USHA JOHNSON vs. THE COMMISSIONER OF INCOME TAX

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI WEDNESDAY, THE 25TH DAY OF NOVEMBER 2020/4TH AGRAHAYANA,1942 ITA.No.96 OF 2015 AGAINST THE ORDER IN ITA 123/2012 DATED 14-11-2014 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH APPELLANT/APPELLANT IN ITA: USHA JOHNSON PROPRIETRIX, M/S.GLOBAL ROADWAYS, (NOW KNOWN AS MARUTHAYATH TRANSPORTS), MARUTHAYATH BUILDINGS, PALLIMUKKU, KUNDARA, KOLLAM. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS RESPONDENT/RESPONDENT: THE COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695 003. BY ADV. SRI.CHRISTOPHER ABRAHAM INCOME TAX DEPARTMENT BY ADV. SRI.K.M.V.PANDALAI INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25.11.2020, ALONG WITH ITA.100/2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

I.T.A.Nos.96 & 100 of 2015 -2- IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE K.VINOD CHANDRAN & THE HONOURABLE MR. JUSTICE T.R.RAVI WEDNESDAY, THE 25TH DAY OF NOVEMBER 2020/4TH AGRAHAYANA, 1942 ITA.No.100 OF 2015 AGAINST THE ORDERIN ITA 124/2012 DATED 14-11-2014 OF INCOME TAX APPELLATE TRIBUNAL,COCHIN BENCH APPELLANT/APPELLANT IN ITA: USHA JOHNSON PROPRIETRIX, M/S.GLOBAL ROADWAYS, (NOW KNOWN AS MARUTHAYATH TRANSPORTS), MARUTHAYATH BUILDINGS, PALLIMUKKU, KUNDARA, KOLLAM. BY ADVS. SRI.M.GOPIKRISHNAN NAMBIAR SRI.P.BENNY THOMAS SRI.K.JOHN MATHAI SRI.JOSON MANAVALAN SRI.KURYAN THOMAS RESPONDENT/RESPONDENT: THE COMMISSIONER OF INCOME TAX AAYAKAR BHAVAN, KOWDIAR, THIRUVANANTHAPURAM-695 003. BY ADV. SRI.CHRISTOPHER ABRAHAM INCOME TAX DEPARTMENT BY ADV. SRI.K.M.V.PANDALAI INCOME TAX DEPARTMENT THIS INCOME TAX APPEAL HAVING BEEN FINALLY HEARD ON 25-11-2020, ALONG WITH ITA.96/2015, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING:

I.T.A.Nos.96 & 100 of 2015 -3- K.VINOD CHANDRAN & T.R. RAVI,JJ. ------------------------------------------------ I.T.A.Nos.96 & 100 of 2015 -------------------------------------------------- Dated this the 25th day of November, 2020 JUDGMENT

T.R.Ravi, J. These two appeals have been filed by the assessee under Income-tax Act, challenging the orders dated 14.11.2014 of the Income Tax Appellate Tribunal, Cochin Bench, Cochin in I.T.A.Nos.123 and 124 of 2012. The dispute relates to assessments for the years 2006-07 and 2007-08. The only legal issue which arises for consideration in these appeals is whether the petitioner is entitled to claim depreciation on the vehicles which have been supplied to the Indian Oil Corp. Ltd. and Bharat Petroleum Corporation Ltd., under a contract for transporting LPG cylinders, at the rate of 30% instead of 15%. According to the assessee, the nature of the business is hiring of vehicles which entitles her to claim depreciation at the higher rate of 30%.

I.T.A.Nos.96 & 100 of 2015 -4- According to the Department, the nature of the business is "transport contract business" and hence the assessee is entitled to claim depreciation only at the rate of 15%. The Assessing Officer in Annexure A order dated 20.2.2009, found that the assessee had claimed depreciation at the rate of 40% as against 30% admissible. The Commissioner of Income Tax, in exercise of powers under Section 263 of the Income Tax Act, revised the assessments as per Annexure B order dated 28.1.2011, on the ground that they are prejudicial to the revenue. According to the Commissioner, depreciation was allowable only at the rate of 15% and not 30%. The assessee challenged the order in appeal before the Tribunal. The Tribunal by order Annexure E dated 26.4.2013 dismissed the appeal on the ground of delay. By Annexure F order in ITA Nos.194 and 195 of 2013, this Court set aside the order of the Tribunal and remitted the appeal to the Tribunal for disposal on merits. Thereafter the Tribunal issued Annexure G order dated 14.11.2014. The Tribunal found that the assesse is not engaged in the business of running the vehicles on

I.T.A.Nos.96 & 100 of 2015 -5- hire and rejected the claim of the assessee. 2. Heard Sri Kuryan Thomas on behalf of the Appellant and Sri Christopher Abraham, Standing Counsel for the Income Tax department. 3. The relevant entry in the table of rates at which depreciation is admissible reads thus: "Motor buses, motor lorries and motor taxis used in a business of running them on hire" 4. The rate of depreciation admissible for the above vehicles is 30%. The counsel for the appellant placed before us Circular No.652 dated 14.6.1993, issued by the Central Board of Direct Taxes to all Chief Commissioners of Income tax and all Directors General of Income tax, which has been extracted in Annexure G order also, clarifying that higher depreciation will be admissible on motor lorries used in the assesse's business of transportation of goods on hire and that the same will not be available if motor buses, motor lorries etc. are used in some other non-hiring business of the assessee. Read along with the circular, the entry does not leave any room for doubt. Whether

I.T.A.Nos.96 & 100 of 2015 -6- the business of the assessee is use of motor lorries in the business of running them on hire or whether it has to be treated as a transport contract business, will not make any difference, and in either case, the assessee will be entitled to claim depreciation at the rate of 30%. 5. The Counsel for the appellant relied on the decision of the Hon'ble Supreme Court in Commissioner of Income Tax, Gujarat vs. Gupta Global Exim Private Ltd. reported in [(2008) 17 SCC 87], wherein the Hon'ble Supreme Court laid down that the user of the vehicles in the business of the assessee, of transportation, is the test for deciding whether an assessee is entitled to claim higher depreciation at the rate of 30%. Applying the said test to the facts of this case, admittedly, the assessee is involved in supplying her vehicles on the basis of a contract, for the purpose of transportation of LPG Cylinders of M/s. Indian Oil Corporation and Bharat Petroleum Corporation Ltd. This clearly shows that the business of the appellant is, facilitating transportation. The consideration is paid by the hirers

I.T.A.Nos.96 & 100 of 2015 -7- on the basis of rates per kilometre. It was also pointed out by the counsel for the appellant that following the dictum laid down in the above judgment, the Bombay High Court had dismissed an appeal filed by the Department, in the decision in Commissioner of Income Tax v. S.C.Thakur and Bros. reported in [(2010) 322 ITR 463 (Bom)], holding that higher rate of depreciation is applicable to motor lorries used in transportation business. 6. We are convinced that going by the provision of law and the Circular issued by the department and the dictum laid down by the Hon'ble Supreme Court in Gupta Global (supra), the order Annexure B issued by the Commissioner of Income Tax under Section 263 of the Income Tax Act, Annexure C order issued giving effect to Annexure B order and Annexure G order issued by the Tribunal cannot be sustained and we set aside the same. Annexure A order of the Assessing Authority shall be restored. The questions of law raised in the appeals are decided in favour of the assessee and against the Department. The

I.T.A.Nos.96 & 100 of 2015 -8- Income Tax Appeals are allowed. The parties shall bear their respective costs.

Sd/- K. VINOD CHANDRAN JUDGE Sd/- T.R. RAVI JUDGE

dsn

I.T.A.Nos.96 & 100 of 2015 -9- APPENDIX IN ITA 96/2015 APPELLANT'S ANNEXURES: ANNEXURE A: TRUE COPY OF ASSESSMENT ORDER DATED 20.2.09.ISSUED TO THE APPELLANT BY THE INCOME TAX OFFICER, WARD-4, KOLLAM. ANNEXURE B: TRUE COPY OF ORDER DT.28.1.2011 ISSUED TO THE APPELLANT BY THE COMMISIONER OF INCOME TAX, THIRUVANANTHAPURAM ANNEXURE C: TRUE COPY OF PROCEEDINGS BEARING NO.IAP/W- 4/KLM/2011-12 DATED 28.6.2011 ISSUED TO THE APPELLANT BY THE INCOME TAX OFFICER. ANNEXURE D: TRUE COPY OF APPEAL DT.21.4.2012 FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, COCHIN IN RESPECT OF ASSESSMENT YEAR 2006-07 ANNEXURE E: TRUE COPY OF COMMON ORDER IN ITA Nos.123 AND 124/COCH/2012 DT.26.4.2013 ISSUED TO THE APPELLANT BY THE INCOME TAX APPELLATE TRIBUNAL. ANNEXURE F: TRUE COPY OF COMMON JUDGMENT DT.5.2.2014 ISSUED TO THE APPELLANT BY THE HON'BLE HIGH COURT OF KERALA IN ITA NOS.194 AND 195/2013 ANNEXURE G: TRUE COPY OF COMMON ORDER IN ITA Nos.123 AND 124/COCH/2012 DT14.11.2014 ISSUED TO THE APPELLANT BY THE HON'BLE INCOME TAX TRIBUNAL.

I.T.A.Nos.96 & 100 of 2015 -10- APPENDIX IN ITA 100/2015 APPELLANT'S ANNEXURES: ANNEXURE A: TRUE COPY OF ASSESSMENT ORDER DATED 20.2.09.ISSUED TO THE APPELLANT BY THE INCOME TAX OFFICER, WARD-4, KOLLAM. ANNEXURE B: TRUE COPY OF ORDER DT.28.1.2011 ISSUED TO THE APPELLANT BY THE COMMISIONER OF INCOME TAX, THIRUVANANTHAPURAM ANNEXURE C: TRUE COPY OF PROCEEDINGS BEARING NO.IAP/W- 4/KLM/2011-12 DATED 28.6.2011 ISSUED TO THE APPELLANT BY THE INCOME TAX OFFICER. ANNEXURE D: TRUE COPY OF APPEAL DT.21.4.2012 FILED BY THE APPELLANT BEFORE THE INCOME TAX APPELLATE TRIBUNAL, COCHIN IN RESPECT OF ASSESSMENT YEAR 2007-08 ANNEXURE E: TRUE COPY OF COMMON ORDER IN ITA Nos.123 AND 124/COCH/2012 DT.26.4.2013 ISSUED TO THE APPELLANT BY THE INCOME TAX APPELLATE TRIBUNAL. ANNEXURE F: TRUE COPY OF COMMON JUDGMENT DT.5.2.2014 ISSUED TO THE APPELLANT BY THE HON'BLE HIGH COURT OF KERALA IN ITA NOS.194 AND 195/2013 ANNEXURE G: TRUE COPY OF COMMON ORDER IN ITA Nos.123 AND 124/COCH/2012 DT14.11.2014 ISSUED TO THE APPELLANT BY THE HON'BLE INCOME TAX TRIBUNAL.