EBENEZER INTERNATIONAL FOUNDATION vs. THE ASST.COMMISSIONER OF INCOME TAX

Ebenezer International Foundation, Ettumanoor Kottayam/assessee is the appellant. The Assistant Commissioner of Income Tax, Circle-1, Kottayam/Revenue is the respondent. The assessee being aggrieved by the order in ITA No.545/Coch/2015 dated 17.11.2017 of the Income Tax Appellate Tribunal (for short 'the Tribunal') Cochin Bench has filed the subject appeal under Section 260A of the Income Tax Act, 1961 (for short 'the Act').

1

2 The circumstances relevant for considering the above substantial questions are a few. The assessee is a Trust registered under Section 12A of the Act. The Trust is running a Residential CBSE School in Ettumannoor. The assessee has provided transport facility/school buses for attending the school, by picking up and dropping both the students and the teachers. The assessee claimed additional depreciation for the school buses operated by the assessee provided for the above -4- additional service. The claim for additional depreciation has been rejected by the authorities including the Tribunal under the Act. We find it convenient and useful to excerpt the operative portion of the findings recorded by the Tribunal which read thus:

Mr Anil D Nair places reliance on the judgments reported in Commissioner of Income Tax v. Lake Palace Hotels and Motels P. Ltd1; Commissioner of Income Tax v. Rajasthan & Gujarati Foundation2; Commissioner of Income Tax v. Institute of Banking Personnel Selection (IBPS)3; Commissioner of Income Tax v. K R Jayachandran4; and unreported judgment in The Commissioner of Income Tax v. M/s. Kallungal Trading Company5, and contends that the assessee since is subjected to business income as well, the assessee is automatically entitled to claim additional depreciation. The rejection of additional depreciation by the Tribunal and the authorities is illegal and liable to be set aside.

Senior Advocate Mr P K R Menon argues that the claim of additional depreciation is both a mixed question of fact 1 [2006] 286 ITR 589 (Raj) 2 [2018] 402 ITR 441 (SC) 3 [2003] 264 ITR 110 (Bom) 4 [1995] 212 ITR 637 (Ker) 5 Judgment dated 07.11.2017 in ITA 130/2012 -7- and law. The entitlement to additional depreciation by an assessee is dependent upon the nature of activity carried on by the assessee and the purpose for which the vehicles are used by the assessee. The judgments relied on by the appellant are clearly distinguishable to the fact situation of the case. He invites our attention to the findings recorded by the Tribunal on the nature of activity being undertaken by the assessee and the consideration the assessee receives either from the students or the teachers in this behalf. According to him, at best, what is received by the assessee could be treated as reimbursement to the School by the students and teachers on cost-to-cost basis but not as consideration in any business transaction. For the purpose of additional depreciation what is important is the vehicles must have been used for the business purpose of the assessee. The assessee since is running the school cannot be said to be doing business in plying passengers from one place to -8- another. He places strong reliance on the judgment of the Supreme Court in Commissioner of Income Tax v. Gupta Global Exim P. Ltd.6 on: “Held, setting aside the decision of the High Court and remanding the matter for fresh decision to the Commissioner (Appeals), that a neat question of law arose in the matter. Under item (2)(ii) of heading III in Appendix I to the Income-tax Rules, 1962, the higher rate was admissible on motor trucks used in a business of running them on hire. Therefore, the user of the same in the business of the assessee of transportation was the test.

1 He placed reliance on the consideration by the Apex Court by laying much emphasis on the following sentences 't herefore, the user of the same in the business of the assessee of 6 [2008] 305 ITR 132 (SC)

The only argument canvassed is that the receipts received by the assessee in this behalf are included in the business income and, therefore, the assessee is automatically entitled to additional rate of depreciation. The judgment of the Supreme Court in Gupta Global Exim P. Ltd is a complete answer to the said contention canvassed by the assessee. Gupta Global Exim P. Ltd held that the user of vehicles in the business of the assessee is the test and that the receipt/income is included in the business income would not i.e., qualify for additional depreciation. Except the above, no other point is urged. In our -10- view the point urged is no more res integra and the test laid down by the Supreme Court in Gupta Global Exim P. Ltd is clear on the point. By appreciating the circumstances and also following the judgment in Gupta Global Exim P. Ltd the questions are answered in favour of the Revenue and against the assessee.