TMI Blog2008 (6) TMI 267X X X X Extracts X X X X X X X X Extracts X X X X ..... the case for scrutiny and issued notices under s. 143(2)/142(1). During the course of assessment proceedings, the AO scrutinized the sheet of computation of income annexed with the return and noticed that assessee has shown car hire charges amounting to Rs. 1,86,000. Assessee has claimed thereon, depreciation, car insurance, interest paid to bank and driver's salary amounting to Rs. 1,39,464, Rs. 20,953, Rs. 69,763 and Rs. 42,000 respectively. This resulted in a loss from car hire charges. The AO asked the assessee to substantiate the claim of loss from car hiring charges and its setting off against salary income in the same financial year. It was explained that the claim has been made under s. 57(ii) of the Act. The AO, however, took a different view. He noted that loss from hiring of the car has been claimed to set it off against salary income. He, however, assessed it under the head 'Income from business or profession' and accordingly, set off of the loss was not allowed against salary income, by virtue of s. 71(2A) which was introduced in the IT Act, 1961 w.e.f. 1st April, 2005. 3. The learned CIT(A) confirmed the order of AO by holding that assessee is engaged in organized ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n though principle of res judicata is not applicable but where facts are the same and there is absence of any material change justifying Department to take a different view from that taken in earlier proceedings, then they should not have changed their view. 5. Against this, the learned Departmental Representative submitted that the AO had not carried out any enquiry in earlier years and had not applied his mind in earlier years, therefore, it would not be correct to say that an error which crept in earlier years should have been allowed to continue in subsequent years. The assessee has been doing the business of car hiring and therefore, its income should have been assessed under the head 'Income from business or profession'. He referred to the concept of 'business' as per s. 2(13) which, according to him is very wide and would include even a single transaction. He referred to the decision in the case of Mahammad Faruq, In re (1938) 6 ITR 1 (All) rendered by Hon'ble Allahabad High Court wherein the Hon'ble Court elaborated the concept of word 'business'. It was held that business must be some activity which has for its object the acquirement of some profits which can be claimed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of Orissa Ltd. vs. CIT (2004) 189 CTR (Ori) 417 : (2004) 268 ITR 130 (Ori). 10. We have considered the rival submissions and perused the material on record. Undisputed facts are that assessee has only one car which was given on hire to M/s Jai Prakash Associates. She was assessed to tax under s. 143(3) wherein she had declared the income from car hire charges under the head 'Income from other sources'. In some years there was loss which was set off against salary income and was accepted by the AO. For the sake of convenience, we give below the figures of income/loss assessed under s. 143(3) in earlier years: ------------------------------------------------------------- Asst. Assessment framed Description year under s. 143(3) vide order dated ------------------------------------------------------------- 2000-01 1.3.2003 Loss of Rs. 45,036 from car hiring adjusted against salary and other income. 2002-03 15.3.2005 Loss of Rs. 1,28,529 from car hiring adjusted against income from salary, house property ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4. Similar view was taken by the Hon'ble Delhi High Court in case of Director of IT (Exemptions) vs. Escorts Cardiac Diseases Hospital Society (2008) 300 ITR 75 (Del). 15. Therefore, apparently there is no reason or material placed on record which could justify a different decision this year. Notwithstanding, we are of the view that under the facts and circumstances of the present case, income from hiring of car cannot be assessed under the head 'Income from business or profession'. The reasons are that business constitutes an organized activity which involves an assessee physically/mentally. If assessee hands over its assets/income earning apparatus to somebody else and enjoys the fruits thereof then it could not said that he is engaged in an organized business activity. 16. The Hon'ble Supreme Court in the case of Barendra Prasad Roy vs. ITO held that the word 'business' is one of wide import and it means an activity carried on continuously and systematically by a person by applying his labour or skill with a view to earn income. 17. The Hon'ble Supreme Court in the case of CST vs. Sai Publication Fund (2002) 177 CTR (SC) 1 : (2002) 258 ITR 70 (SC) held that where the main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... esel is borne by the hirer. From this point of view, we find that assessee is only enjoying hire charges. There is no activity as such except letting the car to the hirer and making payments in respect of insurance and driver's salary. If hiring of car is to be treated as a business activity then it should have engaged in day-to-day or periodical activities, like giving car on hire to one person for short time and then to another, arranging customer for giving car on hire like a taxi is given on hire to various persons. For this purpose, assessee would organize herself to search the customers. If there are number of vehicles with her then organizing activity would be more apparent. It would require the labour of the assessee, his skill and attention and intention to earn more profit by reducing expenses thereon. In the present case, the receipts are apparently fixed being hire charges set out at the beginning of assessment year, driver's salary is fixed and so are the insurance and interest. There is apparently no application of mind during the year by the assessee in earning more profit which is practically ascertained at the beginning of the year. Thus, neither there is engagemen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ead from 'income from other sources' to 'income from business or profession'. 24. There is another aspect argued by the learned Departmental Representative. He submitted that this is a colourable device the assessee had adopted for reducing her tax liability by offering the income from hire charges under the head 'Income from other sources'. We do not consider that this is an acceptable argument. Once Department has accepted the position in earlier years and no corrective step has been taken then assessee could not be blamed for offering the income from car hire charges under the head 'Income from other sources'. Because of a stand taken by the Department in earlier years the assessee has been allowed to take a particular position and now assessee cannot be put to a disadvantage by changing the stand by the Department in the present year without there being any apparent reasoning or material on record or any change in facts and circumstances. Notwithstanding, we have held that income from hiring of car to one customer for entire year would be assessable only under the head 'Income from other sources'. 25. Regarding claim of the assessee about insurance charges, the AO will veri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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