1995 (11) TMI 83 - HC - Income Tax

Alternate Remedy, Depreciation At Higher Rate, Grant Of Depreciation, Income Tax Authorities, Motor Vehicles, Question Of Fact, Rate Of Depreciation, Transport Business

Summary

Issues Involved:
1. Legality of disallowing higher depreciation rates.
2. Entitlement to higher depreciation rates for transportation of goods on hire.
3. Binding nature of Central Board of Direct Taxes (CBDT) circulars.
4. Maintainability of writ application under Article 226 of the Constitution.

Issue-wise Detailed Analysis:

1. Legality of Disallowing Higher Depreciation Rates:
The petitioner challenged the assessment order dated March 31, 1994, which rejected their claim for higher depreciation rates on trucks used for transportation of goods on hire. The petitioner argued that this disallowance was illegal and without jurisdiction, as it contravened Circular No. 652 issued by the CBDT. The court noted that the circulars from the CBDT, dated July 29, 1991, and June 14, 1993, clarified that higher depreciation rates were admissible for motor vehicles used in the business of transportation of goods on hire. The assessment order, however, did not follow these circulars, leading to the disallowance of higher depreciation rates.

2. Entitlement to Higher Depreciation Rates for Transportation of Goods on Hire:
The petitioner, a limited company engaged in the business of transportation of goods on hire, claimed entitlement to higher depreciation rates under sub-item (2)(ii) of item III of Appendix I to the Income-tax Rules, 1962. The company argued that it owned several trucks and sometimes hired additional trucks depending on the volume of business, thus qualifying for higher depreciation rates. The court acknowledged that the CBDT circulars supported the petitioner's claim, but the assessing authority interpreted the business as merely transportation, not transportation on hire, leading to the rejection of higher depreciation rates.

3. Binding Nature of CBDT Circulars:
The petitioner contended that the CBDT circulars issued under section 119 of the Income-tax Act, 1961, were binding on the income-tax authorities. The court referred to several precedents, including K.P. Varghese v. ITO and Ellerman Lines Ltd. v. CIT, which established that CBDT circulars, even if deviating from the statutory provisions, are binding on the revenue authorities. The court emphasized that the circulars dated July 29, 1991, and June 14, 1993, should be binding on the income-tax authority, but whether the petitioner was entitled to the benefit of these circulars needed to be decided by the appropriate authority.

4. Maintainability of Writ Application under Article 226 of the Constitution:
The respondents raised a preliminary objection, arguing that the writ application under Article 226 was not maintainable due to the availability of an alternative, efficacious remedy and the involvement of disputed questions of fact. The court cited several Supreme Court decisions, including J.R. Raghupathy v. State of A.P. and Jai Singh v. Union of India, which supported the principle that where an alternative remedy exists, the High Court should not exercise its extraordinary jurisdiction. The court agreed with the respondents, stating that the petitioner should have pursued the remedy available under the Income-tax Act, and the matter involved disputed questions of fact that could not be decided in a writ application.

Conclusion:
The court concluded that the writ application lacked merit and dismissed it, stating that the petitioner must pursue the appropriate remedy in the relevant forum. The court clarified that the CBDT circulars would be binding on the income-tax authority, but the entitlement to higher depreciation rates would have to be decided by the authority as and when agitated. The parties were left to bear their own costs.