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TMI Blog2003 (3) TMI 667X X X X Extracts X X X X X X X X Extracts X X X X ..... . as per the Income-tax Rules as against the assessee s claimed depreciation at 40 per cent. During the course of hearing of the proceeding, the assessee contended that their claim of depreciation at 40 per cent. is allowable considering the fact that the explosives are transported to the collieries for which hiring charges are realised from the clients in the assessment year 1993-94. The assessee s claim, however, was not accepted and depreciation on these assets were allowed at 25 per cent. only. Being aggrieved the assessee appealed before the Commissioner of Income-tax (Appeals)-VI, Calcutta, who in his order dated September 19, 1996, held that the depreciation at 40 per cent. was allowable to the assessee. The Department, however, has not accepted the verdict of the Commissioner of Income-tax (Appeals) and preferred second appeal against the order. Considering the facts of the case, the Assessing Officer was also of the opinion that depreciation on explosives vans should be allowed at 25 per cent. only against the assessee s claim of 40 per cent. Aggrieved with the order of the Assessing Officer, the assessee went in appeal before the Commissioner of Income-tax (Appeals). ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee s) own business activities, depreciation applicable on such vehicles at the rates applicable. . . at 25 per cent. as against the assessee s claimed depreciation at 40 per cent. Aggrieved, the assessee carried the matter in appeal before the Commissioner of Income-tax (Appeals) who concluded as follows : 3.2 I have examined the above submissions. It is a fact that while acting as consignment agent for transportation of explosives, the appellant was hiring out his vehicle to others. Therefore, it is not correct to infer that in such activities, the appellant was plying the vehicles for his own business. The appellant is thus entitled to depreciation at the enhanced rate of 40 per cent., as clarified by the Central Board of Direct Taxes Circular No. 652 dated June 14, 1993 (see [1993] 202 ITR (St.) 55), mentioned above. The Assessing Officer will allow the claim. Grounds Nos. 1, 2 and 3 of the appeal are allowed. Aggrieved by the aforesaid order of the learned Commissioner (Appeals), the Revenue is in appeal before us. I may mention that operative portion of the order of the Tribunal, by which the aforesaid issue is said to be covered and which is incidentally authored b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The facts of the case also show that the trucks and trailers were actually used by the assessee in connection with its transport business and not in connection with its business as a dealer of Maruti vehicles. Hence, in my view, the conditions as laid down for allowance of the higher rate of depreciation to the effect that the motor lorry, etc., should be used in business of running them on hire, stand fulfilled. I am, therefore, of the opinion that in the instant case, the assessee is entitled to higher rate of depreciation at 50 per cent. on the trucks and trailers under consideration. Let us compare these facts with admitted facts of the case before us. In the aforesaid case, it was not the assessee s duty to transport the cars from Faridabad to Calcutta and therefore it could not be said that transporting these cars from Faridabad to Calcutta was incidental to business. In the case before us, however, the assessee is a consignment agent and it is admittedly part of his agency activity to deliver the explosives at the mining sites. In fact, there is no dispute that carrying the explosives to mining sites is incidental to the business of the assessee before us. In Machino Tec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se certain foreign motor cars, owned by them, for providing transportation services to tourists, depreciation should be allowed on these cars. The position will not change even where such transportation services are provided as part of a package tour for tourists, which may include a number of other services like boarding and lodging, service of guides, etc. A tourist, who opts for a package tour, agrees to pay for a number of services including use of car provided to him by the tour operator or travel agent. Thus, it can be said that the car has been taken by him on hire from such tour operator or travel agent. Therefore, depreciation on foreign motor cars, owned by him and used for providing transportation services to tourists, whether in a package tour or otherwise, should be allowed. 3. Further, under sub-item (2)(ii) of item III of Appendix I to the Income-tax Rules, 1962, a higher rate of depreciation, namely 50 per cent., is allowed on motor buses, motor lorries and motor taxies used in a business of running them on hire. Therefore, where a tour operator or travel agent uses such vehicles, owned by him, in providing transportation services to the tourists, higher rate of d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere mainly used by the assessee for carrying stones from the mine site to the sales depot and, therefore, he should be entitled to depreciation at 30 per cent. is undisputed in the facts of the present case also. In view of the above views expressed by the hon ble Rajasthan High Court, it is clear that unless there is a finding that the assessee is in the business of running vehicles on hire, even if hire charges are recovered by the assessee from its constituents, in an activity merely incidental to its other businesses, the assessee will not be entitled to the higher rate of depreciation. No judicial precedent to the contrary has been brought to the notice of this Bench. Accordingly, I see no merit in the assessee s this contention, in fact the only contention before the Assessing Officer, also. In view of the above discussions, I am of the opinion that the Assessing Officer was quite justified in restricting the depreciation claim to normal depreciation rate which is 25 per cent. in the present case. As I hold so, I have taken note of the fact that there is nothing at all on record to even remotely suggest that assessee was, to use the phraseology employed in the statute, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in my own opinions when picked up a few months after delivery, and reread with due contrition. It is fairly well settled in law that there is no res judicata in the income tax proceedings, through the principle of consistency should normally be maintained, unless there are strong reasons to depart from the stand taken in earlier assessment proceedings and unless the parties have allowed that position to be sustained by not challenging the earlier orders. The hon ble Supreme Court, in the case of Radhasoami Satsang v. CIT [1992] 193 ITR 321, has observed that (page 329) : We are aware of the fact that, strictly speaking, res judicata does not apply to income-tax proceedings. Again, each assessment year being a unit, what is decided in one year may not apply in the following year but where a fundamental aspect permeating through the different assessment years has been found as a fact one way or the other and parties have allowed that position to be sustained by not challenging the order, it would not be at all appropriate to allow the position to be changed in a subsequent year. Applying this principle to the facts of the present case, however, there is nothing before us to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r decision has been arrived at without due enquiry and without taking into account all material evidence. Even as I am conscious of the judicial discipline requiring co-ordinate benches to normally follow the orders in earlier years, it is for specific and cogent reasons placed on record that I find it a deserving case for deviating from the view taken in preceding year by a co-ordinate Bench, and since, without the consent of my colleague, I cannot even refer this appeal to a larger Bench. I am taking an independent view in the matter. It is for the elaborate reasons discussed in paragraphs 21 to 25 (pages 85 and 86) above that I hold the view that the Tribunal, having decided the identical issue the immediate preceding year in favour of the assessee, has, in deserving cases, the liberty to take another view in this assessment year. I accordingly, am not dissuaded from taking the views expressed in paragraphs 10 to 20 (pages 80 to 85) above, even though these views deviate from the view taken by the Tribunal in the immediate preceding year. In the result, in my considered view, the Revenue s appeal should be allowed. Order of reference to Third Member As there is a differe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee at normal rate at 25 per cent. only. It has been pointed out by the Assessing Officer in the assessment order that though the Commissioner of Income-tax (Appeals) VI, Kolkata, vide his order dated September 19, 1996, has allowed the claim of depreciation at 40 per cent. on explosive vans, the order was not being followed as the Department had preferred second appeal against the said order. Thus, the disallowance on account of depreciation was made to the extent of Rs. 1,23,410. The assessee appealed to the Commissioner of Income-tax (Appeals) and vide order dated June 10, 1998, the Commissioner of Income-tax (Appeals)-X, relying upon the Central Board of Direct Taxes Circular No. 652 dated June 14, 1993 (see [1993] 202 ITR (St.) 55) read with Circular No. 609 dated July 29, 1991 (see [1991] 191 ITR (St.) 1), held that since the assessee was acting as consignment agent for transportation of explosives, higher depreciation at 40 per cent. was permissible. The Commissioner of Income-tax (Appeals) has also recorded a finding that the Assessing Officer was wrong to infer that the assessee was plying vehicles for its own business. The Department carried the matter to the Tribunal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a different view taken earlier by the coordinate Bench when there is no material difference in the facts and circumstances of the case. According to the learned counsel, the learned Accountant Member has merely taken a different view which amounts to review of the earlier order on the same set of facts. Learned counsel also pointed out that an application for admission of additional evidence has been filed in the form of (i) copies of letters of IDL Chemicals Ltd. fixing transportation charges payable to the company from the factory to explosive magazines ; (ii) summary of van income, i.e., transport charges received ; (iii) copy of ledger account of van income from IDL Chemicals Ltd., Hyderabad ; (iv) copy of ledger account of van income from IDL Chemicals Ltd., Rourkela ; (v) copy of ledger account of van income from Eastern Explosives and Chemicals Ltd. (explosive manufacturer) ; and (vi) van income return trips (from explosives magazines). Learned counsel pointed out that all these papers form part of the record of the company and since no opportunity was given in regard to this aspect of matter at any level, the evidence may be admitted and considered for arriving at a de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies for transportation of explosives. Section 32 of the Income-tax Act, 1961, provides for allowance of deduction on account of depreciation in respect of assets owned and used by the assessee for the purposes of the business or profession as may be prescribed. As per Appendix I to the Income-tax Rules, 1962, depreciation under entry D(9) reads as under : Motor buses and motor lorries other than those used in a business of running them on hire-25 per cent. Entry E(1A) reads as under : Motor buses, motor lorries, and motor taxies used in a business running them on hire-40 per cent. As is evident from the above entries, depreciation on motor buses and motor lorries as per the ordinary rate of depreciation is 25 per cent. However, higher rate of depreciation is allowed in respect of motor buses, motor lorries and motor taxies used in the business of running them on hire. Thus, it will be necessary to ascertain the purpose for which the vans owned have been used by the assessee. The assessee, as already pointed out, is also deriving income from acting as a consignment agent for some chemical companies. The assessee has used the vans for transportation of explosives from min ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for tourists. The second proviso to section 32(1)(ii) of the Income-tax Act, 1961, which disallows depreciation on foreign motor cars, is reproduced below : Provided further that no deduction shall be allowed under this clause in respect of any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, and is used otherwise than in a business of running it on hire for tourists. 2. The intention behind this provision is to discourage use of foreign cars for the purposes of business or profession. However, in order to promote tourism industry, an exception has been made in the case of foreign motor cars used in a business of running them on hire for tourists, on which full depreciation is allowable. 2.2 Where tour operators or travel agents use certain foreign motor cars, owned by them, for providing transportation services to tourists, depreciation should be allowed on these cars. The position will not change even where such transportation services are provided as part of a package tour for tourists, which may include a number of other services like boarding and lodging, service of guides, etc. A tourist, wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m III of Appendix I to the Income-tax Rules, 1962, higher rate of depreciation is admissible on motor buses, motor lorries and motor taxies used in a business of running them on hire. A question has been raised as to whether, for deriving the benefit of higher depreciation, motor lorries must be hired out to some other person or whether the user of the same in the assessee s business of transportation of goods on hire would suffice. 2. In Board s Circular No. 609 dated July 29, 1991 (see [1991] 191 ITR (St.) 1), it was clarified that where a tour operator or travel agent uses motor buses or motor taxies owned by him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles. It is further clarified that higher depreciation will also be admissible on motor lorries used in the assessee s business of transportation of goods on hire. The higher rate of depreciation, however, will not apply if the motor buses, motor lorries, etc., are used in some other non-hiring business of the assessee. (underling mine) It would also be useful to refer to some relevant decisions relating to the issue involved in this appeal. In the case of CIT v ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... claimed in respect of trucks and trailers used for transportation of Maruti vehicles. The Tribunal by a majority view decided the issue in favour of the assessee taking into account that it was not duty of the assessee-company to carry the vehicles of Maruti Udyog Ltd. from Faridabad to Kolkata. On the other hand, it was the duty of Maruti Udyog Ltd. to deliver the vehicles at the Kolkata godown of the assessee. The obligation of Maruti Udyog Ltd. for transporting the vehicles was undertaken by the assessee for which transportation charges were being collected by them from Maruti Udyog Ltd. Thus, the assessee was held also to be engaged in the business of running the vehicles on hire. On the basis of the Central Board of Direct Taxes Circulars, the decision of the Tribunal and other decisions of the High Courts referred to above, the following principles emerge : (i) The assessee will be entitled to deduction on account of depreciation on higher rate if the vehicles are used by the assessee in the business of running them on hire. (ii) If the assessee is engaged in business other than the business of running the vehicles on hire and has used the vehicles in the course of such ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of acting as a consignment agent is one business of the assessee and carrying of explosives from mine site to collieries and other places another business, then it will not be difficult to determine the rate of depreciation permissible in respect of the vans used in such business. It may be relevant to refer to the memorandum of association in the case of the respondent-company. One of the objects for which the company was formed is as under : (2) To carry on in all its branches, either solely or in partnership with other companies, corporations, firms, or individuals, the business of exporting, importing, storing, transporting, supplying, manufacturing, dealing in purchasing, selling and distributing goods of all kinds and to carry on all or any of the business of consignees and agents, general merchants for the sale of such goods and other kindred business, wharfingers, merchants carriers by land, sea and air, shipowners, charterers, barge owners, and to act as traders and brokers in all or any of their branches and to turn such goods to kind in any manner whatsoever. It is evident from the above that the company is authorized to carry on the business as carriers by land. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon the decision of the Rajasthan High Court in the case of CIT v. Sardar Stones [1995] 215 ITR 350, where their Lordships have held that charging or showing hire charges separately in the bill would not be the only determinative factor for deciding as to whether the assessee was carrying on the business of running the vehicles on hire. In that case, it is observed that the assessee was engaged in the business of sale of stones. The assessee had sold stones and carried the stones from mine site to the sales depot. Trucks were also used for carrying the goods to the destination of the customers and higher rate of depreciation on the trucks was claimed by the assessee. However, their Lordships of the Rajasthan High Court held that since the trucks were mainly used by the assessee for carrying stones from the mine site to the sales depot, the depreciation at higher rate was not permissible. In my considered view, the facts in the case of CIT v. Sardar Stones [1995] 215 ITR 350 (Raj) are distinguishable with the facts of this case. The nature of the business of the assessee, in my view, is very important in determining as to whether the vehicles were used for running them on hire. In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taken by the co-ordinate Bench of the Tribunal. It is only as a matter of precaution I refer to the decision of the Supreme Court in the case of Union of India v. Raghubir Singh [1989] 178 ITR 548 where their Lordships have laid down criteria for taking a contrary view. In view of the guidelines laid down by their Lordships of the apex court, it hardly needs to be mentioned that such guidelines would equally apply to any court/Tribunal of subordinate jurisdiction. I would therefore, refer to the guidelines laid down by their Lordships of the Supreme Court as under (headnote) : The Supreme Court of India should not differ from the earlier decision merely because a contrary view appeared preferable. But, if the previous decision is plainly erroneous, there is a duty of the court to say so and not perpetuate the mistake. A revision of its earlier decision would be justified if there were compelling and substantial reasons to do so. The earlier decision may be reviewed, for instance, (i) where an earlier relevant statutory provision had not been brought to the notice of the court, or (ii) if a vital point was not considered. Whether the court should review depends on several rele ..... X X X X Extracts X X X X X X X X Extracts X X X X
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