Income Tax Appellate Tribunal - Kolkata
Deputy Commissioner Of Income Tax vs B.P. Agarwalla And Sons Ltd. on 30 June, 2003
Equivalent citations: [2003]86ITD219(KOL), [2004]266ITR77(KOL), (2003)80TTJ(KOL)719
ORDER
B.K. Mitra, J.M. March, 2002
1.This appeal has been filed by the Department against the order of the CIT(A) for the asst. yr. 1995-96.
2. The following ground has been taken by the Department :
"That on the facts and in the circumstances of the case the learned CIT(A)-X, Calcutta, erred in holding that the assessee-company is entitled to depreciation on explosive van @ 40 per cent in place of 25 per cent allowed by the AO at the time of assessment and thereby directing the AO to allow the claim."
3. Briefly stated the facts are that 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 vehicles are used for its own business activities, the AO held that depreciation applicable on such vehicles at the rate applicable to plant and 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 asst. yr. 1993-94. The assessee's claim, however, was not accepted and depreciation on these assets was allowed @ 25 per cent only. Being aggrieved the assessee appealed, before CIT(A)-VI, Calcutta, who in his order dt. 19th Sept., 1996, held that the depreciation @ 40 per cent was allowable to the assessee. The Department, however, has not accepted the verdict of CIT(A) and preferred second appeal against the order. Considering the facts of the case the AO 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 AO the assessee went in appeal before the CIT(A).
5. The CIT(A) held that it is a fact that while acting as a consignment agent for transportation of explosives the assessee was hiring out his vehicles to others. Therefore, it is not correct to infer that in such activities the assessee was plying the vehicles for its own business. The assessee is thus entitled to depreciation at the enhanced rate of 40 per cent as clarified by the CBDT Circular No. 652, dt. 14th June, 1993.
6. Aggrieved, the Department came in appeal before the Tribunal.
7. The learned Departmental Representative supported the order of the AO.
8. The learned authorised representative of the assessee stated that a similar issue in the assessee's own case came up before the Tribunal "E" Bench, Kolkata, in ITA No. 72/Cal/1997, dt. 21st Aug., 2001, wherein the Tribunal dismissed the Departmental appeal.
9. Respectfully following the aforesaid order of the Tribunal, we confirm the order of the CIT(A) and dismiss the Departmental appeal.
Pramod Kumar, A.M. 28th June, 2002
10. I have carefully gone through the draft order authored by my learned Brother and have also had the opportunity of discussing the matter with him in great details. Much as I persuade myself to agree with the conclusion arrived at by my learned Brother, I am unable to concur with him and my learned Brother colleague is also not inclined to yield to my suggestions. Accordingly, to come out of this cul-de-sac and with the leave and consent of my Brother colleague, I proceed to write this separate and dissenting order.
11. Let met first narrate some of the material undisputed facts of this case before addressing myself to the reasons of dissenting from the views taken by my Brother colleague. It is not in dispute that the assessee-company acts as a consignment agent of certain chemical companies and its work involves transporting explosives manufactured by such companies to the mines to which this material is supplied. However, the assessee has claimed depreciation @ 40 per cent on such 'explosive vans' on the ground that "explosives are transported to the collieries for which hiring charges are realised from the clients". The AO rejected this claim and also observed that "since such new vehicles are used for its (assessee's) own business activities, depreciation application on such vehicles at the rates applicable.....@ 25 per cent as against assessee's claimed depreciation @ 40 per cent." Aggrieved, assessee carried the matter in appeal before the CIT(A) 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, dt. 14th June, 1992, mentioned above. The AO will allow the claim. Ground Nos. 1, 2 and 3 of the appeal are allowed."
Aggrieved by the aforesaid order of the learned CIT(A), 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, dt, 29th July, 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 on such vehicles. It has been brought to our notice that the vans were used for carrying exclusively explosives for which fares were received by the assessee and, therefore, van was eligible for higher percentage of depreciation.
7. In view of the above, and keeping the Third Member view as stated earlier (supra), we are of the opinion that the learned CIT(A) was quite justified in allowing depreciation @ 40 per cent and his order is, therefore, sustained."
13. I may further make it clear that Third Member case, referred to above, is the ITAT decision in the case of Dy. CIT v. Machino Techno Sales Ltd. (2001) 70 TTJ (Cal)(TM) 340 : (2001) 250 ITR 12 (Cal)(TM) (AT).
14. Rival contentions are conscientiously heard, orders of the authorities below carefully perused, and applicable legal position duly deliberated upon.
15. As far as Tribunal's decision in Machino Techno Sales Ltd. (supra) is concerned, I may mention that in this case, the Tribunal had, inter alia, observed as follows :
"As has been submitted by the assessee-company, carrying the vehicles from Faridabad to Calculate is not the duty of the assessee-company and on the other hand, Maruti Udyog Ltd. 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 (P) 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 AO 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 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 its agency activity to deliver the explosives at the mining sites. In fact, 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 (supra), there was a finding by the AO 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 itself 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 vehicles on hire'. There is nothing before us to demonstrate, or even hint, that the hire charges recovered from the mines to which explosives are supplied are not received in the ordinary course of business and as incidental to business activities of the company. For these material differences in facts of the case, we see no support by the aforesaid Tribunal decision to assessee's case. When, the material facts lack any similarity, the conclusions arrived at in one case cannot have any application in the other. I, therefore, respectfully differ from the reliance placed on Machino Techno Sales Ltd.'s case (supra), by my Brother colleague.
16. Let me now move on to CBDT Instruction 609, dt. 29th July, 1991, on which assessee has placed reliance. I may reproduce the aforesaid circular, in entirety, which reads as follows :
"Subject: Allowance of depreciation on motor vehicles owned and used by tour operators and travel agents in the business of running these vehicles on hire for tourists.
The second proviso to Section 32(1)(ii) of the IT Act, 1961, which disallows depreciation on foreign motor car, 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 had been made in the case of foreign motor cars used in the 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 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 of otherwise, should be allowed.
3. Further, under sub-item (2)(ii) of item III of Appendix I to the IT Rules, 1962, a higher rate of depreciation, namely, 50 per cent is allowed on motor buses, motor lorries an motor taxis 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. 202/61/9-IT(All)]
17. Para 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, The only CBDT clarification is that motor vans are akin to motor lorries or motor buses and, therefore, similar higher depreciation, as available for motor lorries and motor buses, will be allowed on motor vans also if "these are used for providing transport services to tourists". I am not able to comprehend as to how does this clarification help the case of the assessee, particularly when there is no finding that these 'explosive vans' are used for the purpose of 'running vehicles on hire', In any event, even a 'motor van' is not in pari materia with 'explosive vans' but such an aspect of the matter is not even relevant for our purposes.
18. As for the assessee's contention that "explosives are transported to the collieries for which hiring charges are realised from the clients", I may only refer to the following observation made by Hon'ble Rajasthan High Court in the case of CIT v. Sardar Stones (1995) 215 ITR 350 (Raj) wherein Their Lordships have, inter alia, observed as follows :
"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, Charging of hire for the use of the vehicles may be casual as was found in the present case and the main business was of carrying on stones from the mines to the depot of the assessee and also to the destination of the customer. The business of running trucks on hire by transportation stands on a different footing from that of using the truck on hire by a person which is considered different business for which the rate of depreciation has been separately provided. The view this Court has taken in the case of CIT v. Manjeet Stone Co. (1991) 190 ITR 183 (Raj), referred to above that the trucks were mainly used by the assessee for carrying stones from the mine site to the sales depot and, therefore, he should be entitled to depreciation at 30 per cent is undisputed in the facts of the present case also."
In view of the above views expressed by the Hon'ble Rajasthan High Court, it is clear that unless there is a finding that the assessee is in the business of running vehicles on hire, even if hire charges are recovered by the assessee from its constituents, in an activity merely incidental to its other businesses, the assessee will not be entitled 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 AO, also.
19. In view of the above discussions, I am of the opinion that the AO 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 in, 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 (supra), 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 CIT(A) should be vacated and that of the AO restored.
20. Before parting with this appeal, I deem it necessary to deal with one more aspect of the matter and that is regarding the issue whether the Tribunal, having decided the identical issue in the immediate preceding year in favour of the assessee, has the liberty to take another view in this assessment year.
21. At the outset I do feel that in an ideal situation this matter should have been referred to a larger Bench but since that can only be done with the consent of both the members, the choice before me was restricted to whether to follow the earlier decision or to depart-on account of detailed reasons set out above from the same. In making this choice, I find guidance from the words of Justice Bhagwati, as he then was, who, while speaking for himself and his colleagues in the Hon'ble Supreme Court, namely, Chandarchud CJ., Madan and Thakkar JJ in the case of Distributors (Baroda) (P) Ltd. v. Union of India and Ors. (1985) 155 ITR 120 (SC), observed that :
"To perpetuate an error is no heroism. To rectify it is the compulsion of the judicial conscience. In this, we derive comfort and strength from the wise and inspiring words of Justice Bronson in Pierce v. Delameter (A.M.Y. at p. 18) : "a judge ought to be wise enough to know that he is fallible and, therefore, ever ready to learn : great and honest enough to discard all mere pride of opinion and follow truth wherever it may lead : and courageous enough to acknowledge his errors"."
22. A famous American judge, Chief Justice Cardozo, in his inimitable language, had once observed (The Nature of the Judicial Process p. 29) :
"I own that it is a good deal of a mystery to me how judges, of all persons in the world, should put their faith in dicta. A brief experience on the Bench was enough to reveal to me all sorts of cracks and crevices and loopholes in my own opinions when picked up a few months after delivery, and reread with due contrition."
23. It is fairly well-settled in law that there is no res judicata in the income-tax proceedings, though the principle of consistency should normally be maintained, unless there are strong reasons to depart from the stand taken in earlier assessment proceedings and unless the parties have allowed that position to be sustained by not challenging the earlier orders. Hon'ble Supreme Court in the case of Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC), has observed that :
"We are aware of the fact that, strictly speaking, res judicata does not apply 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 Tribunal 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; p 116) observes that :
"The position would remain unaltered even if assessment is taken in appeal to the Dy. CIT(A) or the Tribunal. The proceedings in appeal are still merely directed towards ascertaining the income upon which a taxpayer should be charged for the particular year of assessment. The appeal is merely another step taken to determine the amount of tax. In estimating the total income, the appellate authority should necessarily form and express opinion upon various incidental questions of fact or law. But the only thing appellate authority has jurisdiction to decide directly and as a substantive matter is the amount of taxpayer's income for the year in question. That being so, its decision upon incidental question of fact or law, however, necessary it may be for ascertaining the income for the year of assessment, cannot be conclusive in reference to the ascertainment of the taxpayer's income for any subsequent year of assessment. [IRC v. Sneath 17 Tax Cases 149, 162 (CA)] The aforesaid principle holds good even if the assessment of an earlier year had been taken to the High Court by way of a case stated under Section 256, and the High Court has answered the reference, The High Court can only express an opinion on question of law. It has no jurisdiction whatsoever to review the facts. Hence, no estoppel can arise by the virtue of an answer to the reference...."
25. I am also conscious to the judicial consensus that this Tribunal should be extremely slow in departing from the findings given in an earlier order of the Tribunal, with a view to ensure that there is finality and certainty in all litigations, including the litigations arising out of the IT Act. However, it is equally well-settled that the Tribunal has the liberty of deviating from the stand taken in an earlier order particularly when the earlier decision has been arrived at without due enquiry and without taking into account all material evidence. Even as I am conscious of the judicial discipline requiring co- ordinate Benches to normally follow the orders in earlier years, it is for specific and cogent reasons placed on record that I find ft a deserving case for deviating from the view taken in preceding year, by a co-ordinate Bench, and since, without the consent of my colleague, I cannot even refer this appeal to a larger Bench, I am taking an independent view in the matter.
26. It is for the elaborate reasons discussed in paras. 21 to 25 above that I hold the view that the Tribunal, having decided the identical issue in the immediate preceding year in favour 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 paras 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.
REFERENCE UNDER SECTION 255(4) OF THE IT ACT, 1961 By The Bench 9th Oct., 2002 As there is a difference of opinion between the JM and the AM, the matter is being referred to the Hon'ble President of the Tribunal 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 ?"
M.A. Bakhshi, Vice President (As Third Member) 28th May, 2003
1.The appeal of the Revenue for asst. yr. 1995-96 had come up for hearing before the Division Bench of the Tribunal. Since there was a difference of opinion amongst the Members of Bench in regard to the rate of depreciation applicable on vans used for transportation of explosives, the President of the Tribunal has, accordingly, nominated me as Third Member under Section 255(4) of the IT Act in regard to the point of difference formulated by the Division Bench as under :
"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 ?"
2. Parties have been heard and record including the dissenting orders of the learned Members of the Division Bench have been perused. The respondent in this case is a company. The assessee had set up an industrial unit at Kandla. It has made substantial exports during the year under appeal in respect of which there is no dispute involved in this appeal. The assessee had also been acting as consignment agent for certain chemical companies in respect of explosive goods. For transportation of explosives to the collieries, the hiring charges had been realized by the assessee from the chemical factories. The assessee had claimed higher depreciation @ 40 per cent in respect of explosive vans. Since similar claim made by the assessee was rejected for asst. yr. 1993-94 on the ground that assessee had not used the vans in the business of running them on hire, the AO allowed the claim of the assessee at normal rate at 25 per cent only. It has been pointed out by the AO in the assessment order that though the CIT(A)-VI, Kolkata, vide his order dt. 19th Sept., 1996, has allowed the claim of depreciation at 40 per cent on explosive vans, the order was not being followed as the Department had preferred second appeal against the said order. Thus, the disallowance on account of depreciation was made to the extent of Rs. 1,23,410.
3. The assessee appealed to the CIT(A) and vide order, dt. 10th June, 1998, the CIT(A)-X, relying upon CBDT Circular No. 652, dt. 14th June, 1993, r/w Circular No. 609, dt. 29th July, 1991, held that since the assessee was acting as consignment agent for transportation of explosives, higher depreciation @ 40 per cent was permissible. The CIT(A) has also recorded a finding that the AO was wrong to infer that the assessee was plying vehicles for it own business.
4. The Department carried the matter to the Tribunal challenging the said finding of the CIT(A)-X, Kolkata.
5. The learned JM taking into account the earlier decision of the Tribunal in assessee's own case for asst. yr. 1992-93 in ITA No. 72/Cal/1997, dismissed the appeal of the Revenue.
6. However, the learned AM 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 CIT v. Sardar Stones (1995) 215 ITR 350 (Raj) in support of the view. The learned AM has also given reasons for not following the earlier decision of the Tribunal in assessee's own case.
7. The learned 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 evidence on record to establish that assessee was engaged in the business of running of vans on hire. In this connection my attention was invited to the Trading and P&L a/c of the assessee where the assessee had used the expression "Terex (for hire) and new Explosives Vans for transporting explosives to collieries." The P&L a/c for the years ended 31st March, 1992, 1995, and 1996 have been placed on record, Copy of the letter of the assessee dt. 29th Dec., 1994, filed with the AO has also been placed on record claiming that the assessee had admitted that only Terex was used for running on hire.
8. The learned counsel for the assessee, on the other hand, contended that assessee had used the goods transportation vans in the business of running them on hire and substantial transportation charges had been recovered from various chemical companies. It was contended that the charges recovered from the chemical companies have been separately reflected in the books of accounts and after debiting the expenses, net deficiency has been debited to the P&L a/c. The learned counsel further pointed out that the fact that the transportation charges have been recovered from the chemical companies has not even been disputed by the AO. It was further contended that the Tribunal is not entitled to take a different view taken earlier by the co-ordinate Bench when there is no material difference in facts and circumstances of the case. According to the learned counsel, the learned AM has merely taken a different view which amounts to review of the earlier order on same set of facts.
9. The learned counsel also pointed out that an application for admission of additional evidence has been filed in form of (i) copies of letters of IDL. Chemicals Ltd. fixing transportation charges payable to the company from factory to explosive magazines; (ii) summary of van income, i.e., transport charges received; (iii) copy of ledger account of van income from IDL Chemicals Ltd. Hyderabad; (iv) copy of ledger account of van income from IDL Chemicals Ltd. Rourkela; (v) copy of ledger account of van income from Eastern Explosives & Chemicals Ltd. (explosive manufacture); and (vi) van income return trips (from explosives magazines).
10. The learned counsel pointed out that all these papers form part of the record of the company and since no opportunity 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.
11. The learned Departmental Representative opposed 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 accounts 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 AO as well as before the CIT(A) as the issue relating to recovery of explosives was not disputed at any stage. The assessee, therefore, did not consider it necessary to furnish this evidence before the Revenue authorities. In the Tribunal also, the assessee seems to have proceeded on the presumption that the decision of the Tribunal in assessee's own case for asst. yr. 1992-93 would be followed. Therefore, no attempt was made to place the said evidence before the Division Bench. The aforementioned facts may justify the filing of additional evidence at this stage. But, at the same time, it will be unreasonable for me to base my order on the basis of the evidence which was not available to the other Members of the Bench when the matter was heard by them. Taking into account the facts and circumstances of this case, I decline to consider the fresh evidence filed by the assessee at this stage.
13. Now reverting bank to the issue relating to the rate of depreciation applicable in the case of the vans used by the assessee for transportation of explosives, it will be necessary to find out as to the purpose for which the transportation vans have been used by the assessee. On consideration of the evidence on record, I find that there is no dispute in regard to the recovery of transportation charges by the assessee from the chemical companies for transportation of explosives. Section 32 of the IT Act, 1961, provides for allowance of deduction on account of depreciation in respect of assets owned and used by the assessee for purposes of business or profession as may be prescribed. As per Appendix-I to IT Rules, 1962, depreciation under Entry D(9) reads as under:
"Motor buses and motor lorries other than those used in a business of running them on hire--25 per cent"
Entry E(1A) reads as under:
"Motor Buses, motor lorries, and motor taxis used in a business running them on hire--40 per cent."
14. As is evident from the above entries, depreciation on motor buses and motor lorries as per the ordinary rate of depreciation is 25 per cent. However, higher rate of depreciation is allowed in respect of motor buses, motor lorries and motor taxis used in the business of running them on hire. Thus, it will be necessary to ascertain the purpose for which the vans owned have been used by the assessee. The assessee, as already pointed out, is also deriving income from acting as a consignment 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 AO 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 AO in this regard. The relevant finding is contained at p. 2 of the assessment order, which is reproduced hereunder:
"One of the issues which arose in asst. yr. 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 and 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 realized from the clients in asst. yr. 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 the CIT(A)-VI, Calcutta, who in his order dt. 19th Sept., 1996, held that the depreciation @ 40 per cent was allowable to the assessee. The Department, however, has not accepted the verdict of CIT(A) and preferred second appeal against the order. Considering the facts of the case I am also of the opinion that depreciation on explosives vans should be allowed @ 25 per cent only against assessee's claim of 40 per cent.
15. On these facts, let me consider whether the assessee is entitled to deduction on account of depreciation on vans at a higher rate of 40 per cent. In this connection, some circulars issued by the CBDT are relevant and are, accordingly, reproduced for the sake of ready reference :
Circular No. 609 dt. 29th My, 1991.
"Subject: Allowance of depreciation on motor vehicles owned and used by tour operators and travel agents in the business of running these vehicles on hire for tourists :
The second proviso to Section 32(1)(ii) of the IT Act, 1961, which disallows depreciation on foreign motor car, 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 had 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 service 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 as 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 in of Appendix I to the IT Rules, 1962, a higher rate of depreciation, namely 50 per cent is allowed on motor buses, motor lorries and motor taxis 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."
[Underlining, italicised in print, mine] Circular No. 622, dt. 6th Jan., 1992 :
"Subject: Allowance of depreciation on motor vehicles owned and used by tour operators and travel agents in the business of running these vehicles on hire for tourists.
Circular No. 609, dt. 29th July, 1991, clarified, inter alia, that the higher rate of depreciation under sub-item (2)(i) of item III of Appendix I of the IT Rules, 1962, will be allowed on motor vans also if they are used for providing transport services to tourists (para 3 of the circular)
2. Vide Notification No. S.O. 467(E) dt. 24th July, 1991, the rate of depreciation in sub-item (2)(ii) of item III of Appendix I to the IT Rules, 1962, has been changed to 40 per cent from the earlier figure of 50 per cent.
3. In view of the above, the figure of 50 per cent occurring in the third line of para 3 of Circular No. 609, dt. 29th July, 1991, may be read as 40 per cent."
Circular No. 652, dt. 14th June, 1993 "Subject: Section 32 of IT Act, 1961, Rate of depreciation on motor lorries.
Under sub-item 2(ii) of Item-III of Appendix-I to the IT Rules, 1962, higher rate of depreciation is admissible on motor buses, motor lorries and motor taxis used in a business of running them on hire. A question has been raised as to whether, for deriving the benefit of higher depreciation, motor lorries must be hired out to some other person or whether the user of the same in the assessee's business of transportation of goods on hire would suffice.
2. In Board's Circular No. 609, dt. 29th July, 1991, it was clarified that where tour operator or travel agent uses motor buses or motor taxis owned by him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles. It is further, clarified that higher depreciation will also be admissible on motor lorries used in the assessee's business of transportation of goods on hire. The higher rate of depreciation, however,will not apply if the motor buses, motor lorries, etc. are used in some other non-hiring business of the assessee."
[Underlining, italicised in print, mine]
16. It would also be useful to refer to some relevant decisions relating to the issue involved in this appeal, In the case of CIT v. Sardar Stones (supra), their Lordships of the Rajasthan High Court had the occasion to consider as to whether in the case of an assessee who had collected transportation charges for delivery of stones from depots to the customer sites would amount to plying of 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 (Ker). In this case, the assessee was engaged in the business of running a nursing home. The assessee was also owning an ambulance van for carrying the patients from their residence to the hospital, etc. for which charges were recovered. The AO had refused to allow higher depreciation on the ground that providing ambulance van on hire to the patients was incidental to the business of the assessee of running the nursing home. Their Lordships of the Kerala High Court held that the plying of ambulance van on hire itself constituted separate business of the assessee, though it may be incidental to the running of the hospital.
18. The Third Member decision in the case of Machino Techno Sales Ltd. (2001) 70 TTJ (Cal)(TM) 340 : (2001) 250 ITR 12 (Cal)(TM) (AT) is also relevant. In that case the assessee was a dealer of Maruti Udyog Ltd. The assessee had also transported Maruti cars from Faridabad to Kolkata and recovered transportation charges from Mariti Udyog Ltd. Higher depreciation was claimed in respect of trucks and trailers used for transportation of Maruti vehicles. The Tribunal by a majority view decided the issue in favour of the assessee taking into account that it was not duty of the assessee-company to carry the vehicles of Maruti Udyog Ltd. from Faridabad to Kolkata. On the other hand, it was the duty of Maruti Udyog Ltd. to deliver the vehicles at the Kolkata godown of the assessee. The obligation of Maruti Ydyog Ltd. for transporting the vehicles was undertaken by the assessee for which transportation charges were being collected by them from Maruti Udyog Ltd. Thus, the assessee was held also to be engaged in the business of running the vehicles on hire.
19. On the basis of the CBDT circulars, the decision of the Tribunal and other decisions of the High Courts referred to above, the following principles emerge:
(i) The assessee will be entitled to deduction on account of depreciation on higher rate if the vehicles are used by the assessee in the business of running them on hire.
(ii) If the assessee is engaged in business other than the business of running the vehicles on hire and has used the vehicles in the course of such business, the mere fact that some recovery has been made from the customers on account of spot delivery of goods may not be a sole determinative factor to come to the conclusion that the vehicles were used for the business of running them on hire.
(iii) The mere recovery of transport charges from the customers is not the sole 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 a/c, the income from distribution has been reflected. There is no income on account of hiring of vehicles reflected in the P&L a/c of the assessee. In fact, there is a debit of Rs. 13,92,175 on account of vehicle expenses in the P&L a/c. It is the claim of the assessee that the debit in the P&L a/c 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 assessee has acted as a consignment agent for chemical companies. The AO in the assessment order has also referred to the claim of the assessee that transportation charges have been reflected by the assessee from the chemical companies. However, the mere recovery of transport charges separately from the principals may not be enough to come to the conclusion that the vans had been used by the assessee in the business of running them on hire. It would be relevant to ascertain as to whether the assessee had carried the explosives from mine site to collieries and sale deposits on behalf of the chemical companies as part of the assignment as a consignment agent or was the carriage of explosives from mine site to collieries and sale depots a separate business of the assessee. In other words, if the business of acting as a consignment agent is one business of the assessee and carrying of explosives from mine site to collieries and other places another business, then it will not be difficult to determine the rate of depreciation permissible in respect of the vans used in such business.
21. It may be relevant to refer to the memorandum of association in the case of the respondent-company. One of the objects for which the company was formed is as under :
"(2) To carry on in all its branches, either solely or in partnership with other companies, corporations, firms, or individuals, the business of exporting, importing storing, transporting, supplying, manufacturing, dealing in purchasing, selling and distributing goods of all kinds and to carry on all or any of the business of consignees and agents, general merchants for the sale of such goods and other kindred business, wharfingers, merchants, carriers by land, sea and air, shipowners, characterers, bargeowners, and to act as traders and brokers in all or any of their branches and to turn such goods to kind in any manner whatsoever".
It is evident from the above that the company is authorized to carry-on the business as carriers by land.
22. The next question that arises for consideration is as to whether it was the obligation of the assessee to carry the goods as consignment agent or was there any separate agreement for the carriage of goods without there being any obligation of the assessee for carrying the goods as per the consignment agreement. In this connection, the terms and conditions of the consignment agency are relevant.
23. The AO 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 realized charges from the clients for transportation of explosives 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 chemicals companies. Whereas I agree with the view expressed, by the learned AM 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 such that a reasonable inference can be drawn on the basis of the nature of the business of the assessee. The assessee is acting as a consignment agent for chemical companies and the explosives transported by the assessee do not belong to the assessee-company. In fact, but for the contract of transportation of explosives from one place to another, the assessee as a consignment agent would not be liable to transport the goods. It would be the responsibility of the consignor to deliver the goods at the' places of delivery and the mere fact that the assessee has also engaged itself in the business of transportation of explosives is not sufficient to detract from the fact that the transportation of goods would not be the obligation of the consignment agent unless agreed otherwise.
24. The learned AM has relied upon the decision of the Rajasthan High Court in the case of CIT v. Sardar Stones (supra), where their Lordships have held that charging or showing hire charges separately in the bill would not be the only determinative factor for deciding as to whether the assessee was carrying on the business of running the vehicles on hire. In that case, it is observed that the assessee was engaged in the business of sale of stones. The assessee had sold stones and carried the stones from mine site to the sales depot, Trucks were also used for carrying the goods to the destination of the customers and higher rate of depreciation on the trucks was claimed by the assessee. However, their Lordships of the Rajasthan High Court held that since the trucks were mainly used by the assessee for carrying stones from the mine site to the sales depot, the depreciation at higher rate was not permissible. In my considered view, the facts in the case of CIT v. Sardar Stones (supra) are distinguishable with the facts of this case. The nature of the business of the assessee, in my view, is very important in determining as to whether the vehicles were used for running them on hire. In the case of Sardar Stones (supra), there is a vital finding of fact that the assessee had used the vehicles mainly for carrying stones from mine site to the sale depots and, therefore, the mere fact that the vehicles were also used occasionally for transportation of stones to the destination of the customers was of no consequence.
25. In the present case, the explosives do not belong to the assessee at all. The explosives belong to 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 Machine Techno Sales Ltd. (supra) (Third Member decision). As already pointed out, the obligation of transportation of goods from mine site to collieries and sale 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 asst. yr. 1992-93, whereby the assessee was held entitled to higher depreciation @ 40 per cent. Circular No. 609, dt. 29th July, 1991, Circular No. 622, dt. 6th Jan., 1992, and Circular No. 652, dt. 14th June, 1993, also support the claim of the assessee for higher rate of depreciation. I, therefore, agree with the view that the assessee is entitled to higher rate of depreciation for transportation vans used in the business of running them on hire.
27. Since I have agreed with the view of the earlier Bench of the Tribunal which has been followed by the learned JM, it is not necessary to go into the issue as to whether there is justification for taking a contrary view to the view taken by the co-ordinate Bench of the Tribunal. It is only as a matter of precaution I refer to the decision of the Supreme Court in the case of Union of India and Anr. v. Raghubir Singh (1989) 178 ITR 548 (SC) where their Lordships have laid down criteria for taking a contrary view. In view of the guidelines laid down by their Lordships of the apex Court, it hardly needs to be mentioned that such guidelines would equally apply to any Court/Tribunal of subordinate jurisdiction. I would, therefore, refer to the guidelines laid down by their Lordships of the Supreme Court as under :
"The Supreme Court of India should not differ from the earlier decision merely because a contrary view appeared preferable. But, if the previous decision is plainly erroneous, there is a duty of the Court to say so and not perpetuate the mistake. A revision of its earlier decision would be justified if there were compelling and substantial reasons to do so. The earlier decision may be reviewed, for instance, (i) where an earlier relevant statutory provision had not been brought to the notice of the Court, or (ii) if a vital point was not considered.
Whether the Court should review depends on several relevant considerations, such as :
(a) What was the nature of the infirmity or error on the earlier occasion, (i) did some patent aspects of the question involved remain unnoticed, or (ii) was the attention of the Court not drawn to any relevant and material statutory provision, or (iii) was any previous decision of the Court hearing on the point not noticed ?
(b) Is the Court hearing the plea for review unanimous that there is such an error in the earlier view ?
(c) Has the earlier decision been followed on subsequent occasions, either by the Supreme Court or by the High Courts ?
(d) What would 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 take 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 and Anr. v. Paras Laminates (P) Ltd. (1990) 186 ITR 722 at p. 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 to 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 or ground of the judicial decision in the earlier cases on identical matters. Classification of particular goods adopted in earlier decisions must not be lightly disregarded in subsequent decisions, lest such judicial inconsistency should shake public confidence in the administration of justice, It is,however,equally true that it is vital to the administration of justice that those exercising judicial power must have the necessary freedom to doubt the correctness of an earlier decision if and when subsequent proceedings bring to light what is perceived by them as an erroneous decision in the earlier case. In such circumstances, it is but natural and reasonable, and indeed efficacious that the case is referred to a larger Bench. This is what was done by the Bench of two Members who, in their reasoned order, pointed out what they perceived to be an error of law in the earlier decision and stated the points for the President to make a reference to a larger Bench."
29. In this case, the decision of the earlier Bench of the Tribunal is in favour of the assessee and, therefore, the said decision could not be ignored without making a reference to the President for constitution of the Special Bench. Taking the totality of the facts and circumstances of this case into consideration, I agree with the view expressed by the learned JM that the decision of the CIT(A) granting depreciation @ 40 per cent in respect of vans used by the assessee for hiring of the transportation vans for explosives does not warrant any interference.
30. Thus, as per this order, the appeal of the Revenue is dismissed.
31. Let the matter be placed before the regular Bench for passing the consequential order in accordance with the majority view.
B.K. Mitra, J.M. 30th June, 2003
1. On a difference of opinion between the Members constituting this Division Bench the following question was referred to a Third Member for his opinion under Section 255(4) of the IT Act, 1961 ;
"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 ?"
2. The Hon'ble Vice President (KZ) has, as Third Member in this case and taking the totality of the facts and circumstances of the case into consideration in the light of the legal principles, discussed in his order, concurred with the conclusion of the JM that the assessee is entitled to depreciation at the rate of 40 per cent in respect of the vans used by the assessee for hiring of the transportation vans for explosives.
3. In accordance with the majority view, the Departmental appeal is dismissed.