TMI Blog1989 (5) TMI 92X X X X Extracts X X X X X X X X Extracts X X X X ..... ning cars on hire for toursits and these two cars were also used in the same business. It was urged that the fact that the assessee did not hire the cars in question directly to the tourists but to the European Asian Bank, which in turn made them available to its foreign clients, did not make any difference. A letter from the bank was produced and it was claimed on that basis that during the period of hire the cars in question were used by the bank only for the use of its overseas visitors and guests touring India. 4. The CIT referred to the meaning of the word "tourist" for the purposes of Customs Formalities and Regulations according to which a person not normally residing in India, who enters India for a period up to six months for legitimate non-immigration purposes, such as, touring, recreation, sports, health, family reasons, study, pilgrimage or business, as a tourist. The CIT reproduced sec. 32(1)(ii), second proviso according to which no deduction shall be allowed in respect of any motor car manufactured outside India, where such motor car is acquired by the assessee after 28th day of February, 1975 and is used otherwise than in a business of running it on hire for touri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be an Indian and since there was no evidence to show that the cars were used exclusively for foreign tourists, he held that the assessee was not entitled to depreciation. The contention of the learned counsel for the assessee is that it is nowhere laid down in the proviso that the car should have been used exclusively for the overseas visitors and guests. All that the proviso required is that the cars should have been used "in a, business of running it on hire for tourists". The learned counsel pointed out that according to the chart submitted before us, Nikhil Traders, a proprietary concern of the assessee owns nine cars. The cars on Sr. Nos. 3, 7, 8 and 9 are of foreign-made cars being Dodge Dart, Peugeot and Oldsmobile respectively. The CIT by not withdrawing the depreciation in respect of Dodge Dart and Oldsmobile cars has obviously accepted the assessee's claim that the assessee is carrying on the business of running the cars on hire for tourists. If that was not so, the CIT would have withdrawn the depreciation even on those cars. It is immaterial that the depreciation on those cars was a small figure while that of these two cars is a big amount. What is important to f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e hoteliers, travel agencies, etc. that one is in such a business. Whenever the hoteliers or travel agents require the cars they inform the assessee that they require the cars for tourists and the assessee supplies those cars either directly to the party concerned or to the hotelier or tourist agency and the hotelier or agent gives them to the tourists for use on hire. It is immaterial whether the assessee gives cars on hire directly to the tourists or to the hotelier or to the travelling agency. So long as the assessee's business is of running the cars on hire for tourists, she qualifies for depreciation. 10. The learned CIT does not doubt the certificate issued by the bank. In fact the bank had written a letter dated 8-10-1980 to the assessee which reads as follows: "Dear Sirs, We frequently need air-conditioned limousines on hire for our overseas visitors and clients touring India. We find it uneconomical to hire these cars on daily basis. We are interested in hiring 1 or 2 medium sized European or Japanese cars on yearly basis. Please let us know the type of cars you can offer and your rates, at an earlier. Thanking you," It is clear from this letter that the bank ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business and if assessee's business of seven cars is to hire them for tourists then it is the same business for the remaining two cars also. There is no material on record to show that the cars were used by the executives of the bank. There is also no material on record to show that the cars were used for any purpose other than use by tourists. The letter of the bank as to why they required the cars and the certificate as to their user clearly brings the assessee's case within the requirement of law that they were used in the business of running them on hire for tourists. We, accordingly, allow the appeal, quash the order of the CIT and restore that of the ITO allowing the depreciation. 12. The appeal is allowed. Per Shri R.P. Garg, Accountant Member - I have very carefully gone through the order prepared by the learned Judicial Member. I agree with his finding that the assessee's business was running the cars on hire and by virtue of having not withdrawn the depreciation on two out of four foreign cars, the department had accepted that the assessee had been carrying on the business of running cars on hire for tourists. However, I am unable to agree with the findings of the l ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection reads as under : "28. The following income shall be chargeable to income-tax under the head 'Profits and gains of business or profession',--- (i) the profits and gains of any business or profession which was carried on by the assessee at any time during the previous year ; From the above, in my opinion, it is evident that the business contemplated in section 32 should be the business carried on by the assessee and to be eligible to the depreciation claim on the car manufactured outside India, the car should be used in that business. In other words, it should be used in a business carried on by the assessee. User of the car by somebody else or by the lessee (in this case the European Asian Bank) for its overseas visitors and guests touring India would not be sufficient to entitle the assessee to claim depreciation on such cars. The foreign made car should be used in the 'business of running it on hire for tourists', which is carried on by the assessee and not in a business carried on by somebody else. User of the car by the lessee, even though for the tourists, would not, in my opinion, be a user of the car in a business carried on by the assessee. From another angle al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on by his order dated 8-9-1983. Thereafter the Commissioner of Income-tax, who happened to peruse the assessment records, came to the conclusion that the allowance of depreciation on the two Peugeot cars was not proper, as in his view, those cars were not used by the assessee "in a business of running them on hire for tourists". He felt that the allowance of depreciation on those two cars had violated the provisions contained in the second proviso to section 32(1)(ii). Initiating proceedings u/s 263 of the Income-tax Act, he gave a notice to the assessee to show cause as to why the depreciation allowed on these two cars should not be withdrawn. In response thereto, the assessee submitted that the assessee had given these two cars on hire at a fixed monthly rent of as high as Rs. 8,000 to European Asian Bank which was to use these cars only for their foreign tourists and guests. As the business of the assessee was of running cars on hire and as these two cars were used in that business alone, the depreciation was rightly allowed and should not be withdrawn. In support of the view that the European Asian Bank was using these cars only for the purpose of foreign tourists, a certificat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot be sufficient to entitle the assessee to the claim of depreciation. He was of the opinion that the cars had to be used by the assessee in its business of running these cars on hire for tourists. He, therefore, agreed with the view expressed by the revenue. 4. As there was thus a difference of opinion between the Members on this issue, the point of difference, framed in the following words, was referred to me as Third Member under section 255(4) of the Income-tax Act : "Whether, on the facts and in the circumstances of the case, the assessee, who is running a business of hiring motor cars for tourists, is entitled to depreciation on the two foreign made motor cars let out on a monthly rent by the assessee to European Asian Bank ?" 5. I have heard at length the arguments addressed to me by Shri Dastur, the learned Advocate on behalf of the assessee, and Shri Prasad, the learned Departmental Representative and I have come to the conclusion, on a careful consideration on the facts on record and the relevant provisions of the law, that the view expressed by the learned Judicial Member is the appropriate, just and fair view which also accords with the legislative intent. 6. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars were used for running them on hire for tourists, the embargo on the allowance of depreciation was not to apply. In other words, to be entitled to depreciation, the imported cars acquired after 28th February, 1975 must be used in a business of running them on hire for tourists. The running oil hire for tourists is the soul of this exception because if the cars are used otherwise than for tourists, then the exception would not apply. Then how to ensure that the cars used in a business were used for running them on hire for tourists. Again, here the object seems to be the promotion of tourism in India with a view to earn more foreign exchange. Unless more comforts are provided to the tourists, unless it is ensured that they would get the same facilities in our country, as they are used to in their own countries, there may be some disinclination or mental blocks in visiting our country. In order to provide comfort for them, therefore, exception had been made that the cars manufactured outside India, could be imported into India provided that they were to be used for hiring to tourists. Since the purpose of making an exception is to attract tourists in India, it is understandable th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reign tourists. Having seen the meaning of the words that exception is provided for the allowance of depreciation on imported cars acquired after 28th February, 1975, if they are used in a business of running them on hire for tourists and when it was considered by both the Members that the assessee was in the business of running cars on hire for tourists, what will be the nature of evidence that the assessee could produce to show that these cars were used for tourists. It, therefore, depends more upon the nature of evidence which the assessee can produce to satisfy the requirement of law. As seen above the expression 'tourist' is not defined in the Income-tax Act. One has, therefore, to fall back upon the cognate laws where the expression 'tourist' is defined, although for different purposes. The Department of Tourism has defined the expression 'Tourist' for the purpose of granting customs exemption as "a person not normally resident in India, who enters India for a period up to six months in the course of any twelve-month period, for legitimate non-immigration purposes, such as, touring, recreation, sports, health, family reasons, study, pilgrimage or business". So if a person not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ank to the assessee on 8th October, 1980 wherein it was stated : (considered by the CIT as genuine) "We frequently need air-conditioned limousines on hire for our overseas visitors and clients touring India. We find it uneconomical to hire these cars on a daily basis. We are interested in hiring 1 or 2 medium sized European or Japanese cars on yearly basis. Please let us know the type of cars you can offer and your rates, at the earliest." In response to this letter, the assessee had lent two of its cars to the European Asian Bank. European Asian Bank, at the instance, perhaps of the assessee, had furnished a certificate on 16-9-1985 to the following effect : (seen and considered by the CIT) "Dear Sirs, Your two Peugeot cars having registration Nos. MMG 3466 and MMG 5830 during the tenure of hire, continue to be used for our overseas visitors and guests touring India, whenever the occasion arises. " This certificate clinches the issue that these cars were used by the overseas visitors and guests touring India, whenever the occasion arose. What more evidence could the assessee be expected to produce about the user of these cars by the tourists. I have not been told by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee. The expression "whenever the occasion arises" used in the certificate only denotes that these cars were used by the foreign tourists. The argument sought to be raised by the learned D.R., based upon these words, that whenever there was no occasion to use these cars for overseas visitors, they were used in India by the company's executives and, therefore, the cars were not used for the purposes of tourists is difficult to accept without any proof. While it is difficult to agree with this interpretation, although such a possibility cannot be ruled out though it is a surmise, I do not think that it can be said that these cars were used by the executives of the European Asian Bank. I do not think, it is commercially viable and economical to hire cars, on such a high rent per month, for the executives of the European Asian Bank when indigenously manufactured cars are available at a much lesser charge. That apart, this is not the point of issue or difference between the learned Members. Neither Member had held in his order that these cars were used by the company executives. As a Third Member, I cannot go into this question for the first time because this is again a matter of evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t have observed that as those foreign tourists came to India to carry on business, they ceased to be tourists. They would have certainly held that the visits of those tourists for business was as tourists. He, therefore, submitted that this decision is not against the assessee but in a way supports the view the assessee had been canvassing for. I am inclined to agree with the view submitted by the learned counsel for the assessee because here I find that the Bench had not noticed the definition of the word "tourist" and had proceeded on the basis that the foreign company having established an office in India for business and since the persons coming to India had come only for the purpose of business, they could not be said to be tourists and, therefore, the user of these cars in a business of that kind, would not be said to be user of cars in a business of running them on hire for tourists. It is no doubt true that the Bench in this case has pointed out that hiring to a particular tourist is more important as was registration. The hiring of the cars to a foreign company was referred to with a view to justify its conclusion that a foreign company, if it employs persons coming to Ind ..... X X X X Extracts X X X X X X X X Extracts X X X X
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