1989 (5) TMI 92 - AT - Income Tax

Summary

Issues Involved:
1. Erroneous Assessment Order
2. Definition and Interpretation of "Tourist"
3. Use of Foreign-made Cars in Business of Running on Hire for Tourists
4. Evidence and Certificate from European Asian Bank
5. Legal Interpretation of Section 32(1)(ii) of the IT Act

Issue-wise Detailed Analysis:

1. Erroneous Assessment Order
The CIT reviewed the assessment order and found it erroneous and prejudicial to the interests of revenue because depreciation on two foreign-made cars was allowed despite them being acquired after 28-2-1975 and not used in a business of running them on hire for tourists. The CIT served notice to the assessee to show cause why the depreciation should not be withdrawn.

2. Definition and Interpretation of "Tourist"
The CIT referred to the definition of "tourist" from Customs Formalities and Regulations, which describes a tourist as a person not normally residing in India, who enters India for a period up to six months for legitimate non-immigration purposes. The CIT concluded that the assessee could not get the benefit because the cars were not used exclusively for tourists as defined.

3. Use of Foreign-made Cars in Business of Running on Hire for Tourists
The assessee argued that her business was running cars on hire for tourists and that the cars were used by the European Asian Bank for its foreign clients. The CIT, however, held that the cars were not used exclusively for tourists and directed the ITO to withdraw the depreciation.

4. Evidence and Certificate from European Asian Bank
The CIT did not find the certificate from the bank sufficient, which stated that the cars were used for overseas visitors and guests touring India "whenever an occasion arises." The CIT interpreted this as meaning the cars were not used exclusively for tourists.

5. Legal Interpretation of Section 32(1)(ii) of the IT Act
The Tribunal considered the rival contentions and found that the requirement of the second proviso to Section 32(1)(ii) was that the cars must be used in the business of running them on hire for tourists. The Tribunal concluded that the assessee's business was indeed running cars on hire for tourists, and the cars were used for that purpose, thus qualifying for depreciation.

Separate Judgments Delivered by the Judges:

Judicial Member's View:
The Judicial Member agreed with the assessee, stating that the cars were used in the business of running them on hire for tourists. The Judicial Member emphasized that the term "tourist" does not exclusively mean foreign tourists and that the business of the assessee was to run cars on hire for tourists, which included both Indian and foreign tourists. The Judicial Member allowed the appeal, quashed the order of the CIT, and restored the ITO's order allowing the depreciation.

Accountant Member's View:
The Accountant Member disagreed, stating that the cars were not used by the assessee in her business of running cars on hire for tourists but were let out to a bank. The Accountant Member emphasized that the cars must be used by the assessee in her business, not by another party. The Accountant Member upheld the CIT's order withdrawing the depreciation.

Third Member's View:
The Third Member agreed with the Judicial Member, stating that the cars were used for tourists by the European Asian Bank, which amounted to the cars being used in the business of running them on hire for tourists. The Third Member emphasized that the evidence provided, including the certificate from the bank, was sufficient to prove that the cars were used for tourists. The Third Member concluded that the assessee was entitled to depreciation on the two foreign-made cars.

Conclusion:
The majority view was that the assessee was entitled to depreciation on the two foreign-made cars as they were used in the business of running them on hire for tourists. The appeal was allowed, and the order of the CIT was quashed.