TMI Blog2005 (5) TMI 255X X X X Extracts X X X X X X X X Extracts X X X X ..... plant machinery, i.e., @ 25 per cent as per IT rules as against assessee's claimed depreciation @ 40 per cent. During the course of hearing of the proceeding the assessee contended that their claim of depreciation @ 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 assessment year 1993-94. The assessee's claim, however, was not accepted and depreciation on these assets were allowed @ 25 per cent only. Being aggrieved the assessee appealed before Commissioner (Appeals)-VI, Calcutta, who in his order dated 19-9-1996 held that the depreciation @ 40 per cent was allowable to the assessee. The department, however, has not accepted the verdict of Commissioner (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 @ 25 per cent only against assessee's claim of 40 per cent. 4. Aggrieved with the order of the Assessing Officer, the assessee went in appeal before the Commissioner (Appeals). 5. The Commissioner (Appeals) held that it is a fact th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal before the Commissioner (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 CBDT Circular No. 652 dated 14-6-1992 mentioned above. The Assessing Officer will allow the claim. Ground Nos. 1, 2 and 3 of the appeal are allowed." Aggrieved by the aforesaid order of the learned Commissioner (Appeals), revenue is in appeal before us. 12. 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 by the brother colleague himself, is as follows: "We have .....noticed that Board's circular No. 609 dated 29-7-1991 clearly indicates that where a tour operator or travel agent uses motor taxi owned by him in providing transportation service to the tourists, higher rate of depreciation would be allowed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat 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 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. Infact, there is no dispute that carrying the explosives to mining sites is incidental to business of the assessee before us. In Machino Techno Sales Ltd s case there was a finding by the Assessing Officer that the assessee was also in transport business but in the case before us there is no finding by the authorities below that the assessee is in the business of running vehicles on hire or that the assessee has engaged himself in such an activity. As a matter of fact, it is not even assessee's case that there are two separate businesses-one of consignment agency, and the other of 'running vehi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 depreciation should be allowed on such vehicles. It is clarified that 'motor vans' are akin to 'motor lorries' or 'motor buses' and, therefore, higher rate of depreciation will be allowed on motor vans also, if they are used for providing transport services to tourists." [F. No. 202/61/91-IT (All.)] 17. Paragraph 3 of the aforesaid circular, which has been referred by the brother colleague, makes it clear that higher depreciation is allowable on motor vans which are used for providing transportation service to tourists. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 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 assessee's this contention, in fact the only contention before the Assessing Officer, also. 19. 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, 'business of running vehicles on hire'. I may also refer to the . observation of Hon'ble Rajasthan High Court, in the case of Sardar Stones, that 'even charging or showing hire charges separately in the bill would not be the only determinative factor but the Tribunal was required to come to the conclusion as to whether the assessee was carrying on the business of running the vehicles on hire'. In my considered view, therefore, order of the Commissioner (Appeals) should be vacated and that of the Assessing Officer restored. 20. Before parting with this ap ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 suggest that the revenue has accepted the ITAT order in this case and let the matter be sustained by not challenging the order. In any event, it is a factual aspect as to whether the assessee was in the business of 'running vehicles on hire' and even in earlier years there is no finding to this effect. There is no question of 'altering the settled position' in such a situation. 24. Elaborating upon this principle, Sampath Iyengar's commentary on 'Law of Income-tax' (9th edition; page 116) observes that: "The position would remain unaltered even if assessment is taken in appeal to the Deputy Commissioner (Appeals) or the Appellate Tribunal. The procee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... avour 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 above, even though these views deviate from the view taken by the Tribunal in the immediate preceding year. 27. In the result, in my considered view, the revenue's appeal should be allowed. ORDER UNDER SECTION 255(4) OF THE INCOME-TAX ACT, 1961 As there is a difference of opinion between the Judicial Member and the Accountant Member, the mater is being referred to the Hon'ble President of ITAT with a request that the following question may be referred to a Third Member or pass such orders as the Hon'ble President may kindly decide: "Whether on the facts and in the circumstances of the case, the Tribunal should have allowed depreciation @ 40 per cent or whether the Tribunal should have allowed the depreciation @ 25 per cent on the vehicles used by the assessee for the purpose of carrying explosives to its customers ?" , THIRD MEMBER ORDER Per Shri M.A. Bakhshi, Vice President.- The appeal of the Revenue for assessment year 1995-96 had come up for hearing before the Division ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er cent was permissible. The Commissioner (Appeals) has also recorded a finding that the Assessing Officer was wrong to infer that the assessee was plying vehicles for its own business. 4. The Department carried the matter to the Tribunal challenging the said finding of the Commissioner (Appeals)-X, Kolkata. 5. The Ld. Judicial member taking into account the earlier decision of the Tribunal in assessee's own case for assessment year 1992-93 in ITA No. 72 (Cal.)/1997 dismissed the appeal of the revenue. 6. However, the Ld. Accountant member passed a dissenting order to hold that the assessee was entitled to depreciation @ 25 per cent in respect of vans used for transportation of explosives. He has relied upon the decision of the Rajasthan High Court in the case of Sardar Stones in support of the view. The Ld. Accountant Member has also given reasons for not following the earlier decision of the Tribunal in assessee's own case. 7. The Ld. Departmental Representative contended that since the assessee had used the vans for its own business, depreciation @ 25 per cent was permissible on such vans. It was further contended that as per the statement of accounts, there is no evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tunity was given in regard to this aspect of matter at any level, the evidence may be admitted and considered for arriving at a decision in regard to the issue. II. The Ld. Departmental Representative opposed to the request on behalf of the assessee for admission of the additional evidence at this stage. It was contended that this evidence was not even filed before the Division Bench and, therefore, may be ignored. 12. Before dwelling upon the issue as to whether the assessee is entitled to deduction on account of depreciation @ 40 per cent or 25 per cent on vans used for transportation of explosives of some chemical companies, I would like to first deal with the request of the assessee for admission of the additional evidence at this stage. The evidence sought to be furnished before me undoubtedly is mostly from the books of account of the assessee. However, copies of the letters from IDL Chemicals Ltd. fixing transportation charges payable to the company from factory to explosive magazines cannot be said to be part of the accounts of the assessee. The assessee has not produced this evidence before the Assessing Officer as well as before the Commissioner (Appeals) as the issue ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ignment agent for some chemical companies. The assessee has used the vans for transportation of explosives from mine sites to collieries and sales depots. It was claimed by the assessee before the Assessing Officer that transportation charges have been recovered by the assessee from chemical companies. In this connection it will be relevant to refer to the finding of the Assessing Officer in this regard. The relevant finding is contained at page-2 of the assessment order, which is reproduced hereunder :- "One of the issue which arose in assessment year 1993-94 is depreciation on explosives vans. The assessee company acts as the consignment agent of certain chemical companies and used to transport explosives from such companies to the mines. Since such new explosive vehicle are used for its own business activities depreciation applicable on such vehicles at the rate applicable to plant machinery, i.e. @ 25% as per Income-tax Rules as against assessee's claimed depreciation @ 40 per cent. During the course of hearing of the proceeding the assessee contended that their claim of depreciation @ 40 per cent is allowable considering the fact that the explosives are transported to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r, agrees to pay for a number of services including use of car 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 depreciation should be allowed on such vehicles. It is clarified that "motor vans. are akin to "motor lorries. or "motor buses" and, therefore, higher rate of depreciation will be allowed on motor vans also, if they are used for providing transport services to tourists." Circular No. 622 dated 6-1-1992 : "Subject: Allowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... vehicles on hire. Their Lordships observed that the assessee was engaged in the business of sale of stones. Vehicles had been mainly used for transportation of stones from mine sites to sales depots. Their Lordships had also noticed that the trucks had also been used for carrying goods to the destination of the customers for which charges were separately recovered. The assessee had claimed higher rate of depreciation on the ground that the trucks were used in the business of running on hire. On these facts, their Lordships held that charging or showing hire charges separately in the bill would not be the sole determinative factor for deciding as to whether the assessee was carrying on the business of running the vehicles on hire. On the basis of the finding of fact that the trucks were mainly used for carrying the stones from mine site to the sales depots of the assessee in its own business, it was held that the assessee was not entitled to the higher rate of depreciation on trucks. 17. It will also be relevant to refer to the decision of the Kerala High Court in the case of CIT v. Dr. K. R. Jayachandran [1995] 212 ITR 637. In this case, the assessee was engaged in the business ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... factor to determine as to whether the vehicles have been used in the business of running them on hire. (iv) That an assessee may have diverse activity of business and the business of running the vehicles on hire may be one of such activities in which case higher depreciation would be permissible. 20. Now let me test the facts of this case in the light of aforementioned principles of law. It would be necessary to find out as to what was the business of the assessee. As per the assessment order, the assessee is engaged in the business of export of merchandise. Besides, it has acted as a consignment agent for some chemical companies. As per the P/L Account, the income from distribution has been reflected. There is no income on account of hiring of vehicles reflected in the P/L Account of the assessee. In fact, there is a debit of Rs. 13,92,175 on account of vehicle expenses in the P/L Account. It is the claim of the assessee that the debit in the P/L Account is the deficit between the gross receipts on account of transportation charges recovered from chemical companies and the expenses incurred by the assessee on running and maintenance of vehicles. It is not disputed that the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nsignment agency are relevant. 23. The Assessing Officer in the assessment order quoted elsewhere in this order has referred to the claim of the assessee that the transportation charges have been realized from the clients. This finding is neither controverted nor rebutted by evidence by the department. Therefore, I proceed with the undisputed fact that the assessee had realised charges from the clients for transportation of explosive from mines to collieries, etc. It is not also disputed that the assessee has acted as a consignment agent for the chemical companies. Goods have been transported by the assessee on behalf of the consignors and not on their own behalf. I do not find any material on record to support the finding that the transportation vans have been exclusively used by the assessee for its own business incidental to the business of acting as a consignment agent for chemical companies. Whereas I agree with the view expressed by the Ld. Accountant Member that if the vehicles/vans are used by the assessee for transportation of goods of its own business, it may not amount to running the vehicles on hire. However, in this case the nature of the business of the assessee is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the chemical companies and the assessee is acting only as a consignment agent for which distribution charges are recovered from the chemical companies. The assessee has a separate contract for transportation of explosives for which substantial amount of Rs. 60,97,596 has been recovered. In my considered view, the facts of this case are pari materia with the facts in the case of Machino Techno Sales Ltd. [Third Member decision]. As already pointed out, the obligation of transportation of goods from mine site to collieries and sales depots is the obligation of the respective companies. The assessee having undertaken the contract of transportation for agreed charges amounts to the carrying on the business of running the vehicles on hire. 26. It is evident from the above object of the company that transporting of goods is one of the objects for which the company has been constituted. The company is also authorized to carry on the business as carriers by land. In my considered view, the facts and circumstances of this case do not justify deviation from the decision of the Tribunal in assessee's own case for assessment year 1992-93, whereby the assessee was held entitled to higher de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be the impact of the error on the general administration of law or on the public good? (e) Would the reversal of the earlier decision lead to public inconvenience, hardship or mischief ? 28. In the event of a doubt about the correctness of the earlier decision, the Bench has to make a reference to the President for constituting a larger Bench for considering the issue decided by a smaller Bench with which they do not honestly agree. In the case of Union of India v. Paras Laminates (P.) Ltd. [1990] 186 ITR 722 at page 726 (SC), their Lordships of the Supreme Court recognized the right of the President to constitute Special Benches. Observations of their Lordships are quoted hereunder - "It is true that a Bench of two members must not lightly disregard the decision of another Bench of the same Tribunal on an identical question. This is particularly true when the earlier decision is rendered by a Larger Bench. The rationale of this rule is the need for continuity, certainty and predictability in the administration of justice. Persons affected by decisions of Tribunals or courts have a right to expect that those exercising judicial functions will follow the reason on ground of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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