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TMI Blog2020 (1) TMI 769X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles on hire. The fact remains that the vehicles are used by the assessee in the assessee's business of rural marketing, promotions, roadshows, display advertising etc. and that the assessee is not in the business of running the vehicles on hire. See GUPTA GLOBAL EXIM (P) LTD. [ 2008 (5) TMI 7 - SUPREME COURT] - Decided against assessee. - IT APPEAL NO. 1338 (DELHI) OF 2017 - - - Dated:- 12-7-2019 - Kuldip Singh, Judicial Member And Anadee Nath Misshra, Accountant Member Sushil Sharma, FCA for the Appellant. Surender Pal, Sr. DR for the Respondent. ORDER Anadee Nath Misshra, This appeal by the assessee is filed against the order of learned Commissioner of Income Tax (Appeals)-36, ( learned CIT(A) , for short), New Delhi, dated 2nd December, 2016 for assessment year 2013-14, on the following grounds :- 1. That the Ld. Assessing Officer has erred in disallowing higher rate of depreciation @ 30% amounting to ₹ 19,57,837/- on commercial vehicles used in the business of promotional activity in rural markets of India. The assessee earns more than 75% of its income primarily from this activity and hi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ncome for the assessee and undergo lot of wear and tear while on roads in rural areas. In fact, due to hard rural conditions, these vehicles undergo more than usual depreciation. 2.1 The reply of the assessee was duly considered but not found tenable, as the assessee-company is engaged in the business of rural marketing, promotions, roadshows, display advertising etc. and not in the business of hiring of vehicles. The assessee carries out its business activities for promotions of brands through its vans duly fitted with display devices. It is germane to mention here that the assessee is not carrying on business of transportation. By delving into the records of usage by the assessee it is perceived that these vans were used by the assessee wholly and exclusively for its own business. In this context the decision by the Apex Court in the SLP(C) No.12846 of 2007, published vide 305 ITR 132 (SC) (2008), in the case of CIT v. Gupta Global Exim P. Ltd. is reproduced below : Generally, this court does not interfere with the concurrent finding of facts recorded by the authorities below. However, we are aware of the view that in this case, a neat substantial question of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. For the aforesaid reasons, we set aside the impugned Judgment of the High Court and we remit the matter to CIT(A) for de novo examination of the case in accordance with the law . This fact is further substantiated by the ratio of decision by Gujarat High Court in the case of CIT v. Pradip N. Desai (HUF) (2012) 341 ITR 277 (Guj.) Wherein it has been held that as the assessee was not carrying on the business hiring of vehicle, not entitled to higher rate of depreciation. 2.2 In view of the foregoing facts and circumstances of the case and in law, the assessee is entitled for depreciation on these vans @ 15% p.a. and the excess depreciation claimed at ₹ 17,09,939/- on commercial video vans and ₹ 2,47,898/- on commercial van body aggregating to ₹ 19,57,837/- is being disallowed and added to the income of the assessee. I am satisfied that assessee has concealed true particulars of income within the provisions of section 271(1)(c) of the Income-tax Act, 1961, so penalty proceedings u/s 271(1)(c) are being initiated separately. ' 4. The assessee filed appeal before the learned CIT(A). However, vide order, dated 2nd Dece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat reliance cannot be made upon the accrual of income as a determinative factor for coming to conclusion that trucks were used in the business of running them on hire. What is relevant is whether the assessee was in the business of hiring out his trucks in addition to his business of trading in timber (in that case). The assessee by self-admission is engaged in business of marketing brand activation serving and advertising through AV methods, mobile vans, T.V., Radios, etc. The use of vehicles is thus only the means to do so. It is clear that in the case of the assessee, without the work of brand promotion/roadshows/rural marketing etc., the assessee would not hire out trucks merely for transportation. Therefore, it cannot be said that the assessee was in the business of hiring of vehicles of transportation. In the above circumstances the disallowance of higher rate of depreciation at 30% is confirmed. 5. The present appeal before us is filed by the assessee against the aforesaid impugned appellate order, dated 2nd December, 2016, of the learned CIT(A). 6. During appellate proceedings in ITAT, a paper book consisting of 108 pages was filed from assessee's ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany is from this source only and it cannot provide these services without using commercial vehicles. The company has its own fleet of 85 (eighty five) commercial vehicles duly registered in its name and also used over 200 (two hundred) vehicles hired from private operators. These vehicles are duly registered as commercial vehicles and National/State permits are taken for operating them on roads. These commercial vehicles are fabricated, branded, painted and modified according to the needs of clients and promotional activity is carried out in Rural markets of India which are based mostly in interior parts of India. Due its reach in remote areas, large number of clients from sectors like FMCG, Automobile, Beverages etc., take services from the assessee. It is also pertinent and emphasized that the hire charges for vehicles are duly charged in the overall billing to its clients by the assessee. 2. That the assessee claimed depreciation @ 30% on commercial vehicles used in the business of handling promotional activity in Rural areas. These vehicles are the main source of income for the assessee without which the company cannot provide such promotional services in R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation @ 30% even upon satisfaction of twin requirements of ownership and usage of business by grossly relying of judgment in the case of Gupta Global Exim (P) Limited (2008) 305 ITR 132 (SC).' He also relied on the submissions made by/on behalf of the assessee before the Assessing Officer and the learned CIT(A). 8. On the other hand, the learned Departmental Representative submitted that the assessee is not in the business of running the vehicles on hire. Since the assessee is not in the business of running the vehicles on hire, learned DR contended, and instead, the assessee is in the business of rural marketing, promotions, roadshows, display advertising etc.; the assessee is eligible for the depreciation on vehicles at the normal rate of 15% and not at the higher rate of 30%. 9. We have heard both sides carefully. We have perused the material on record carefully. We have considered the judicial pronouncements brought to our notice or referred to in the records. The rate at which depreciation is admissible to the assessee is contained in Part A of New Appendix I, read with Rule 5, of Income-tax Rules, 1962, read with Section 32, of Income-tax A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of depreciation at the rate of 30%. Merely because the invoices raised by the assessee include, inter alia, charges for running of vehicles, does not mean that the assessee is in the business of running the vehicles on hire. The fact remains that the vehicles are used by the assessee in the assessee's business of rural marketing, promotions, roadshows, display advertising etc. and that the assessee is not in the business of running the vehicles on hire. For coming to this conclusion, we take guidance from the order of Hon'ble Supreme Court in the case of CIT v. Gupta Global Exim (P.) Ltd. [2008] 171 Taxman 474/305 ITR 132, wherein Hon'ble Apex Court held as under :- Generally, this court does not interfere with the concurrent finding of facts recorded by the authorities below. However, we are aware of the view that in this case, a neat substantial question of law arose for determination which needed interpretation of the Depreciation Table given in Appendix-I, to the Income-tax Rules, 1962. The said table gives rates at which depreciation is admissible. Under sub-item 2(ii) of Item III, higher rate of depreciation is admissible on motor trucks used in a busi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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