Loading judgment…
No AI summary yet for this case.
Income Tax Appellate Tribunal, BANGALORE BENCH A, BANGALORE
Before: SHRI. VIJAY PAL RAO & SHRI. INTURI RAMA RAO
IN THE INCOME TAX APPELLATE TRIBUNAL BANGALORE BENCH 'A', BANGALORE BEFORE SHRI. VIJAY PAL RAO, JUDICIAL MEMBER AND SHRI. INTURI RAMA RAO, ACCOUNTANT MEMBER (Assessment Year : 2011-12) Shri. S. H. Gangadhara Swamy Muniyappa, No.57, Deepthi Nilaya, 3rd 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 the 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
2. Assessee has raised various grounds in this appeal. However, at the time of hearing assessee has filed a letter dt.20.08.2016 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 heard 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 Commissioner of Income-Tax put the Appellant on very short notice. The appellant submits that action of the learned Commissioner 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 is not tenable in law and deserves to be quashed in toto.
Assessment in the case of the assessee was completed u/s.143(3) of the Act, on 28.03.2013. Subsequently on examination 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 that 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 assessee is not entitled to the claim of depreciation at the rate of 30% on vehicles and consequentially the order passed by the AO is erroneous and prejudicial 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 vide impugned order.
4. Ld. AR of the assessee has submitted that since the assessee is using the vehicles for transportation of garbage as a garbage contractor of BBMP, therefore the depreciation at the rate of 30% is allowable 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. Bhanumurthy Reddy v. DCIT [(2015) 53 taxmann.com 110], which has been upheld by the Hon’ble jurisdictional High Court vide decision dt.11.09.2015 in ITA.167/2015. Ld. AR has submitted that this issue is squarely covered in favour of the assessee.
On the other hand, Ld. DR has submitted that the decision relied upon by the assessee is not applicable in the facts of the assessee’s case where the assessee is using its vehicles for his business of removing the garbage under the contract with BBMP. The higher depreciation is allowable only in respect of the vehicles which are used in the business of plying on hire. Since the assessee has not given the vehicles on hire, ITA.710/Bang/2015 Page - 4 therefore, higher depreciation on the vehicles which are used for assessee’s own business of disposal of garbage on behalf of BBMP is not allowable.
Having considered the rival submissions and considering 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 disallowed the depreciation at the rate of 30% by noting the fact that assessee was engaged in the business of transportation of municipal waste and not used the vehicles in the business of hiring of the vehicles. The Tribunal has decided the issue in favour of the assessee in para 6 and 7, as under :
6. The assessee has further relied upon the decision 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 Bombay High Court. The question before the Hon'ble High Court was: “(a) The substantial question of law which arises in the preset appeal is regarding the correct interpretation of section 32 of the Income Tax Act and other relevant provisions of the Act and whether on the facts and in the circumstances of the case and in law, the Hon'ble Tribunal erred in confirming the order of CIT (A) and allowing the depreciation to the assessee @ 50% and 40% respectively for assessment year 1991-92 and 1996-97 on the value of trucks/dumpers owned by the assessee and further failed to appreciate that the assessee was only a civil contractor and was not engaged in the business of wisely out asset i.e. trucks/dumpers transportation”.
ITA.710/Bang/2015 Page - 5 The Hon'ble High Court answered this question as under: “2. On behalf of the appellant the learned counsel submits that considering the judgment of the Supreme Court in CIT vs. Gupta Global Exim (P) Ltd. (2008) 216 CTR (SC) 368 : (2008) 171 Taxman 474 (SC) the correct test which the authorities below had to apply was whether the appellant was in the business of transportation and whether the vehicles were used in 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 such the appellant’s business receipts to a large extent, can be held to be price of the charges received for transporting the goods from one place to another. The learned Tribunal also recorded a finding that the appellant had also shown transportation income from third parties such as Bharat Petroleum Ltd. in its asst. yr. 1996- 97. Considering these facts the learned CIT(A) arrived at the conclusion that the appellant is entitled to depreciation at higher rate as set out in its order.
In appeal the learned Tribunal relied on the Circular 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 depreciation on motor lorries used in the business of transportation 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, motor lorries must be hired out to some other person and whether the user of the same in the assessee’s business of transportation of goods on hire would suffice.
In Board’s Circular No. 609, dt. 29th July, 1991 [(1992) 96 CTR (St) 233], it was clarified that where a tour operator or ITA.710/Bang/2015 Page - 6 travel agent uses motor business or motor taxis owned by him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles. It is further clarified that higher depreciation will also be admissible on motor lorries used for the assessee’s business of transportation of goods on hire. The higher rate of depreciation however, 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 clear that the higher rate of depreciation is also admissible when the motor lorry is used by the assessee in his own business of transportation of goods on hire. Considering the findings recorded by CIT(A) and the Board’s 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 also that of Tribunal”
7. If we peruse the facts of the present case in the light of the Hon'ble Bombay High Court decision as well as in the light of the circulars of the Board, then it would reveal that the learned CIT (A) has failed to construe the circular in right perspective. According to the learned CIT (A) the circular is applicable if an assessee has used the motor vehicle for transporting 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 on hire. Thus, the very nature 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 running any consultancy firm and used a motor car for himself. Here the vehicles are used for transporting the goods of third concern by virtue of a contract. There is a commercial exploitation of the vehicles for transporting the goods 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 arguments were advanced. The interest would be consequential, hence rejected.
ITA.710/Bang/2015 Page - 7
We further note that the Revenue challenged the order of this Tribunal before the Hon’ble jurisdictional High Court. The Hon’ble jurisdictional High Court has upheld the order of the 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 benefit of 30% depreciation has been granted to the assessee for the vehicles being used for commercial purpose of shifting the solid 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 relevant provision of law as well as the circular of the CBDT, held as under:
"..-In the present case, the assessee has been transporting the so/id waste of municipality on hire. Thus, the very nature 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 running any consulting firm and used a motor car for himself Here the vehicles are used for transporting the goods of third concern by virtue of a contract. There is a commercial exploitation of the vehicles for transporting 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 there is no error in the order of the Tribunal and thus no substantial question of law arises for determination by this Court.
ITA.710/Bang/2015 Page - 8
In view of the decision of the coordinate bench as well as the Hon’ble jurisdictional High Court, we hold that the assessee is entitled for depreciation at the rate of 30% on the vehicles used for transportation of the municipal waste. Orders of the authorities below are accordingly set aside and the claim of the assessee is allowed.
In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 26th day of August, 2016.