Income Tax Appellate Tribunal - Kolkata
Asstt. Cit vs Meal Auto Credit Ltd. on 18 September, 2003
Equivalent citations: (2004)86TTJ(KOL)996
ORDER
R.C. Sharma, A.M.:
These are the appeals filed by the revenue against the order of learned Commissioner (Appeals) dated 16-8-2002, for the assessment year 1999-2000, in the matter of disallowance of depreciation at higher rate of 40 per cent.
As common grounds are involved in both the appeals, they are dealt simultaneously for the sake of convenience.
2. The brief facts of the issue are that the assessees are engaged in the business of hire purchase and lease financing. The income from hire purchase is accounted by the assessees as finance charges and from lease financing as lease rentals. In the course of assessment under section 143(3), the assessing officer observed that the assessees have leased out motor lorries and trucks in its lease business and claimed depreciation at 40 per cent thereon. The assessing officer found that the assessees are engaged in the hire purchase and lease financing business and not in the business of running motor lorries and trucks on hire; he, therefore, asked the assessee to explain justification of its claim of depreciation at 40 per cent. In its reply, the assessees submitted that motor trucks and motor lorries hired on lease by it, have been used in the transport business of running them on hire/lease by the lessess. Therefore, it is entitled to claim depreciation as per Appendix I (read with r. 5), Item No. IH(2)(ii) at 40 per cent. It was further submitted that the clients of the assessee were using the vehicles for running them on hire in transport business.
The assessing officer was not convinced with the submission of the assessees and observed that no income as transport charges and freight charges was received by the assessees and it is the kind of use of the assets by the assessees which is to be considered and not the nature of use by a third party, i.e., the lessees. He, therefore, held that the rate of depreciation shall be 25 per cent only and not.40 .per cent as the lessor himself did not use the lorry in a business of running them on hire.
3. By the impugned order, the learned Commissioner (Appeals) allowed the assessee's claim by relying on the judgment of the Hon'ble Supreme Court in the case of CIT v. Maharashtra Apex Corpn. Ltd. (2002) 173 C7R (SC) 475 : (2002) 254 ITR 98 (SC), in which it was held that the assessee, whose business consisted of leasing of machinery, is entitled to benefit of investment allowed as well as extra shift allowance of depreciation, even though it was the lessee who had used the machinery in double shift.
4. It was contended by the learned departmental Representative that as per the judgment of the Hon'ble jurisdictional High Court in the case of Soma Finance & Leasing Co. Ltd. v. CIT (2000) 161 CTR (Cal) 291 : (2000) 244 ITR 440 (Cal); the assessees being lessor, are entitled to general rate of depreciation only and not at a higher rate of 40 per cent as claimed by the assessees.
5. On the other hand, the learned authorised representative submitted that the Hon'ble Calcutta High Court, while deciding the issue in case of Soma Finance there was nobody on behalf of the assessee before the Hon'ble Trust in support, of the contention that where the lessee itself used the vehicles for hiring purpose, the lessor is entitled to higher rate of depreciation even though it is engaged in the business of leasing and the vehicle has not been used by it for hiring purpose. The learned authorised representative relied on the decision of the Hon'ble Karnataka High Court in case of CIT v. Maharashtra Apex Corporation Ltd. (1999) 154 CTR (Kar) 146 : (1998) 234 TTR 484 (Kar), which was upheld by the Hon'ble Supreme Court and reported in (2002) 173 CTR (SC) 475 -(2002) 254 ITR 98 (SC) (supra), in which it was held that investment allowance under section 32A of 1964 Act, could not be denied to the assessee, whose business consisted of leasing of machinery, on the ground that the machinery had not been used by the assessee and that the assessee was entitled to extra shift allowance of depreciation, even though it was the lessee who had used the machinery in double shift.
6. We have heard the rival contentions and carefully gone through the orders of the authorities below. As per Appendix I (read with r. 6), Item No. III(2)(ii), depreciation on motor buses, motor lorries and motor taxis in a business of running them on hire is entitled for higher rate of depreciation of 40 per cent. For claiming the higher rate of depreciation, it is not sufficient that the assessee has leased out the machinery in its business of leasing and financing. For claiming hi gher depreciation, it has to be established that motor buses, motor lorries and motor taxis had been used in a business of running them on hire. In the instant case, there is no dispute to the fact that the assessee was engaged in the business of hire purchase and leasing. The assessing officer is also not in disagreement with the assessee that hired motor vehicles have not been used by the lessee in the business on hire. The only ground on which the assessing officer has declined the assessee's claim is that the assessee himself has not used the machinery for hire in its business of leasing. The assessing officer also held that it is the kind of use of the asset by the assessee which is to be considered and not the nature of use by third party, i.e., the lessees. As the assessee in the instant case was riot in receipt of any income as transport charges/freiglit charges, the assessing officer declined the assessee's claim for higher rate of depreciation. We also find from the record that in the immediately preceding asst.,yr. 1998-99, the assessment framed under section 143(3), as a scrutiny assessment, higher claim of depreciation at 40 per cent in respect of leased assets of commercial vehicles and taxis was allowed. Thus, the department itself had accepted the claim of the assessees in respect of the block of assets being used by the lessee for the purposes of hire.
From a conjoint reading of the provision of section 32 along with r. 5 of the Income Tax Act, it is clear that.the higher rate of depreciation in respect of motor bases, motor lorries and motor taxis is admissible if these are used in a business of running them on hire. The existence of the specified assets, the assessee's ownership thereof and these being used in running them on hire are not in dispute. The only objection of the assessing officer to the grant of higher rate of depreciation is that the assessee is not himself running these vehicles on hire. Therefore, the short question for consideration is whether for availing of the higher rate of depreciation, it is mandatory that the said vehicles are not merely used in a business of running them on hire but the assessee should himself use these vehicles for the said purpose ?
As per our considered view, on a bare reading of the aforesaid provision of section 32 of r. 5, the answer to the question has to be in the negative. The learned departmental Representative has laid much emphasis on the expression "as are used for the purposes of the business or profession of the assessee" appearing in r. 5. The submission is that it is the nature of the assessee's business, which is determining factor for rate of depreciation. It the assessee, even though the owner of the vehicles, does not use these for running them on hire himself, the higher rate of depreciation cannot be granted.
In view of the principle laid down by the Hon'ble Supreme Court in the case of Maharashtra Apex Corpn. Ltd. (supra) while affirming the order of the Hon'ble Karnataka High Court- report at (1999) 154 CTR (Kar) 146 : (1998) 234 ITR 484 (Kar) (supra) in which it was held that the assessee was entitled to extra-shift allowance of depreciation, even though it was the lessee, who had used the machinery in double shift, and the lessor has just leased it out in the course of its leasing business, the stand of assessing officer does not hold correct.
The cardinal rule of interpretation is that the statute must be construed according to its plain language and neither should anything be added. nor subtracted therefrom unless there are adequate grounds to justify the inference that the legislature clearly so intended. It is also well-settled that in a taxing statute one has to look merely at what is clearly stated. The meaning and extent of the statute most be collected from the plain and unambiguous expression used therein, rather than from any notions which may be entertained by the court as to what is just or expedient. It Cape Brandy Syndicate v. IRC (1921) 1 K13 64, it was said that one must look at what is clearly stated in the statute.
Recently in Grasim Industries Ltd. v. Coflector of Customs AIR 2002 SC 1706 :(2002) JT 3 SC 551 their Lordships of the Supreme Court have again observed that the elementary principle of interpreting any word while considering a statute is to gather the mens or sententia legis of the legislature. There the words are clear and there is no obscurity, and there is no ambiguity and the intention of the legislature is clearly conveyed, there is no scope for the court to take upon itself the task of amending or altering the statutory provisions. Wherever the language is clear, the intention of the legislature is to be gathered from the language used.
In our opinion, on a plain reading of the section and the relevant entry in the appendix, it is clear that it is the end user of the specified asset which is relevant for determining the percentage of depreciation. The section requires that the asset should be used for the purposes of the assessee's business and the entry in the appendix refers to the user it should be put to. Apart from the fact that the leasing out of the vehicles is by itself tantamount to hire of vehicles, we are unable to read into any of the aforenoted provisions the requirement that the assets are to be used by the assessee for the purposes of 'his' business or profession. Once it is accepted that the leasing out of the vehicles is one of the modes of doing business by the assessee and in fact the income derived from such leasing is treated as business income of the assessee, it would be clearly contraditory in terms to hold that the vehicles in question were not used wholly for the purpose of the assessee's business, which, as noted above, is one of the requisites stipulated in section 32, apart from the other two conditions indicated above, which all the assessees indubitably fulfilled.
7. Furthermore, the Hon'ble Supreme Court in the case of CIT v. Shaan Finance (P) Ltd. (1998) 146 CTR (SC) 110 : (1998) 231 ITR 308 (SC) drawing a clear distinction between sub-sections (2)(a) and (2)(b) of the section, their Lordships held as follows :
"In respect of a new ship or a new aircraft, section 32A(2)(a) expressly prescribes that the new ship or the new aircraft should be acquired by an assessee which is itself engaged in the business of operation of ships or aircraft. Under sub-section (2)(b), however, any such express requirement that the assessee must himself use the plant or machinery is absent. Sec. 32A(2)(b) merely describes the new plant or machinery which is covered by section 32A. The plant or machinery is described with reference to its purpose. For example, sub-section (2)(b)(i) prescribes "the purposes of business of generation or distribution of electricity or any other form of power". Sub-s. (2)(b)(h) refers to small-scale industrial undertakings which may use the machinery for the business of manufacture or production of any article, and sub-section (2)(b)(iii) refers to the business of construction, manufacture or production of any article or thing other than that specified in the Eleventh Schedule. Sub-s. (2)(b), therefore, refers to the uses to which the machinery can be put. It does not specify that the assessee himself should use the machinery for these purposes."
It is significant to note that the above view was expressed when the expression used in the section is the specified machinery 'which is owned by the assessee is wholly used "for the purposes of the business carried on by him", whereas in section 32 of the Act, the words "carried on by him" are missing. In our opinion, the ratio of the said decision clinches the issue is favour of the assessees and the view taken by us is in line with the said decision.
We are fortified in our view by the decisions of the Andhra Pradesh High Court in CIT v. A.R. Constructions (1999) 238 ITR 775 (AP), the Gauhati High Court in A.B. C. India Ltd. v. CIT (1998) 145 CTR (Gau) 158: (1997) 226 ITR 914 (Gau), the Madras High Court in CIT v. Madan & Co. (2002) 174 CTR (Mad) 172 : (2002) 254 NR 445 (Mad) and the Delhi High Court in CIT v. Bansal Credits Ltd. & Ors. (2003) 179 CTR (Del) 23: (2002) 259 rM 69 (Del).
8. In view of the above discussion, we can conclude that even though the jurisdictional High Court have held that it is assessee who uses the vehicles for its business is to be considered, but in view of the principle affirmed by the Hon'ble Supreme Court in case of Maharashtra Apex Corpn. Ltd. (supra) while approving the judgment of the Hon'ble Karnataka High Court reported at (1998) 231 ITR 308 (Kar) (supra), we can safely conclude that the assessing officer was not justified in ignoring the use of the motor vehicles in the hands of the leasee, which is no doubt for the hire purchase and transport business, and thereby not allowing higher rate depreciation at 40 per cent, therefore, do not, find any infirmity in the order of the learned Commissioner (Appeals).
9. In the result, the both the appeals filed by the revenue are dismissed.