SARABJEET SINGH CHHATWAL vs. COMMISSIONER OF INCOME TAX

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TAXC/101/2010HC ChhattisgarhCGHC01001343201002 May 2013Author: HON'BLE THE CHIEF JUSTICE,HON'BLE SHRI JUSTICE PRITINKER DIWAKER5 pages

AI SummaryPartly Allowed

What did the High Court hold?

The High Court held that 'motor lorry' is a generic term for vehicles carrying heavy loads and includes all such vehicles. A Tipper, being a truck for carrying heavy loads with a hydraulic lift, is covered under the term 'motor lorry'. The Court also noted that the higher depreciation rate is admissible when a motor lorry is used in the assessee's own business of transportation of goods on hire, as per the Thakur case and the Murarka case. Therefore, the assessee is entitled to the benefit of Appendix-1, Part III(3)(ii) of the Rules, and consequently, 40% depreciation on Tippers. Tax Case-101 of 2010 (assessee's appeal for AY 2004-05) was allowed, setting aside the orders of the Tribunal and lower authorities. Tax Case-71 of 2010 (Department's appeal for AY 2005-06) was dismissed, upholding the Tribunal's order.

What were the facts?

The assessee, Sarabjeet Singh Chhatwal, a mining and transportation contractor, entered into an agreement with South Eastern Coalfields Limited (SECL) on April 24, 2004. For Assessment Years (AY) 2004-05 and 2005-06, the assessee claimed 40% depreciation on his Tippers, citing Appendix-1 under rule 5 part lll(3)(ii) of the Income Tax Rules. The Assessing Officer (AO) restricted depreciation to 25% under rule 5 Appendix-1 part 111(1). The Commissioner of Income Tax (Appeals) (CIT-A) upheld the AO's orders. The Income Tax Appellate Tribunal (ITAT) dismissed the assessee's appeal for AY 2004-05 but allowed it for AY 2005-06, relying on a High Court decision. Two appeals were filed before the High Court: one by the assessee for AY 2004-05 and another by the Department for AY 2005-06.

What were the issues?

1. Whether, in the facts and circumstances, the Appellant (assessee) was entitled to depreciation of 40% or 25% on Tippers (turning on Rule 5, Appendix-1, Part III(3)(ii) and Part III(1) of the Income Tax Rules). The Assessee contended that Tippers fall under the category of 'motor lorries' eligible for 40% depreciation. The Revenue argued that Tippers are not covered under Part III(3)(ii) and the assessee is only eligible for 25% depreciation under Part III(1). 2. Whether the ITAT, Bilaspur was justified in allowing relief to the assessee for AY 2005-06 despite no change in the nature of work and receipts from the previous year, where higher depreciation was disallowed. The Revenue argued that the assessee's business was not of running trucks on hire. The Assessee relied on the decision in Commissioner of Income Tax Vs SC Thakur an Brothers and the High Court's decision in Commissioner of Income Tax, Bilaspur Vs Income Tax Appellate Tribunal and Rajesh Kumar Murarka (Murarka case).

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

^ c @ .f>-^ IN THE HON'BLE HIGH COURT OF JUDICATURE FOR CHHATTISGARH AT BILASPUR TAX CASE No.^ OF 2010 APPELLANT ^(Assessee ) ,.^- ^s '^.--* .^'•':. ^^ ^ ^..^^^ . riE^PONDENT tevenue) :^SARABJEET SINGH CHHATWAL PROP. M/S.S.S.CHHATWAL & Co S.S.PLAZA, P.H. ROAD, KORBA (CG) VE RSUS COMMISSIONER OF INCOME- ^ TAX, BILASPUR w"/ APPEAL UNDER SECTION 260-A OF THE INCOME TAX ACT, 1961 r}^ HIGH COURT OF CHHATTISGARH AT BILASPUR CORAM: HON'BLE SHRI YATINDRA SINGH, C.J. HON'BLE SHRI PRITINKER DIWAKER, J. Appellant Respondent Appellant 1 TaxCaseNo.101 of 2010 Sarabjeet Singh Chhatwal, Korba VERSUS Commissjoner of Income Tax, Bilaspur 2 TaxCaseNo.71 of 2010 Deputy Commissioner of Income Tax, Circle Korba, Chhattisgarh VERSUS Sarabjeet Singh Chhatwal, Korba Respondent Appeals under Section 260A of the Income Tax Act 1961a Appearance: Shri Anand Dadariya, counsel forthe Department. Shri SR Rao and Shri MK Sinha, counsel for the Assessee. JUDGEMENT (3rd May, 2013) 1. These two appeals under section 260A of the Income Tax Act, 1961 (the Act) are against the orders of the different Benches of Income Tax Appellate Tribunal (the Tribunal) in respect of the Assessment Years (AY) 2004-05 and 2005-06 in respect of same assessee namely Sarabjeet Singh Chhatwal (the Assessee). The Tax Case- 101 of 2010 is in respect of AY-2004-05 by the Assessee, whereas, Tax Case- 71 of 2010 is in respect of AY 2005-06 by the Income Tax Department (the Department). The main question involved in both the appeals is, 'Whether the Assessee is entitled to 40% or 25% of depreciation on Tippers.' THE FACTS 2. The Assessee is a mining and transportation contractor. He entered into an agreement with the South Eastern Coalfields Limited (the SECL) on 24.04.2004 for removal of over-burden and transporting the soil to the place indicated by the SECL. He filed his return for the relevant years claiming 40% depreciation on Tippers involved in the work claiming ^^ benefit of Appendix-1 under rule 5 part lll(3)(ii) of the Income Tax Rules (theRules). 3. The Assessing Officer (the AO) by his orders dated 31.03.2005 (AY 2004-05) and 23.02.2007 (AY 2005-06) held that the Assessee was entitled to 25% of depreciation under rule 5 Appendix-1 part 111(1) rather than 40% under part lll(3)(ii) ofthe same Appendix. 4. Against the aforesaid orders, the Assessee filed appeals. The^ were dismissed by the Commissioner of Income Tax (Appeats) (the CIT-A) on 23.08.2005 and 06.05.2008. l' 5. The Assessee filed his second appeal before Jabalpur bench of the Tribunal in respect of AY 2004-05. It was dismissed on 16.05.2006 upholding the orders of the authorities below. He filed miscellaneous

application to review this order. It was also dismissed on 30.07.2009. Hence, Tax Case-101 of 2010. 6. The appeal of the Assessee in respect of AY 2005-06 was allowed by the bench of the Tribunal at Bilaspur on 20.01.2010 on the basis of division bench decision of this Court in Tax Case- 24 20.10.2009. Hence the Tax Case- 71 of 2010 by the department. POINT INVOLVED

We have heard counsel for the parties.

Tax Case- 101 of 2010 was admitted on the following substantial question of law: 'Whether in the facts and circumstances of the case, the Appellant was entitled to depreciation of 40% or 25%.'

Tax Case- 71 of 2010 was admitted on the following two substantial questions of law:

n <l 'Whether the ITAT, Bilaspur was justified in allowing the relief to the assessee inspite of facts on records that there was no change in the nature of work and receipts of the Assessee as was in the previous year in which the ITAT, Bilaspur has confirmed the disallowance of higher rate of depreciation. Whether the ITAT, Bilaspur was justified in allowing the higher rate of depreciation inspite of the facts on records that the business of the Assessee was not of running trucks on hire.'

10.

Tax Case- 101 of 2010 was admitted on one substantial question of law, whereas Tax Case- 71 of 2010 was admitted on two substantial questions of law. However, the basic question is as the one that has been pointed out in the opening paragraph of the judgement. ^~''- THE DECISION

11.

The counsel for the Department submits that: (i) Tippers are not covered under rule 5 Appendix-1 part lll(3)(ii) of the Rules; (ii) The Assessee is covered under rule 5 Part 111(1) ofthe Rules, and not under part lll(3)(ii) of the Rules. He is entitled to 25% depreciation ratherthan 40%. 1stSubmission

12.

Partlll(3)(ii) of the Rules uses the words 'motor buses, motor lorries and motor taxies'. Lorry is a vehicle to carry heavy load. This is used more in generic sense rather than any specific sense. It includes all kinds of vehicles that are used for carrying heavy load.

13.

Tipper is a kind of truck to carry heavy load that can be unloaded by lifting the back portion with a hydraulic lift. It is covered in the word motor lorry. This was also so held by a division bench of Punjab & Haryana High Court in Commissioner of Income Tax Vs Rakesh Jain {(2012) 70 DTR(P&H) 1}.

n C1 •i / 2nd Submission

14.

The decision of the division bench of this Court in the Murarka case is based on the decision of the Bombay High Court in Commissioner of Income Tax Vs SC Thakur an Brothers {(2009)180 Taxman 348 (Bom)} (the Thakur case).

15.

In the Thakur case, the Bombay High Court after considering the circular of the Board held that higher rate of depreciation is also admissible when motor lorry is used by the Assessee in his own business of transportation of goods on hire.

16.

In the Murarka case, similar kind of contract with the same contractee namely SECL was involved where the division bench of this Court relying upon the decision in the Thakur case held that the assessee in that case was entitled for higher rate of depreciation in his own business of transportation of goods on hire. So is the case here. The Assessee is entitled to benefit of Appendix-1 part lll(3)(ii) of the Rules.

17.

In our opinion the Assessee is entitled to 40% depreciation on tippers as held in AY 2005-06 rather than 25% as held in AY 2004-05. 18. In viewofabove: (i) Tax Case- 101 of 2010 filed by the Assessee is allowed and orders of the Tribunal as well as the authorities below are set aside; (ii) Tax Case- 71 of 2010 filed by the Department is dismissed and the order of the Tribunal is upheld. subbu ChiefJustice pritinker Diwaker Judge

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