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Deputy Commissioner of Vs. Machino Techno Sales Ltd. - Court Judgment

LegalCrystal Citation
CourtIncome Tax Appellate Tribunal ITAT Kolkata
Decided On
Judge
Reported in(2001)76ITD113(Kol.)
AppellantDeputy Commissioner of
RespondentMachino Techno Sales Ltd.
Excerpt:
.....vehicles in question have been acquired for the purpose of assessee's own business of carrying on maruti vehicles from the factory of maruti situated near delhi to the assessee's business place in calcutta. therefore, the user of these vehicles for carrying public goods on hire becomes incidental to the main user of these vehicles for the purposes of the assessee's business. under these facts and circumstances, in my opinion, these vehicles cannot be held to be 'running on hire'. therefore, i am of the view that the assessee is not entitled to special rate of depreciation in respect of the same. reliance is placed on the following decisions.as there is difference of opinion between the members, we refer the following question to the president under section 255(4) of the income-tax act,.....
Judgment:
1. This is an appeal, filed by the department, against the order of CIT(A), dated 4-5-1994 for the assessment year 1990-91.

2. The appeal is time barred by 24 days. On the basis of the application dated 26-9-1994 as well as on the basis of argument submitted by the Id. D.R., we condone the delay on merits and the appeal is admitted.

3. The brief facts of the case are that the assessec-company is dealing in Maruti vehicles which arc coming to the assessee's godown/ showroom in the long trucks and trailers. After delivering the cars/ vehicles, these trucks and trailers must go back empty but the assessce is sending the goods though these trucks and trailers on their return journey. The assessee claimed the dcprcciafion of 50% on these trucks and trailers. The assessee received hire charges for plying the trucks and trailers on hire for which all necessary documents (bills and vouchers, octroi etc.) were submitted before the Assessing Officer but the Assessing Officer has not allowed the same. In appeal the CIT(A) has allowed the depreciation on trucks and trailers by treating them as public transport vehicles.

4. After hearing both the sides at length and on perusal of the record it appears that the trucks and trailers arc registered as public transport vehicles. The Assessing Officer in the subsequent assessment year 1991-92 has treated it of the public transport vehicles and allowed the depreciation on the said trucks and trailers. In both the assessment years, the assessments were made under section 143(3). For not allowing the depreciation during the assessment year under consideration, the Assessing Officer has not brought any material on record. It also appears that in the assessment year 1989-90 the similar claim was allowed in the original assessment year.

5. By keeping in mind the totality of the facts and circumstances of the case, we find no infirmity in the order of the CIT(A) who has rightly allowed the depreciation @ 50% on the trucks and trailers. The same is hereby upheld.We, having differed on the points in the above appeal filed by the department, refer the following points of difference to the President under section 255(4) of the Income-tax Act, 1961 :-- 1. I do not agree both on facts and in law as regards the order of the Judicial Member appearing above in paras 4, 5 and 6.

It is nowhere on the records that the transport vehicles in question have been registered as public transport vehicles.

The depreciation table in the I.T. Rules provided for higher rales of depreciation as under :-- 2. (ii) Motor buses, motor lorries and motor taxis used in a business of running them on hire." We have to find out the correct meaning of the phrase "running them on hire". In my opinion, if the vehicle is used in ones own business it docs not satisfy the test of running it on hire. The position remains the same even if the vehicle is partly used on hire. In the facts of the assessee's case it is not clear as to what is the percentage of the user on hire vis-a-vis the user in own business. However, admittedly, the assessee is not in transportation business and the vehicles in question have been acquired for the purpose of assessee's own business of carrying on Maruti vehicles from the factory of Maruti situated near Delhi to the assessee's business place in Calcutta. Therefore, the user of these vehicles for carrying public goods on hire becomes incidental to the main user of these vehicles for the purposes of the assessee's business. Under these facts and circumstances, in my opinion, these vehicles cannot be held to be 'running on hire'. Therefore, I am of the view that the assessee is not entitled to special rate of depreciation in respect of the same. Reliance is placed on the following decisions.

As there is difference of opinion between the Members, we refer the following question to the President under section 255(4) of the Income-tax Act, 1961 : "Whether on the facts and in the circumstances of the case, the assessee is entitled to higher rate of depreciation allowable on motor lorries etc." 1. On account of a difference of opinion between the two Members, the following question has been referred to me by the President, ITAT under section 255(4) of the Income-tax Act, 1961 ;-- "Whether on the fads and in the circumstances of the case, the assessee is entitled to higher rate of depreciation allowable on motor lorries etc.".

2. The facts of the case are that that the assessee is a dealer in Maruti vehicles and also carries on business in certain other lines.

Certain trucks and trailers owned by the asscssee-company were utilised for the purpose of carrying the Maruti vehicles from their factory at Faridabad to Calcutta. During the return journey, the assessee used those trucks and trailers on hiring basis and received hire charges thereon. All necessary documents like bills and vouchers, etc. in support of receipt of hire charges of the trucks and trailers were submitted before the Assessing Officer. The assessee claimed higher rate of depreciation at 50% on the trucks and trailers by contending that the said trucks and trailers were used by it in the business of running them on hire. The Assessing Officer, however, did not accept the contention of the assessee. Although he acknowledged the fact that "the assessee is in the transport business" and in that way it is quite likely that it can earn some freight charges in the course of its normal business of transportation, at the same time again, he has been of the view that it is nowhere established that such receipt of freight charges represents hire charges of trucks and trailers used in the business of hiring of vehicles. As such, he allowed depreciation on those trucks and trailers at the lower rate of 33 1/3%.

In the first appeal, the Id. CIT(A) was convinced, on examination of the registration certificates of the trucks and trailers and also the copies of the bills for hiring charges that the said trucks and trailers had been used as public transport vehicles. He also noted that the Assessing Officer himself had allowed depreciation at higher rate in assessment year 1991-92. Accordingly, he directed the Assessing Officer to allow depreciation on the trucks and trailers by treating them as public transport vehicles.

3. Before me, the Id. D.R. has relied on the following decisions in support of his contention that the user of the trucks and trailers for hiring out purpose being just incidental to carrying on of the main business of the assessee in transporting cars, etc. from Faridabad to Calcutta, the trucks and trailers cannot be considered as having been used by the assessee in the business of running them on hire :-- (iv) Income-tax Commissioner v. Anupchand & Co. [1999] 239 ITR 466 (MP).

4. On the other hand, the Id. counsel for the assessee submitted that the trucks and trailers are not being used by the assessee in its own business. A reference has been made in this connection to the written submissions of the assessee dated 9-3-1994 before the Assessing Officer in connection with assessment year 1991-92 to the effect that although the assessee-company owns these trucks and trailers, they, however, stand leased out to M/s. Sanjiv Jindal Pvt. Ltd., who carry on the business of transportation of cars and other vehicles from Faridabad to Calcutta on behalf of Maruti Udyog Limited and not on behalf of the assessee itself. It is furthermore contended in this connection that as per the agreement with Maruti Udyog Limited, it is the responsibility of Maruti Udyog Limited to deliver the cars, etc. at the showroom/godown of the assessee-company at Calcutta and that they pay the transportation charges of such cars to M/s. Sanjiv Jindal Pvt. Ltd. However, since Sanjiv Jindal Pvt. Ltd. uses the trucks and trailers belonging to the assessee-company, Sanjiv Jindal Pvt. Ltd. pays freight charges to the assessee in respect of transportation of such cars, etc.

It is furthermore stated that that during the course of the return journeys, the said trucks and trailers are hired out to other parties.

It is thus contended that although there may be some indirect benefit to the assessee by transportation of the cars, etc. by the trucks and trailers belonging to the assessee, the said process of transportation is not a part of the activity of the assessee-company itself, inasmuch as, such process is undertaken by M/s. Sanjiv Jindal Pvt. Ltd. on behalf of Maruti Udyog Ltd. alone, and what the assessee's benefit out of the process is the receipt of freight charges from Sanjiv Jindal Pvt. Ltd. It is thus contended that it is not a fact that the trucks and trailers are actually used in the business of the assessee of acting as a dealer of Maruti vehicles, But on the other hand, the said trucks and trailers are fully utilised by the assessee in the course of its business of hiring out vehicles in the capacity of a public carrier. In support of this contention, reliance has been placed on a judgment of the Hon'ble Gauhati High Court in the case of CIT v. A.B.C.India Ltd [1997] 226 ITR 733.

It is also pointed out that both in assessment year 1989-90 as welt as in 1991-92, the Assessing Officer himself has allowed higher rate of depreciation on the same trucks and trailers. It is thus argued that the Department should follow a consistent approach to the matter and there is no reason by the Department to depart from the beaten track in one of the years only. In support of his contention that consistency should be maintained in the approaches of the Department, the Id.

counsel for the assessee has relied on the following judgments :-- (i) Dhansiram Agarwalla v. CIT [1996] 217 ITR 4 (Gauhati); (ii) Joint Family of Udayan Chinubhai v. CIT[1967] 63 ITR 416 (SC).

5. I have examined the various papers submitted by the assessee in a form of a paper book. Copies of the registration of some of the trucks and trailers are included therein, from which it can be found out that the said trucks and trailers have been registered as "Public Carriers", and not as "Private Carriers". This suggests that the said trucks and trailers were not meant for being utilised for the assessee's own business purpose alone. The Profit & Loss A/c. of the assessee for the year under consideration shows receipt of a hefty amount of Rs. 9,02,890 by way of freight and transportation charges. Copies of some of the bills raised in this connection have also been examined by me.

All these documentary evidences go to show that the trucks and trailers were actually used for the purpose of being hired out to the public.

Furthermore, the entire Departmental contention seems to hinge on the point that the assesscc uses the trucks and trailers in its own business as dealer in Maruti vehicles and for the purpose of carrying such vehicles from Faridabad to Calcutta. As has been submitted by the assessee-company, carrying the vehicles from Faridabad to Calcutta is not the duty of the assessee-company and on the other hand, Maruti Udyog Limited is obliged to deliver the same at the Calcutta godown of the assessee. Hence, although incidentally the trucks and trailers belonging to the assessee-company itself might have been utilised for that purpose, the user of the said trucks and trailers in that regard was, however not in the course of the assessee's own business but rather as a transporter hiring out its vehicles to outsider M/s. Sanjiv Jindal Pvt. Ltd. In respect of this activity, the assessee-company has duly received freight charges also. There is no doubt about the fact that the main business of the assessee is as a dealer of Maruti vehicles. But that, however, does not preclude it from carrying on other lines of business also. The Assessing Officer himself has admitted in the assessment order that the assessee is in the transport business. The facts of the case also show that the trucks and trailers were actually used by the assessee in connection with its transport business and not in connection with its business as a dealer of Maruti vehicles. Hence, in my view, the conditions as laid down for allowance of higher rate of depreciation to the effect that the motor lorry, etc.

should be used in business of running them on hire, stand fulfilled. I am, therefore, of the opinion that in the instant case, the assessee is entitled to higher rate of depreciation at 50% on the trucks and trailers under consideration.

6. In the result, the Departmental appeal is, therefore, liable to be dismissed.


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