2005 (5) TMI 255 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to depreciation rate on Explosive Vans.
2. Applicability of CBDT Circulars.
3. Consistency in Tribunal decisions.
4. Business of running vehicles on hire.
5. Admissibility of additional evidence.

Issue-wise Detailed Analysis:

1. Entitlement to Depreciation Rate on Explosive Vans:
The primary issue was whether the assessee company was entitled to claim depreciation on Explosive Vans at 40% instead of the 25% allowed by the Assessing Officer. The Commissioner (Appeals) had ruled in favor of the assessee, allowing a 40% depreciation rate based on the usage of the vans for hiring out to others. The department challenged this decision, arguing that the vans were used for the assessee's own business activities, thus justifying a 25% depreciation rate.

2. Applicability of CBDT Circulars:
The Commissioner (Appeals) and the Tribunal's Judicial Member relied on CBDT Circular No. 652 dated 14-6-1993, which clarified that higher depreciation rates are applicable to vehicles used in the business of running them on hire. The Judicial Member upheld the 40% depreciation rate, noting that the assessee was hiring out its vans, thus falling under the purview of the circular. The Accountant Member, however, disagreed, arguing that the circulars did not apply as there was no evidence that the assessee was in the business of running vehicles on hire.

3. Consistency in Tribunal Decisions:
The Judicial Member referenced a previous Tribunal decision in the assessee's favor for a similar issue, emphasizing the need for consistency. The Accountant Member, however, argued for a departure from the earlier decision, citing the need to rectify what he perceived as an error in the previous ruling. He referenced the Supreme Court's guidance on judicial consistency and the liberty to deviate from earlier decisions when justified.

4. Business of Running Vehicles on Hire:
The Accountant Member emphasized that for higher depreciation to apply, the assessee must be in the business of running vehicles on hire. He pointed out that merely recovering transportation charges does not suffice to prove this. The Judicial Member and the Third Member, however, found that the assessee's activities, including recovering substantial transportation charges, indicated that the vans were indeed used in the business of running them on hire.

5. Admissibility of Additional Evidence:
During the proceedings, the assessee sought to introduce additional evidence to support its claim. The Third Member declined to consider this new evidence, arguing that it was not available to the other members of the Bench when the matter was initially heard. However, the Third Member still found in favor of the assessee based on the existing record and previous Tribunal decisions.

Conclusion:
The Third Member agreed with the Judicial Member, concluding that the assessee was entitled to the higher depreciation rate of 40% for the Explosive Vans. This decision was based on the nature of the assessee's business activities and the substantial transportation charges recovered, which indicated that the vans were used in the business of running them on hire. Consequently, the departmental appeal was dismissed in accordance with the majority view.