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TMI Blog1995 (11) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... llows 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, who opts for a package tour, agrees to pay for a number of services including use of car provided ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... der is annexure-III to the writ application and the relevant portion of the same is quoted below : " Less--Depreciation under section 32 : The assessee has claimed depreciation on higher rates on trucks and imported trucks as per Board's Circular No. 609, dated July 29, 1991. But as per this circular, it is clear that the higher rate of depreciation is allowable to those assessees whose business is transportation of goods on hire. But in this case, the assessee is carrying on transportation business only. Hence, depreciation on higher rate is disallowed. Accordingly, depreciation is allowed at normal rate of 33 1/3 per cent. as per annexure enclosed at. " The brief facts are as follows : Petitioner No. 1 is a limited company and it carries on the business of transportation of goods on hire. The petitioner-company owns several trucks and sometimes depending upon the volume of business, hires trucks for transportation of goods. The petitioner-company is entitled to higher rates of depreciation as the company is involved in the business of transportation of goods on hire. Under sub-item (2)(ii) of item No. III of Appendix I to the Income-tax Rules, 1962, a higher rate of deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsel for the respondents. The following points are urged by Mr. Goswami, learned counsel for the petitioner : 1. That the action of the respondents in disallowing depreciation at the higher rates in contravention of Circular No. 652 issued by the Central Board of Direct Taxes is quite illegal and without jurisdiction. 2. That the petitioner-company being engaged in the business of transporting goods on hire, the petitioner-company is entitled to depreciation at a higher rate as per sub-part (2)(ii) of item III of Appendix I to the Income-tax Rules, 1962. 3. That the respondents are bound to follow the circular clarification and guidelines issued by the Central Board of Direct Taxes in exercise of the powers conferred under section 119 of the Income-tax Act, 1961. The petitioner having been carrying on the business of transportation on hire and having been using the vehicles for transportation of goods on hire, there is no basis and/or material and/or reasons for denying the benefit of higher depreciation to the petitioner-company. 4. That respondent No. 1 failed to take note of Circular No. 652, dated June 14, 1993 issued by the Central Board of Direct Taxes while completing t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractice would result in arbitrariness or absence of fairplay or discrimination, particularly where the authority making such non-statutory rule or the like comes within the definition of " State " under article 12 '." 2. Jai Singh v . Union of India, AIR 1977 SC 898 where in paragraph 4 (at page 899), the Supreme Court pointed out as follows : " The High Court dismissed the writ petition on the ground that it involved determination of disputed questions of fact. It was also observed that the High Court should not in exercise of its extraordinary jurisdiction grant relief to the appellant when he had an alternative remedy. After hearing Mr. Sobhagmal Jain on behalf of the appellant, we see no cogent ground to take a view different from that taken by the High Court. There cannot, in our opinion, be any doubt, on the point that the extent of purity of the gypsum won by the appellant is a question of fact. It has also been brought to our notice that after the dismissal of the writ petition by the High Court, the appellant has filed a suit, in which he has agitated the same question which is the subject-matter of the writ petition. In our opinion, the appellant cannot pursue two paral ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... de or modify an assessment made under a provision of the Act which is ultra vires, the Privy Council observed (at page 336) : ' In construing the section it is pertinent, in their Lordships ' opinion, to ascertain whether the Act contains machinery which enables an assessee effectively to raise in the courts the question whether a particular provision of the Income-tax Act bearing on the assessment made is or is not ultra vires. The presence of such machinery, though by no means conclusive, marches with a construction of the section which denies an alternative jurisdiction to inquire into the same subject-matter '." (b) The Supreme Court also considered its earlier decision in State of Uttar Pradesh v. Mohammad Nooh [1958] SCR 595 ; AIR 1958 SC 86 and pointed out as follows (at page 671) : (a) . . . . that the rule which requires the exhaustion of alternative remedies is a rule of convenience and discretion rather than a rule of law ; in other words, it does not bar the jurisdiction of the court. (b) The Act provides for a complete machinery to challenge an order of assessment, and the impugned orders of assessment can only be challenged by the mode prescribed by the Act and no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... recruiting officer musters in a man who is five feet-five inches only in height, and pays him the King's shilling; afterwards the officer is sued by the Government for being short in his accounts ; among other items he claims to be allowed the shilling paid to the undersized recruit. The court has to consider and apply this regulation and, whatever its effect may be, that effect will be given to it by the court exactly as effect will be given to a statute providing that murderers shall be hanged, or that last wills must have two witnesses' (John Chipman Gray on ' The Nature and Sources of the Law '). " This case instead of helping the respondents helps the petitioner. 2. G. J. Fernandez v. State of Mysore, AIR 1967 SC 1753, where in paragraph 12 (at page 1756), the Supreme Court pointed out as follows : " (a) . . . . Before however, we consider the question whether instructions in the Code have been followed or not, we have to decide whether these instructions have any statutory force. If they have no statutory force, they confer no right on anybody and a tenderer cannot claim any rights on the basis of these administrative instructions. If these are mere administrative instruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enue and this binding character attaches to the two circulars even if they be found not in accordance with the correct interpretation of sub-section (2) and they depart or deviate from such construction. It is now well settled as a result of two decisions of this court, one in Navnit Lal C. Javeri v. K K Sen, AAC [1965] 56 ITR 198 and the other in Ellerman Lines Ltd. v. CIT [1971] 82 ITR 913 that circulars issued by the CBDT under section 119 of the Act are binding on all officers and persons employed in the execution of the Act even if they deviate from the provisions of the Act." 2. Ellerman Lines Ltd. v. CIT [ 1971] 82 ITR 913, where the Supreme Court pointed out as follows : " Now, coming to the question as to the effect of instructions issued under section 5(8) of the Act, this court observed in Navnit Lal Javeri v. K K Sen, AAC [1965] 56 ITR 198 : ' It is clear that a circular of the kind which was issued by the Board would be binding on all officers and persons employed in the execution of the Act under section 5(8) of the Act. This circular pointed out to all the officers that it was likely that some of the companies might have advanced loans to their shareholders as a r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that the circular was binding on the Income-tax Officers.' The same view was reiterated by the Supreme Court in K P. Varghese's case [1981] 131 ITR 597 above referred to. The above-mentioned three decisions of the Supreme Court set at rest any doubt as to the binding nature of the circulars issued by the Central Board of Direct Taxes so far as the officials of the Income-tax Department are concerned. We may also refer to two Bench decisions of this court in R. J. K Ranga Rao v. CET [1979]116 ITR 154 (AP) and Addl. CIT v. Sarvaraya Textiles Ltd. [1982] 137 ITR 369, which has taken the same view following the above decisions of the Supreme Court Having regard to the above decisions we are unable to accede to ; the submission of learned standing counsel for the Revenue that departmental officials are not bound to implement the instructions of the Central Board of Direct Taxes, if such instructions deviate from the correct legal position. We may point out that the provisions of section 119 of the Act enjoin that the officers of the Income-tax Department are bound by the instructions and directions given by the Central Board of Direct Taxes. Wherever the instructions given by the Ce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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