2021 (9) TMI 1228 - HC - Income Tax

Excess depreciation u/s 32 - as per revenue depreciation at 30% in respect of motor buses/lorries/taxi used in the assessee's business of running them on hire, whereas in the instant case, the vehicles are used for assessee's own business and therefore, will not be eligible for higher rate of depreciation - assessee claims to be a C F agent involved in stevedoring, clearing and forwarding agency, custom house agency, steamer agency and is rendering services in New Mangalore Port - HELD THAT - As per Supreme Court in 'RADHASOAMI SATSANG 1991 (11) TMI 2 - SUPREME COURT has held that even though principles of res judicata do not apply to income tax proceedings, but where a fundamental aspect permeating through the different Assessment Years has been found as the fact one way or the other and the parties have allowed the position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in subsequent year. Thus in view of the law laid down by the Supreme Court in RADHASOAMI SATSANG, supra and taking into account that the identical issue has been held in favour of the assessee by the Tribunal vide order dated 07.09.2013 in respect of Assessment Years 1993-94 and 1995-96 and the parties have allowed it to attain finality, it is not appropriate to allow the position to be changed in subsequent year. In the result, the substantial question of law framed in this appeal is answered against the revenue

Summary

Issues:
- Interpretation of depreciation rates under Section 32(1)(ii) of the Income Tax Act for vehicles used in business.
- Application of higher rate of depreciation for vehicles used in the business of hire.
- Consideration of past decisions and principles of res judicata in income tax proceedings.

Analysis:
1. Interpretation of Depreciation Rates: The appeal involved a dispute over the interpretation of Section 32(1)(ii) of the Income Tax Act regarding the eligibility for higher rates of depreciation for vehicles used in business. The revenue contended that the assessee, engaged in stevedoring and forwarding agency business, should not be eligible for the higher 30% depreciation rate as the vehicles were used for the assessee's own business, not for hire. The revenue argued that the rate of depreciation should be 15% for such business activities involving transportation of goods. The Tribunal and CIT(A) had allowed the claim of excess depreciation, leading to the appeal.

2. Higher Rate of Depreciation for Hire Business: The crux of the matter was whether the assessee's business activities, including transportation services, qualified for the higher rate of depreciation at 30% under Section 32(1)(ii) of the Act. The revenue contended that the hire charges for vehicles constituted only a small percentage of the total revenue, indicating that the business did not primarily involve vehicle hire. However, the assessee argued that the vehicles and machinery were used in the business of hire, supported by substantial hire charges received, justifying the claim for higher depreciation rates.

3. Application of Res Judicata: The judgment considered the principle of res judicata in income tax proceedings, emphasizing that if a fundamental aspect persisted through different assessment years and parties did not challenge it, changing the position in subsequent years would not be appropriate. The Commissioner of Income Tax (Appeals) and the Tribunal relied on past decisions in the assessee's favor for previous assessment years, indicating consistency in the treatment of depreciation claims. The Tribunal upheld the Commissioner's decision based on past precedents and lack of contrary decisions cited.

4. Final Decision: The High Court, following the principles established by the Supreme Court, upheld the Tribunal's decision in favor of the assessee. Citing the importance of maintaining consistency and respecting past decisions, the Court concluded that the substantial question of law framed in the appeal was answered against the revenue and in favor of the assessee. Consequently, the appeal was dismissed, affirming the allowance of higher depreciation rates for the assessee's business activities involving vehicle hire.

By considering past decisions, interpreting relevant provisions of the Income Tax Act, and applying principles of consistency in judicial decisions, the High Court provided a detailed analysis and upheld the Tribunal's decision in favor of the assessee regarding the claim of excess depreciation for vehicles used in business operations.