Ita/50/2018 Of Ebenezer International Foundation v. The Asst.commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAMPRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJITUESDAY, THE 2 DAY OF NOVEMBER 2021 / 11TH KARTHIKA, 1943 ITA NO. 50 OF 2018 AGAINST THE ORDER IN ITA 545/2015 OF I.T.A.TRIBUNAL,COCHIN BENCH,ERNAKULAM APPELLANT/S: EBENEZER INTERNATIONAL FOUNDATIONEBENEZER GARDENS RATNAGIRI, PATTITHANAM, ETTUMANOOR, KOTTAYAM-686631 BY ADVS.ANIL D. NAIRSRI.R.SREEJITHKUM.MEKHALA M.BENNYSRI.ACHYUT K PADMARAJ RESPONDENT/S: THE ASST.COMMISSIONER OF INCOME TAXCIRCLE-1, KOTTAYAM. SR ADV. P.K.R. MENON ; SRI.JOSE JOSEPH, SC, FOR INCOME TAX OTHER PRESENT: THIS INCOME TAX APPEAL HAVING COME UP FOR HEARING ON 02.11.2021,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: J U D G M E N T S.V. Bhatti, J. Heard Mr Anil D Nair, learned counsel for the appellantand Mr P K R Menon, learned Senior Advocate, for therespondent. 2.Ebenezer International Foundation, Ettumanoor Kottayam/assessee is the appellant. The Assistant Commissioner of Income Tax, Circle-1, Kottayam/Revenue isthe respondent. The assessee being aggrieved by the order inITA No.545/Coch/2015 dated 17.11.2017 of the Income Tax Appellate Tribunal (for short 'the Tribunal') Cochin Bench hasfiled the subject appeal under Section 260A of the Income TaxAct, 1961 (for short 'the Act'). I.T.A. No.50/2018 2.1The appeal has been admitted on the followingsubstantial questions of law: “i.In the facts and circumstances of the case, ought not theTribunal have held that the appellant is entitled for additionaldepreciation as he was hiring buses? In the facts and circumstances of the case, ought not the ii. In the facts and circumstances of the case, ought not theTribunal have held that the ratio of the judgment in ITA.No.130 of 2012 squarely applies and that the appellant isentitled for additional depreciation?” 2.2The circumstances relevant for considering the above substantial questions are a few. The assessee is a Trustregistered under Section 12A of the Act. The Trust is running aResidential CBSE School in Ettumannoor. The assessee hasprovided transport facility/school buses for attending theschool, by picking up and dropping both the students and theteachers. The assessee claimed additional depreciation for theschool buses operated by the assessee provided for the above I.T.A. No.50/2018 additional service. The claim for additional depreciation hasbeen rejected by the authorities including the Tribunal underthe Act. We find it convenient and useful to excerpt theoperative portion of the findings recorded by the Tribunalwhich read thus: “6. We have considered the rival contentions and perused theorders of the authorities below. Assessee was a trust registeredu/s.12A of the Act and was claiming its income exempt u/s.11of the Act. Thus assessee was not at in any business at all. It wasdoing a charitable activity of education. Entry III(3) (ii) of newAppendix 1 clearly specifies "motor buses, motor lorries andmotor taxis used in the business of running them on hire".When assessee itself is not doing any business it cannot say thatbus fees received from students and staff were from a businessincidental to its main business. That apart, in the case of LakePalace Hotels & Motels Pvt. Ltd(supra) relied on by the ld.Authorised Representative, the assessee concerned was in hotelbusiness and they were also carrying on a business of runningcars on hire for tourists who stayed in their hotel. In ouropinion, this case will not help the assessee since it was notengaged in any business. What was held by Hon'ble Apex Court I.T.A. No.50/2018 in the case of Gupta Global Exim P. Ltd (supra) is very relevant andthey is reproduced hereunder: I.T.A. No.50/2018 in the case of Gupta Global Exim P. Ltd (supra) is very relevant andthey is reproduced hereunder: "Under item 2(ii) of heading III, the higher rate of depreciationis admissible on motor trucks used in a business of runningthem on hire. Therefore, the user of the same in the business ofthe assessee of transportation is the test..... In our view, the entire approach of the Commissioner ofIncome tax (Appeals) was erroneous when he has stated thatthe transportation income of Rs. 12,50,639 by way of runningthe subject vehicles on hire is an integral part of, theappellant's business and its inclusion in the head "Businessincome" is not disputed by the Assessing officer. In our view,mere inclusion of Rs.12,50,639/- in the total business income isnot the determinative factor for deciding whether trucks wereused by the assessee during the relevant year in a business ofrunning them on hire. In our view, the Commissioner ofIncome tax (Appeals) had erred in relying upon the accrual ofincome as a determinative factor for coming to the conclusionthat the trucks were used in a business of running them onhire". Thus in our opinion, assessee was never in the business ofrunning buses on hire and could not claim enhanceddeprecation relying on entry III(3) (ii) of new Appendix 1. Wedo not find any reason to interfere with the orders of the lowerauthorities.” Hence the appeal. 3. Mr Anil D Nair places reliance on the judgments reported in Commissioner of Income Tax v. Lake Palace Hotels andMotels P. Ltd[1]; Commissioner of Income Tax v. Rajasthan & GujaratiFoundation[2]; Commissioner of Income Tax v. Institute of BankingPersonnel Selection (IBPS)[3]; Commissioner of Income Tax v. K RJayachandran[4]; and unreported judgment in The Commissioner ofIncome Tax v. M/s. Kallungal Trading Company[5], and contends thatthe assessee since is subjected to business income as well, theassessee is automatically entitled to claim additionaldepreciation. The rejection of additional depreciation by theTribunal and the authorities is illegal and liable to be set aside. 4.Senior Advocate Mr P K R Menon argues that theclaim of additional depreciation is both a mixed question of fact 1[2006] 286 ITR 589 (Raj) 2[2018] 402 ITR 441 (SC) 3[2003] 264 ITR 110 (Bom) 4[1995] 212 ITR 637 (Ker) 5Judgment dated 07.11.2017 in ITA 130/2012 I.T.A. No.50/2018 and law. The entitlement to additional depreciation by anassessee is dependent upon the nature of activity carried on bythe assessee and the purpose for which the vehicles are used bythe assessee. The judgments relied on by the appellant areclearly distinguishable to the fact situation of the case. Heinvites our attention to the findings recorded by the Tribunalon the nature of activity being undertaken by the assessee andthe consideration the assessee receives either from the studentsor the teachers in this behalf. According to him, at best, whatis received by the assessee could be treated as reimbursementto the School by the students and teachers on cost-to-cost basisbut not as consideration in any business transaction. For thepurpose of additional depreciation what is important is thevehicles must have been used for the business purpose of theassessee. The assessee since is running the school cannot besaid to be doing business in plying passengers from one place to -8- another. He places strong reliance on the judgment of the Supreme Court in Commissioner of Income Tax v. Gupta Global EximP. Ltd.[6] on: -8- another. He places strong reliance on the judgment of the Supreme Court in Commissioner of Income Tax v. Gupta Global EximP. Ltd.[6] on: “Held, setting aside the decision of the High Court andremanding the matter for fresh decision to the Commissioner(Appeals), that a neat question of law arose in the matter.Under item (2)(ii) of heading III in Appendix I to the Income-taxRules, 1962, the higher rate was admissible on motor trucksused in a business of running them on hire. Therefore, the userof the same in the business of the assessee of transportationwas the test. Merely because the income from the letting of thetrucks on hire was included in the business income the higher. The matter had to be decided on therate would not applyquestion as to whether the assessee was in the business ofrunning the trucks for hire.” (emphasis supplied) 4.1He placed reliance on the consideration by the Apex Court by laying much emphasis on the following sentences 't herefore, the user of the same in the business of the assessee of transportation was the test. Merely because the income from theletting of the trucks on hire was included in the business income thehigher rate would not apply'. (emphasis supplied) He concludes byarguing that the assessee is subjected to business income doesnot mean that the assessee is automatically entitled toadditional depreciation as well. 5.The only argument canvassed is that the receiptsreceived by the assessee in this behalf are included in thebusiness income and, therefore, the assessee is automaticallyentitled to additional rate of depreciation. The judgment of theSupreme Court in Gupta Global Exim P. Ltd is a complete answerto the said contention canvassed by the assessee. Gupta GlobalExim P. Ltd held that the user of vehicles in the business of theassessee is the test and that the receipt/income is included inthe business income would not i.e., qualify for additionaldepreciation. Except the above, no other point is urged. In our view the point urged is no more res integra and the test laiddown by the Supreme Court in Gupta Global Exim P. Ltd is clearon the point. By appreciating the circumstances and alsofollowing the judgment in Gupta Global Exim P. Ltd the questionsare answered in favour of the Revenue and against the assessee.Hence the appeal stands dismissed. No order as to Costs. Sd/- S.V.BHATTIJUDGESd/- BASANT BALAJIJUDGE APPENDIX OF ITA 50/2018 PETITIONER ANNEXURE ANNEXURE A TRUE COPY OF THE ASSESSMENT ORDER DATED 16.12.2009 FOR THE YEAR 2007-08 ISSUED TO THE APPELLANT. ANNEXURE BTRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS),FOR THE YEAR 2007-08 ISSUED TO THE APPELLANT. ANNEXURE C TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 17.11.2017.