Gangadhara Swamy Muniyappa, Bangalore V. Pr. CIT, Bangalore

ITA 710/BANG/2015

• Counselvise Citation: [2016] 131 COUNSELVISE.COM (IT) 9432 (ITAT-BANGALORE)
• Duration Of Justice: 1 year(s) 3 month(s) 14 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 26-08-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 22-08-2016
• Assessment Year: 2011-2012
• Appeal Filed On: 12-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: RAMA RAJU
• Keywords: Business income; Depreciation; Opportunity of being heard; Principle of natural justice; Question of law
• Section: 32; 263

Judgement Text

ITA.710/BANG/2015 PAGE - 1 IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER I.T.A NO.710/BANG/2015 (ASSESSMENT YEAR : 2011-12) SHRI. S. H. GANGADHARA SWAMY MUNIYAPPA, NO.57, DEEPTHI NILAYA, 3 RD STAGE, SANJAY NAGAR, BENGALURU 560 094 .. APPELLANT PAN : AGHPM5171F V. PRINCIPAL COMMISSIONER OF INCOME-TAX, CIRCLE -6, BANGALORE .. RESPONDENT ASSESSEE BY : SHRI. RAMA RAJU, ADVOCATE REVENUE BY : SHRI. S. S PARIDA, CIT-DR HEARD ON : 22.08.2016 PRONOUNCED ON : 26.08.2016 O R D E R PER VIJAY PAL RAO, JUDICIAL MEMBER: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E REVISION ORDER DT.30.03.2015 OF PR. CIT-6, BENGALURU , PASSED U/S. 263 OF THE ACT, FOR THE ASSESSMENT YEAR 2011-12. ITA.710/BANG/2015 PAGE - 2 02. ASSESSEE HAS RAISED VARIOUS GROUNDS IN THIS APP EAL. HOWEVER, AT THE TIME OF HEARING ASSESSEE HAS FILED A LETTER DT.20.0 8.2016 WHEREBY THE ASSESSEE IS NOT PRESSING THE ISSUES REMANDED BACK BY THE CIT TO BE DECIDED BY THE AO AFTER GIVING AN OPPORTUNITY OF BEING HEAR D TO THE ASSESSEE, INVOLVED IN GROUND NOS.3 TO 12, EXCEPT GROUND.6. THEREFORE, THE ONLY ISSUE PRESSED BY THE ASSESSEE IN THIS APPEAL IS GROUND.6 WHICH READS AS UNDER : THE APPELLANT SUBMITS THAT THE LEARNED COMMISSIONE R OF INCOME-TAX PUT THE APPELLANT ON VERY SHORT NOTICE. THE APPELLANT SUBMITS THAT ACTION OF THE LEARNED COMMIS SIONER OF INCOME-TAX IS IN VIOLATION OF PRINCIPLES OF NATURAL JUSTICE. THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX IN DENYING THE APPELLANT A REASONABLE OPPORTUNITY OF BEING HEARD I S NOT TENABLE IN LAW AND DESERVES TO BE QUASHED IN TOTO. 03. ASSESSMENT IN THE CASE OF THE ASSESSEE WAS COMP LETED U/S.143(3) OF THE ACT, ON 28.03.2013. SUBSEQUENTLY ON EXAMINATIO N OF THE RECORD, THE CIT, INTER ALIA FOUND THAT DEPRECIATION ON VEHICLES IS GRANTED AT 30% FOR RS.17,58,286/- STATING THAT IT WAS USED FOR HIRE. CIT NOTED THAT SINCE THE ASSESSEE IS A GARBAGE CONTRACTOR, IT IS OBVIOUS THA T ASSESSEE HAS USED THE VEHICLES FOR HIS OWN BUSINESS AND NOT FOR BUSINESS OF RUNNING THE VEHICLES ON HIRE. ACCORDINGLY, THE CIT OBSERVED THAT THE AS SESSEE IS NOT ENTITLED TO THE CLAIM OF DEPRECIATION AT THE RATE OF 30% ON VEH ICLES AND CONSEQUENTIALLY THE ORDER PASSED BY THE AO IS ERRONEOUS AND PREJUDI CIAL TO THE INTERESTS OF ITA.710/BANG/2015 PAGE - 3 REVENUE. CIT HAS REVISED THE ASSESSMENT ON VARIOUS ISSUES INCLUDING THE ISSUE OF CLAIM OF DEPRECIATION AT 30% ON VEHICLES V IDE IMPUGNED ORDER. 04. LD. AR OF THE ASSESSEE HAS SUBMITTED THAT SINCE THE ASSESSEE IS USING THE VEHICLES FOR TRANSPORTATION OF GARBAGE AS A GAR BAGE CONTRACTOR OF BBMP, THEREFORE THE DEPRECIATION AT THE RATE OF 30% IS AL LOWABLE ON THE VEHICLES USED FOR COMMERCIAL PURPOSE OF SHIFTING THE GARBAGE ON BEHALF OF BBMP. HE HAS SUBMITTED THAT THIS ISSUE IS COVERED BY THE DECISION OF COORDINATE BENCH OF THE TRIBUNAL IN THE CASE OF C. V. BHANUMUR THY REDDY V. DCIT [(2015) 53 TAXMANN.COM 110], WHICH HAS BEEN UPHELD BY THE HONBLE JURISDICTIONAL HIGH COURT VIDE DECISION DT.11.09.20 15 IN ITA.167/2015. LD. AR HAS SUBMITTED THAT THIS ISSUE IS SQUARELY CO VERED IN FAVOUR OF THE ASSESSEE. 05. ON THE OTHER HAND, LD. DR HAS SUBMITTED THAT TH E DECISION RELIED UPON BY THE ASSESSEE IS NOT APPLICABLE IN THE FACTS OF THE ASSESSEES CASE WHERE THE ASSESSEE IS USING ITS VEHICLES FOR HIS BU SINESS OF REMOVING THE GARBAGE UNDER THE CONTRACT WITH BBMP. THE HIGHER D EPRECIATION IS ALLOWABLE ONLY IN RESPECT OF THE VEHICLES WHICH ARE USED IN THE BUSINESS OF PLYING ON HIRE. SINCE THE ASSESSEE HAS NOT GIVEN T HE VEHICLES ON HIRE, ITA.710/BANG/2015 PAGE - 4 THEREFORE, HIGHER DEPRECIATION ON THE VEHICLES WHIC H ARE USED FOR ASSESSEES OWN BUSINESS OF DISPOSAL OF GARBAGE ON BEHALF OF BB MP IS NOT ALLOWABLE. 06. HAVING CONSIDERED THE RIVAL SUBMISSIONS AND CON SIDERING THE RELEVANT MATERIAL ON RECORD, AT THE OUT SET WE NOTE THAT AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF C. V. BHANUMURTHY REDDY (SUPRA), WHEREIN THE AO DISALLOWE D THE DEPRECIATION AT THE RATE OF 30% BY NOTING THE FACT THAT ASSESSEE WAS ENGAGED IN THE BUSINESS OF TRANSPORTATION OF MUNICIPAL WASTE AND N OT USED THE VEHICLES IN THE BUSINESS OF HIRING OF THE VEHICLES. THE TRIBUN AL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN PARA 6 AND 7, AS UNDER : 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 I N THE PRESET APPEAL IS REGARDING THE CORRECT INTERPRETATION OF S ECTION 32 OF THE INCOME TAX ACT AND OTHER RELEVANT PROVISIONS OF THE ACT AND WHETHER ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E CASE AND IN LAW, THE HON'BLE TRIBUNAL ERRED IN CONFIRMING THE O RDER OF CIT (A) AND ALLOWING THE DEPRECIATION TO THE ASSESSEE @ 50% AND 40% RESPECTIVELY FOR ASSESSMENT YEAR 1991-92 AND 19 96-97 ON THE VALUE OF TRUCKS/DUMPERS OWNED BY THE ASSESSEE A ND FURTHER FAILED TO APPRECIATE THAT THE ASSESSEE WAS ONLY A C IVIL CONTRACTOR AND WAS NOT ENGAGED IN THE BUSINESS OF WISELY OUT A SSET I.E. TRUCKS/DUMPERS TRANSPORTATION. ITA.710/BANG/2015 PAGE - 5 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 CI T VS. GUPTA GLOBAL EXIM (P) LTD. (2008) 216 CTR (SC) 368 : (200 8) 171 TAXMAN 474 (SC) THE CORRECT TEST WHICH THE AUTHORIT IES BELOW HAD TO APPLY WAS WHETHER THE APPELLANT WAS IN THE B USINESS OF TRANSPORTATION AND WHETHER THE VEHICLES WERE USED I N 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 S UCH THE APPELLANTS BUSINESS RECEIPTS TO A LARGE EXTENT, CA N BE HELD TO BE PRICE OF THE CHARGES RECEIVED FOR TRANSPORTING THE GOODS FROM ONE PLACE TO ANOTHER. THE LEARNED TRIBUNAL ALSO RECORDE D A FINDING THAT THE APPELLANT HAD ALSO SHOWN TRANSPORTATION IN COME FROM THIRD PARTIES SUCH AS BHARAT PETROLEUM LTD. IN ITS ASST. YR. 1996- 97. CONSIDERING THESE FACTS THE LEARNED CIT(A) ARRI VED AT THE CONCLUSION THAT THE APPELLANT IS ENTITLED TO DEPREC IATION AT HIGHER RATE AS SET OUT IN ITS ORDER. 4. IN APPEAL THE LEARNED TRIBUNAL RELIED ON THE CIR CULAR 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 TRANSPORTATIO N OF GOODS REGARDING. UNDER SUB-ITEM 2(II) OF ITEM NO. III OF APPENDIX 1 TO THE IT 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 QUESTION HAS BEEN RAISED AS TO WHETHER FOR DERIVING THE BENEFIT OF HIGHER DEPRECIATION, MO TOR LORRIES MUST BE HIRED OUT TO SOME OTHER PERSON AND WHETHER THE USER OF THE SAME IN THE ASSESSEES BUSINESS OF TRANSPORTATI ON OF 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 TOUR O PERATOR OR ITA.710/BANG/2015 PAGE - 6 TRAVEL AGENT USES MOTOR BUSINESS OR MOTOR TAXIS OWN ED BY HIM IN PROVIDING TRANSPORTATION SERVICES TO TOURISTS, HIGH ER 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 FOR THE ASSESSEES BUSINESS OF T RANSPORTATION OF GOODS ON HIRE. THE HIGHER RATE OF DEPRECIATION H OWEVER, 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 CLE AR THAT THE HIGHER RATE OF DEPRECIATION IS ALSO ADMISSIBLE WHEN THE MOTOR LORRY IS USED BY THE ASSESSEE IN HIS OWN BUSINESS O F TRANSPORTATION OF GOODS ON HIRE. CONSIDERING THE FI NDINGS 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 A LSO 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 TH AT THE LEARNED CIT (A) HAS FAILED TO CONSTRUE THE CIRCULAR IN RIGH T PERSPECTIVE. 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 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. ITA.710/BANG/2015 PAGE - 7 07. WE FURTHER NOTE THAT THE REVENUE CHALLENGED THE ORDER OF THIS TRIBUNAL BEFORE THE HONBLE JURISDICTIONAL HIGH COU RT. THE HONBLE JURISDICTIONAL HIGH COURT HAS UPHELD THE ORDER OF T HE TRIBUNAL VIDE DECISION DT.11.09.2015 AS UNDER : THE REVENUE IS IN APPEAL AGAINST THE ORDER DATED 21.11.2014 PASSED BY THE TRIBUNAL, WHEREBY THE BENE FIT OF 30% DEPRECIATION HAS BEEN GRANTED TO THE ASSESSEE FOR T HE VEHICLES BEING USED FOR COMMERCIAL PURPOSE OF SHIFTING THE S OLID WASTE ON BEHALF OF THE BRUHAT BENGALUIU MAHANAGARA PALIKE (FOR SHORT 'BBMP), WHICH WAS UNDER A CONTRACT GRANTED IN HIS FAVOUR. THE TRIBUNAL, AFTER CONSIDERING THE RELEVAN T PROVISION OF LAW AS WELL AS THE CIRCULAR OF THE CBDT, HELD AS UN DER: '..-IN THE PRESENT CASE, THE ASSESSEE HAS BEEN TRA NSPORTING THE SO/ID WASTE OF MUNICIPALITY ON HIRE. THUS, THE VERY NATUR E OF THE ASSESSEE'S BUSINESS IS SUCH WHICH BRING HIM IN THE AMBIT OF THE CIRCULAR. IT IS NOT THE CASE WHERE A PERSON IS RUNN ING ANY CONSULTING FIRM AND USED A MOTOR CAR FOR HIMSELF HERE THE VEHI CLES ARE USED FOR TRANSPORTING THE GOODS OF THIRD CONCERN BY VIRTUE O F A CONTRACT. THERE IS A COMMERCIAL EXPLOITATION OF THE VEHICLES FOR TR ANSPORTING THE GOODS ON HIRE. THEREFORE, THE ASSESSEE IS ENTITLED FOR HIGHER RATE OF DEPRECIATION.' CHALLENGING THE SAID ORDER ; THIS APPEAL HAS BEEN FILED. HAVING HEARD THE LEARNED COUNSEL FOR THE APPELLANTS AND PERUSED THE RECORDS, WE AN OF THE OPINION THAT THER E IS NO ERROR IN THE ORDER OF THE TRIBUNAL AND THUS NO SUBSTANTIAL QUEST ION OF LAW ARISES FOR DETERMINATION BY THIS COURT. ITA.710/BANG/2015 PAGE - 8 08. IN VIEW OF THE DECISION OF THE COORDINATE BENCH AS WELL AS THE HONBLE JURISDICTIONAL HIGH COURT, WE HOLD THAT THE ASSESSEE IS ENTITLED FOR DEPRECIATION AT THE RATE OF 30% ON THE VEHICLES USE D FOR TRANSPORTATION OF THE MUNICIPAL WASTE. ORDERS OF THE AUTHORITIES BEL OW ARE ACCORDINGLY SET ASIDE AND THE CLAIM OF THE ASSESSEE IS ALLOWED. 09. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D. ORDER PRONOUNCED IN THE OPEN COURT ON 26 TH DAY OF AUGUST, 2016. SD/- SD/- (INTURI RAMA RAO) (VIJ AY PAL RAO) ACCOUNTANT MEMBER JUDICIAL M EMBER MCN* COPY TO: 1. THE ASSESSEE 2. THE ASSESSING OFFICER 3. THE COMMISSIONER OF INCOME-TAX 4. COMMISSIONER OF INCOME-TAX(A) 5. DR 6. GF, ITAT, BANGALORE BY ORDER ASSISTANT REGISTRAR