text

, , , IN THE INCOME TAX APPELLATE TRIBUNAL C BENCH : KOLKATA ( (( ( ) )) ) . .. . . . . . , ,, , ! ! ! ! '#$ '#$ '#$ '#$ . .. .% %% % . . . . &' &' &' &', , , , () () () () [BEFORE HONBLE SHRI G. D. AGRAWAL, VP & HONBLE SR I D. K. TYAGI, JM] $* $* $* $* / ITA NO. 586 /KOL/2010 +, #-. +, #-. +, #-. +, #-./ // / ASSESSMENT YEAR : 2006-07 M/S. BOTHRA SHIPPING SERVICES -VS- COMMISSIONER OF INCOME-TAX-XII, KOL (PA NO.AADFB 8479 P) (01 / APPELLANT ) (2&01/ RESPONDENT ) FOR THE APPELLANT: / SHRI SOMNATH GHOSH FOR THE RESPONDENT: / SHRI B. N. VARMA (%3 / ORDER PER D. K. TYAGI, JM ( . . . . % %% % . . . . &' &' &' &', () ) THIS APPEAL PREFERRED BY THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE LD. CIT, KOLKATA DATED 01.02.2010 FOR THE ASSESSMENT Y EARS 2006-07 PASSED U/S. 263 OF THE I. T. ACT. 2. BRIEFLY STATED FACTS OF THE CASE ARE THAT THE AS SESSEE IS A PARTNERSHIP FIRM CARRYING ON BUSINESS AS STEVEDOR, CLEARING & FORWARDING AGEN T AND CONTRACTOR OF COMMERCIAL VEHICLES AND LEASES OUT EARTH MOVING VEHICLES. THE ASSESSEE CLAIMED DEPRECIATION @ 30% IN RESPECT OF TATA, JCB & 400V WHEEL LOADERS WH ICH ARE USED TO LOAD AND UNLOAD GOODS WHICH ARE NOT GROUPED OR BLOCKED TOGET HER WITH ASSETS LIKE LORRY , TAXI, BUS OR COMMERCIAL VEHICLES WITHIN THE MEANING OF SECTIO N 32(2) OF THE I. T. ACT, 1961 READ WITH SECTION 2 OF MOTOR VEHICLES ACT, 1988 AND THE SAME WAS ACCEPTED BY THE AO. SUBSEQUENTLY, THE LD. CIT INITIATED 263 PROCEEDINGS . ACCORDING TO HIM, THE DEPRECIATION CLAIMED @ 30% IN EXCESS OF 15% SHOULD HAVE BEEN DISALLOWED AND ADDED BACK BY THE AO AS THE SAME WAS ALLOWED WITHOUT ANY EXAMINATION. HENCE, ACCORDING TO THE LD. CIT, THE ORDER PASSED BY THE AO IS ERRONEOU S AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HE DIRECTED THE AO TO DISALLOW AND ADD BACK TO THE TOTAL INCOME OF THE ASSESSEE, THE EXCESS DEPRECIATION CLAIMED @ 15% I.E . RS.39,02,625/- OUT OF RS.78,05,251/-. AGGRIEVED BY THE SAID ORDER, NOW T HE ASSESSEE IS IN APPEAL BEFORE US. 2 3. AT THE TIME OF HEARING BEFORE US THE LD. COUNSEL FOR THE ASSESSEE WHILE REITERATING HIS SAME SUBMISSIONS AS SUBMITTED BEFOR E THE LOWER AUTHORITIES FURTHER SUBMITTED THAT IN COURSE OF THE ASSESSMENT PROCEED INGS, AFTER MAKING DUE ENQUIRY AND VERIFICATION, THE AO ACCEPTED THE RETURNED INCOME D ISCLOSED BY THE ASSESSEE. HOWEVER, THE LD. CIT ASSUMED JURISDICTION U/S. 263 OF THE IN COME TAX ACT, 1961 ON THE PREMISE THAT THE ASSESSMENT ORDER PASSED BY THE AO WAS ERRO NEOUS AS WELL AS PREJUDICIAL TO THE INTEREST OF REVENUE FOR ALLOWING THE CLAIM OF DEPRE CIATION WITHOUT ANY EXAMINATION IN RESPECT OF THE PAY LOADERS AT THE RATE OF 30% AS AG AINST THE ALLOWABLE RATE OF 15%. HE ALSO SUBMITTED THAT THE ASSESSEE OWNS TATA, JCB AND 400V ARE MAINLY DUMPERS/EXCAVATORS, CRANE MOUNTED VEHICLES AND VEHI CLES FITTED WITH CONSTRUCTION EQUIPMENTS REGISTERED AS HEAVY OR MEDIUM MOTOR VEHI CLES WITH THE REGIONAL TRANSPORT OFFICER UNDER THE OMNIBUS CATEGORY OF VE HICLES AND THEY ARE USED IN THE BUSINESS OF HIRING THEM OUT TO OTHERS AND AS SUCH E LIGIBLE FOR DEPRECIATION @ 30% AS PER ENTRY NO. III(3)(II) OF PART A OF APPENDIX I OF THE INCOME TAX RULES, 1962 AS MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIS USED IN A BUSI NESS OF RUNNING THEM ON HIRE . HE EXPLAINED THAT THESE ARE FOUR WHEELED MULTI-UTILITY VEHICLES USED FOR EXCAVATION OF EARTH AND MOVEMENT OF THE SAME IS LIMITED WITHIN SHORT DI STANCES. THE MANUFACTURES HAVE CERTIFIED THAT PAY LOADERS ARE EARTH MOVING VEHICLE S. IT WAS SUBMITTED THAT PAY LOADERS ARE AKIN TO MOTOR VEHICLES AS THEY ARE FITTED WITH DIESEL ENGINES, HYDRAULIC BRAKES AND PNEUMATIC TYRES AND ARE REGISTERED WITH THE RTO; AS SUCH, THEY SQUARELY FALL WITHIN THE MEANING OF MOTOR VEHICLES AS PRESCRIBED IN THE PR OVISION OF S. 2(28) OF THE MOTOR VEHICLES ACT 1988. HE VEHEMENTLY ARGUED THAT MOTOR LORRY APPEARING IN ENTRY NO. III(3)(II) OF PART A OF APPENDIX I OF THE INCOME TA X RULES, 1962 WOULD MEAN NOT ONLY ANY MOTOR VEHICLE DESIGNED TO CARRY FREIGHT OR GOOD S BUT ALSO TO PERFORM SPECIAL SERVICES. IT IS REITERATED THAT THESE ARE NOT USED AS TRANSPORT VEHICLES BUT THEY ARE USED IN EXCAVATION OF EARTH AND MOVEMENT OF THE SAME, THOUG H FOR LIMITED DISTANCE AND THE MACHINE IS ALSO USED TO LEVEL AND SHAPE THE LAND.. HE ALSO SUBMITTED THAT THE ACTION OF THE LD. CIT IS ITSELF ERRONEOUS AS HE HAD NOT CONSI DERED THE FACTS OF THE CASE IN PROPER PERSPECTIVE AND THEREBY CAME TO A CONCLUSION WHICH IS UNSUSTAINABLE IN LAW. HE FURTHER SUBMITTED THAT A MOTOR LORRY CAN PERFORM OTHER SPEC IAL SERVICES PERFORMED BY MOTOR VEHICLES DESIGNED FOR SUCH SERVICES. A LORRY OR TRU CK WHICH IS ADAPTED OR DESIGNED TO 3 CARRY CRANE IS MEANT FOR SPECIAL SERVICES OF LIFTIN G LOADS, MOVING IT SIDE BY SIDE OR ROTATING THEM OR MOVING THEM, HORIZONTALLY. THE CRA NE TRUCK IS A PORTABLE BOOM CRANE MOUNTED ON AN INDUSTRIAL TRUCK. IT MAY BE USED WITH CLEARING GRABS AND HOOKS FOR DEPOSIT AND LIFTING AND MOVING OF MATERIALS. THESE TRUCKS C OME WITHIN THE MEANING OF EXPRESSION OF MOTOR LORRIES AS DESCRIBED IN THE E NCYCLOPAEDIA BRITANNICA. IT WAS HIS CONTENTION THAT MOTOR VEHICLES LIKE FIRE FIGHTING T RUCK, CRANE TRUCKS ETC. DESIGNED FOR SPECIAL SERVICES FALL WITHIN THE CATEGORY OF MOTOR TRUCKS ALSO INCLUDING MOTOR LORRIES. CRANE IS ANY OF A DIVERSE GROUP OF MACHIN ES THAT NOT ONLY LIFT HEAVY LOADS BUT ALSO SHIFT THEM HORIZONTALLY. THE FORK LIFT TRUCK W IDELY USED FOR MOVING GOODS FROM ONE PLACE TO ANOTHER IS ALSO A MOTOR VEHICLE. GOODS CA RRIAGE AS DEFINED IN S. 2(14) OF THE MOTOR VEHICLES ACT, 1988 IS A MOTOR VEHICLE CONSTRU CTED OR ADAPTED FOR USE FOR THE CARRIAGE OF GOODS. THE MOBILE CRANE WHICH WAS REGIS TERED AS A HEAVY MOTOR VEHICLE CLEARLY FELL WITHIN THE EXPRESSION OF MOTOR LORRIE S. HE FURTHER CONTENDED THAT AS THE CONDITIONS PRECEDENT ARE SATISFIED, THE PAY LOADERS ARE ENTITLED TO SPECIAL DEPRECIATION AS PROVIDED FOR MOTOR LORRIES APPEARING IN ENTRY NO. III(3)(II) OF PART A OF APPENDIX I OF THE INCOME TAX RULES, 1962. IT WAS SUBMITTED THAT A MOBILE CRANE OR AN EXCAVATOR WHICH IS REGISTERED AS A HEAVY MOTOR VEHICLE WITH THE RTO WOULD CLEARLY FALL WITHIN THE EXPRESSION MOTOR LORRIES IN ENTRY IIIE(1A) OF TAB LE IN APPENDIX I UNDER RULE 5 OF THE INCOME TAX RULES, 1962 SINCE IT IS USED IN THE BUSI NESS OF RUNNING ON HIRE AND AS SUCH ENTITLED TO DEPRECIATION @ 30% AND THE LD. CIT WAS PATENTLY WRONG TO RESTRICT THE ALLOWANCE @ 15% WHICH IS CONTRARY TO THE LAW AS LAI D DOWN IN BOSE ABRAHAM VS STATE OF KERALA AIR 2001 SC 835. IN SUPPORT OF HIS CONTEN TION, HE RELIED UPON A CATENA OF DECISIONS WHICH ARE AS UNDER : - 1. CIT VS GAYLORD CONSTRUCTIONS (2010) 190 TAXMAN 4 06 (KERALA) 2. GUJCO CARRIERS VS CIT (2002) 122 TAXMAN 206 (GUJ ARAT) 3. SANCO TRANS LTD. VS ACIT (1997) 58 TTJ (MAD) 619 4. GUJARAT TUBE WELL CO. VS ITO (1992) 43 TTJ (AHD) 331 5. HINDUSTAN CONSTRUCTION CO. VS ITO (1988) 32 TTJ (AHD) 278 HE FURTHER SUBMITTED THAT IN THE INSTANT CASE, THE EARTH MOVING VEHICLES NAMELY TATA, JCB, 400V WHEEL LOADERS FELL UNDER ENTRY NO. III(3) (II) OF PART A OF APPENDIX I OF THE INCOME TAX RULES, 1962 AND AS SUCH ENTITLED TO DEPR ECIATION @ 30% AS ALLOWABLE IN 4 CASE OF MOTOR LORRIES SINCE THEY WERE USED IN THE BUSINESS OF RUNNING THEM ON HIRE WHICH WAS CONSIDERED IN THE PROPER PERSPECTIVE BY T HE AO AND THE ACTION OF THE LD. CIT OF ISSUING DIRECTION TO RESTRICT THE DEPRECIATION @ 15% IN THE ORDER PASSED U/S. S. 263 IS UNLAWFUL IN THE CIRCUMSTANCES AND RESPECTFULLY PRAY ED BEFORE THE BENCH TO QUASH THE SAME. 4. ON THE OTHER HAND, THE LD. DR VEHEMENTLY SUPPORT ED THE ORDER OF THE LD. CIT AND URGED BEFORE THE BENCH TO UPHOLD SUCH ACTION WH ICH, ACCORDING TO HIM, IS WELL WITHIN THE FOUR CORNERS OF LAW. 5. AFTER A CAREFUL ANALYSIS OF THE ARGUMENTS ADVANC ED BY BOTH THE PARTIES AND ON PERUSAL OF THE MATERIALS AVAILABLE ON RECORD IN LIG HT OF THE CASE LAWS CITED BY THE LD. COUNSEL OF THE ASSESSEE, WE FIND THAT THE ASSESSEE FIRM IS CARRYING ON A BUSINESS OF, INTER ALIA, LEASING OUT EARTH MOVING VEHICLES. IN THE RET URN FILED THE ASSESSEE CLAIMED DEPRECIATION, AT PAGE NO 78 OF THE PAPER BOOK, ON T ATA LOADERS IN THE SUM OF RS. 20,41,096/-, ON JCB LOADERS AMOUNTING TO RS. 39,50, 070/- AND ON DAEWOO 400V WHEEL LOADERS OF RS. 18,14,095/- AGGREGATING TO RS. 78,05 ,261/- APPLYING THE RATE OF 30% AVAILABLE IN CASE OF MOTOR LORRIES UNDER ENTRY NO . III(3)(II) OF PART A OF APPENDIX I OF THE INCOME TAX RULES, 1962. WE ALSO FIND FROM THE P ROFIT AND LOSS ACCOUNT, AT PAGE 95 OF THE PAPER BOOK, THAT THE ASSESSEE HAS DISCLOSED INCOME FROM COMMERCIAL VEHICLES/ OTHER EQUIPMENTS/ AUTO BAGGING & STANDARDISATION WO RK IN THE SUM OF RS. 3,51,43,929/- WHICH WAS DULY CONSIDERED IN THE NET PROFIT OF RS. 6,72,14,954/- DISCLOSED IN THE RETURN. THEREFORE THE OBSERVATION OF THE LD. CIT ON THIS ACCOUNT THAT THESE WHEEL LOADERS MAY BE USED IN THE BUSINESS OF THE ASSESSEE BUT THESE ARE NOT HIRED OUT TO OTHERS HAS NO LEGS TO STAND ON. WE FIND FORCE IN THE ARGUM ENTS OF THE LD. COUNSEL OF THE ASSESSEE THAT THE ASSESSEE IS ENTITLED TO DEPRECIAT ION @ 30% ON THE DUMPERS/EXCAVATORS, CRANE MOUNTED VEHICLES, VEHICLES FITTED WITH CONSTR UCTION EQUIPMENTS AND OTHER TATA, JCB AND 400V WHEEL LOADERS WHICH ARE REGISTERED AS HEAVY OR MEDIUM MOTOR VEHICLES BY THE REGIONAL TRANSPORT OFFICER AND THER EFORE CLEARLY FALLS WITHIN THE AMBIT OF THE EXPRESSION MOTOR LORRIES APPEARING IN ENTR Y NO. III(3)(II) OF PART A OF APPENDIX I OF THE INCOME TAX RULES, 1962 SINCE THEY ARE USED IN THE BUSINESS OF HIRING THEM OUT TO OTHERS. THEY ARE FITTED WITH DIESEL ENGINES, HYD RAULIC BRAKES AND PNEUMATIC TYRES. THESE ARE FOUR WHEELED MULTI-UTILITY VEHICLES USED FOR EXCAVATION OF EARTH AND 5 MOVEMENT OF THE SAME IS LIMITED WITHIN SHORT DISTAN CES. THESE ARE NOT USED AS TRANSPORT VEHICLES BUT THEY ARE USED IN EXCAVATION OF EARTH A ND MOVEMENT OF THE SAME, THOUGH FOR LIMITED DISTANCE AND THE MACHINE IS ALSO USED TO LE VEL AND SHAPE THE LAND. WE ALSO FIND THAT THE APEX COURT IN THE CASE OF BOSE ABRAHAM VS STATE OF KERALA SUPRA HAS HELD THAT THE EXCAVATORS AND ROAD ROLLERS ARE MOTOR VEHICLES WITHIN THE MEANING OF S. 2(28) OF THE MOTOR VEHICLES ACT, 1988 AND ARE EXIGIBLE TO TAX UN DER ENTRY TAX ACT. WE ARE OF THE CONSIDERED OPINION THAT A PAY LOADER IS AKIN TO A M OTOR VEHICLE AND IS REGISTERED WITH THE RTO AS A HEAVY OR MEDIUM MOTOR VEHICLES AND THEREFO RE, THEY SQUARELY FALL WITHIN THE MEANING OF MOTOR VEHICLES AS PRESCRIBED IN THE PR OVISION OF S. 2(28) OF THE MOTOR VEHICLES ACT 1988.. THEREFORE THE APPROACH OF THE A O WAS CORRECT IN LAW IN ALLOWING DEPRECIATION AT THE RATE OF 30% ON THESE PAY LOADER S THE MOBILE CRANE AND EXCAVATORS WHICH WERE REGISTERED AS HEAVY OR MEDIUM MOTOR VEHI CLES CLEARLY FELL WITHIN THE SCOPE OF THE EXPRESSION OF MOTOR LORRIES. THEREFORE, IN OUR CONSIDERED VIEW, THE IMPUGNED DIRECTION OF THE LD. CIT THAT THE TATA, JCB, 400V W HEEL LOADERS ARE ENTITLED TO DEPRECIATION @ 15% IS BASED ENTIRELY ON WRONG PREMI SES AND ASSUMPTIONS. WE FIND THAT THE ONLY AUTHORITY EMPOWERED TO REGISTER SUCH VEHIC LES IS THE RTO AND THE VEHICLES WERE REGISTERED AS HEAVY OR MEDIUM MOTOR VEHICLES WITHIN THE MEANING OF MOTOR VEHICLE AS ASSIGNED IN S. 2(28) OF THE MOTOR VEHICLES ACT 1988 . IN THE INSTANT CASE, THE TATA, JCB 400V WHEEL LOADERS ARE USED IN THE BUSINESS OF GIVI NG THEM ON HIRE WHICH ARE REGISTERED AS HEAVY OR MEDIUM MOTOR VEHICLES WITH THE RTO AND AS SUCH ARE ENTITLED TO SPECIAL DEPRECIATION AS PROVIDED FOR MOTOR LORRIES APPEAR ING IN ENTRY NO. III(3)(II) OF PART A OF APPENDIX I OF THE INCOME TAX RULES, 1962. THIS VIEW OF OURS IS FORTIFIED WITH THE DECISION OF THE HONBLE GUJARAT HIGH COURT IN THE C ASE OF GUJCO CARRIERS VS CIT SUPRA WHEREIN IT WAS HELD THAT A MOBILE CRANE WHICH IS RE GISTERED AS A HEAVY MOTOR VEHICLE WITH THE RTO WOULD CLEARLY FALL WITHIN THE EXPRESSI ON MOTOR LORRIES IN ENTRY IIIE(1A) OF TABLE IN APPENDIX I UNDER RULE 5 OF THE INCOME T AX RULES, 1962 SINCE IT IS USED IN HE BUSINESS OF RUNNING THE CRANE ON HIRE AND AS SUCH E NTITLED TO DEPRECIATION @ 40%. SIMILARLY, IN THE CASE OF CIT VS GAYLORD CONSTRUCTI ONS SUPRA IT WAS HELD THAT THE EARTH MOVING EQUIPMENT, JCB, WHICH ARE USED ON HIRE FOR E XCAVATION OF SOIL ARE UTILIZED EQUALLY FOR TRANSPORT OF THE EXCAVATED SOIL OR OTHE R LOADS FOR A LIMITED DISTANCE AND THEREFORE IT SERVES AS A TRANSPORT EQUIPMENT AS WEL L AND SO LONG AS IT IS REGISTERED AS A 6 MOTOR VEHICLE WITH THE RTO IT IS ELIGIBLE FOR DEP RECIATION @ 40%. THEREFORE IN THE INSTANT CASE, THE TATA, JCB AND 400V WHEEL LOADERS ARE COVERED WITHIN THE EXPRESSION MOTOR LORRIES WHICH ARE USED IN BUSINESS OF RUNNI NG THEM ON HIRE AND THE AO HAD CORRECTLY ALLOWED THE CLAIM OF DEPRECIATION U/S. 32 IN THE SUM OF RS. 78,05,251/- APPLYING THE RATE OF 30% ASSIGNED TO ENTRY NO. III( 3)(II) OF PART A OF APPENDIX I OF THE INCOME TAX RULES, 1962 APPLICABLE FOR AS MOTOR BUSES, MOTOR LORRIES AND MOTOR TAXIS USED IN A BUSINESS OF RUNNING THEM ON HIRE AND THE IMPUGNED ORDER PASSED BY LD. CIT IS UNSUSTAINABLE IN LAW BEING IN CONTRAVENTION OF T HE SETTLED LEGAL POSITION IN THIS RESPECT, IS HEREBY QUASHED. THE APPEAL OF THE ASSE SSEE IS, THEREFORE, ALLOWED. 6. IN THE RESULT, THE APPEAL OF THE ASSESSEE IS AL LOWED. ORDER IS PRONOUNCED IN THE OPEN COURT ON 16.7.10 SD/- SD/- . .. . . . . . , , , , ! ! ! ! . . . . % %% % . . . . &' &' &' &', , , , () (G. D. AGRAWAL) (D. K. TYAGI) VICE PRESIDENT JUDICIAL MEMBER ( (( (4 4 4 4) )) ) DATED : 16 TH JULY, 2010 #56 +7 +8# JD.(SR.P.S.) (%3 9 2++: %:-;- COPY OF THE ORDER FORWARDED TO: 1. 01 /APPELLANT M/S. BOTHRA SHIPPING SERVICES, 2, CLI VE GHAT STREET, KOLKATA-1. 2 2&01 /CIT-XII, KOLKATA. .. . 3. DCIT, CIRCLE-34, KOLKATA. 4. #A+' 2+ / DR, KOLKATA BENCHES, KOLKATA &: 2+/ TRUE COPY, (%3B/ BY ORDER, $ /DEPUTY REGISTRAR .