2003 (3) TMI 667 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to depreciation at 40% instead of 25% on explosive vans.
2. Applicability of higher depreciation rate for vehicles used in the business of running them on hire.
3. Consistency in judicial decisions and the liberty to deviate from earlier Tribunal decisions.

Issue-wise Detailed Analysis:

1. Entitlement to depreciation at 40% instead of 25% on explosive vans:
The primary issue revolves around whether the assessee-company is entitled to a higher depreciation rate of 40% on explosive vans used for transporting explosives, as opposed to the 25% allowed by the Assessing Officer (AO). The assessee claimed that the vans were used for transporting explosives to collieries and hiring charges were realized from clients, thus qualifying for the higher depreciation rate. The AO, however, held that since the vans were used for the assessee's own business activities, the applicable depreciation rate was 25%. The Commissioner of Income-tax (Appeals) (CIT(A)) agreed with the assessee, citing the Central Board of Direct Taxes (CBDT) Circular No. 652, which clarified that higher depreciation is allowable for vehicles used in the business of running them on hire. The Tribunal, following its earlier decision in the assessee's own case, confirmed the CIT(A)'s order and dismissed the Departmental appeal.

2. Applicability of higher depreciation rate for vehicles used in the business of running them on hire:
The dissenting opinion by the Accountant Member argued that the assessee was not in the business of running vehicles on hire and that the mere recovery of transport charges did not justify a higher depreciation rate. The Accountant Member relied on the Rajasthan High Court's decision in CIT v. Sardar Stones, which held that charging hire charges separately does not necessarily mean the business of running vehicles on hire. The Third Member, however, agreed with the Judicial Member, stating that the transportation of explosives was a separate business activity of the assessee, distinct from its consignment agency business. The Third Member also referred to the CBDT Circulars and the Tribunal's earlier decision in Machino Techno Sales Ltd., which supported the view that higher depreciation is allowable for vehicles used in the business of transportation on hire.

3. Consistency in judicial decisions and the liberty to deviate from earlier Tribunal decisions:
The dissenting Accountant Member emphasized the principle of consistency in judicial decisions but argued that the Tribunal has the liberty to deviate from earlier decisions if there are compelling reasons. The Accountant Member cited the Supreme Court's observations in Distributors (Baroda) (P.) Ltd. v. Union of India, which stated that perpetuating an error is not justified. However, the Third Member, agreeing with the Judicial Member, held that the earlier decision of the Tribunal should be followed unless there are substantial reasons to deviate. The Third Member also referred to the Supreme Court's guidelines in Union of India v. Raghubir Singh, which emphasized the need for continuity and predictability in judicial decisions.

Conclusion:
The Third Member concluded that the assessee is entitled to higher depreciation at 40% for the explosive vans used in the business of running them on hire. The appeal of the Revenue was dismissed, and the matter was placed before the regular Bench for passing the consequential order in accordance with the majority view.