Ita/532/2018 Of The Pr. Commissioner Of Income-Tax v. M/S. Hasan Hajee And Co

IN THE HIGH COURT OF KARNATAKA AT BENGALURU DATED THIS THE J25TH DAY OF AUGUST 20271PRESENT| THE HON’BLE MR. JUSTICE ALOK ARADHE AND| THE HON’BLE MR.JUSTICE HEMANT CHANDANGOUDAR. LT.A. NO.532 OF JZO18 BEITWEEN 1. THE PR. COMMISSIONER OF INCOME-TAX. C.R. BUILDING, ATTAVARA|MANGALURU-5/5001.MANGALURU-5/5001. 2. THE INCOME-TAX OFFICER. WARD-1(1), PRESENT ADDRESS ACIT, CIRCLE-1(1), C.R. BUILDING| ATTAVARA, MANGALURU-575001. _.. APPELLANTS (BY SRI. E.I. SANMATHI, ADV., FOR| SRI. K.V. ARAVIND, ADV.,). AND M/S. HASAN HAJEE & CO.NO.20-8-678, NEAR OLDMUNICIPAL OFFICE, BUNDER|MANGALURU-5/75001. (BY SRI. THIRUMALESH M, ADV.,). .., RESPONDENT| THIS I.T.A. IS. FILED UNDER SECTION 260-A OFI.T.ACT, 1961 ARISING OUT OF ORDER DATED 12.04.2018 PASSED IN ITA NO.220/PAN/2017, FOR THE ASSESSMENTYEAR 2007-08, PRAYING TO: I. FORMULATE THE SUBSTANTIAL QUESTIONS OF LAW|STATED ABOVE. I]. ALLOW THE APPEAL AND SET ASIDE THE ORDERS|PASSED|BY|THE|INCOME-TAXAPPELLATETRIBUNAL,BANGALORE IN ITA NO.220/PAN/2017 DATED 12.04.2018|CONFIRMINGTHE|ORDER.OF|THE|APPELLATECOMMISSIONER AND CONFIRM THE ORDER PASSED BY THE|ASST. COMMISSIONER OF INCOME TAX, CIRCLE-1(1),|MANGALURU. III. PASS SUCH OTHER SUITABLE ORDERS AS THIS.HON BLE COURT DEEMS FIT TO GRANT IN THE FACTS ANDCIRCUMSTANCES OF THE CASE [IN THE [INTEREST OJUSTICE AND EQUITY. THIS I.T.A. COMING ON FOR FINAL HEARING, THIS.DAY,ALOK ARADHE J.,DELIVERED THE FOLLOWING: JUDGMENT This appeal under Section 260-A of the Income TaxAct, 1961 (hereinafter referred to as ‘the Act’, for short) has|been filed by the revenue against tne order dated|12.04.2018 passed by the Income Tax Appellate Tribunal.The subject matter of the appeal pertains to the AssessmentYear 2006-07. The appeal was admitted by a Bench of thisCourt on the following substantial question of law: “WhetherOf)thefactand.Inthecircumstances of the case, the Tribunal andCIT(A) are right tn law in allowing claim of excessdepreciation without properly considering tnat section 32(1)(i1) of the Act read with Rule 5 andAppendix 1, inter alia, provides for depreciation at30% in respect of motor buses/lorries/taxi used in|the assessee's business of running them on hire,whereas in the instant case, the vehicles are usedfor assessee’'s own business and therefore, willnot be eligibie for nigner rate of depreciation?’ 2. Facts leading to filing of this appeal briefly statedare tnat the assessee claims to be a C & F agent involved in|stevedoring, clearing and forwarding agency, custom house|agency, steamer agency and is rendering services in NewMangalore Port. The assessee had filed the return of income.for the Assessment Year 2005-06 declaring a total income of Rs.17,60,590/-. The aforesaid income was processed underSection 143(1) of the Act and an order of assessment underSection 143(3) of the Act was passed on 06.11.2008 by the|Assessing Officer, by wnich the total income of the assesseewas assessed at Rs.8/,66,590/-. A search under Section|132 of the Act was conducted on the premises of the|assessee on 04.08.2011 and in pursuance of the aforesaidsearch, an order under Section 143(3) read with Section|153A of the Act was passed. The aforesaid order was. challenged in an appeal before the Commissioner of Income|Tax (Appeals), who by an order dated 10.07.2005, disposedof the appeal. Thereafter, the Prl. Commissioner of Income|Tax invoked powers under Section 263 of the Act and by an|order dated 23.12.2015, held that the order of assessment|passed under Section 143(3) read with Section 153A of tne|Act, is erroneous and is prejudice to the interest of the|revenue. The Prl. Commissioner of Income Tax directed theAssessing Authority to pass fresn orders with regard to tne|claim of the assessee for depreciation to the extent of 30%|on lorries, tippers, loaders, etc. Tne Assessing Authority|thereafter passed a consequential order dated 28.11.2016|under Section 143(3) of the Act, by which the claim of the|assessee for depreciation was negatived. The assessee|thereupon filed an appeal before the Commissioner of|Income|Tax(Appeals) WNICNWaS|allowedDYtne|Commissioner by an order dated 05.06.2017. Being|aggrieved, the revenue filed an appeal before the Tribunal|whereas the assessee filed a cross-objection. The Tribunal,|by a common order dated 12.04.2018, dismissed the appealpreferred by the revenue as well as the cross-objection| preferred by the assessee. In the aforesaid factual|background, this appeal has been filed. 3. Learned counse!] for the revenue submitted tnat tnemain activity of the assessee i.e. business of stevedoring andcommission and forwarding agency, steamer agency does|not involve hiring of the vehicle and the assessee is mainly|transporting goods imported / exported, inside and outside|tne New Mangalore Port area eitner by using its own|transport vehicle or by hiring vehicle. Therefore, in respectof such business rate of depreciation would be 15% and not30%. It is also argued that the earning from vehicle hire is |only 4.11% of the gross revenue which cannot be treated as substantial amount of revenue from venhicie nire. It is furtner|Submitted that even though the TridDunal Nas placed reliancein the case of the assessee for earlier Assessment Years,|nowever, there is no res judicata in taxation and claim in|each Assessment Year has to be adjudicated independentlyon the basis of material available on record. It Is also.Submitted that the Appellate Authority has assigned reasons|and the Commissioner of Income Tax (Appeals) nas set aside the finding recorded by the Assessing Officer without|assigning any cogent reasons and the Tribunal has adopted|the same in a cryptic manner. In Support of aforesaid|Submission, reliance Nas been placed on Circular No.609|dated 29.07.1991 and Circular No.652 dated 14.06.1993|issued by the Central Board of Direct Taxes (CBDT) and thedecision of the Supreme Court in|‘COMMISSIONER OFINCOME-TAX Vs. GUPTA GLOBAL EXIM (P) LTD.|(2008) 305 ITR 132. 4. On the other hand, learned counsel for the assesseehas supported the findings recorded by the Commissioner of Income Tax (Appeals) as well as the Tribunal and has|submitted that the Tribunal has rightly placed reliance on theorder dated 07.09.2013 passed in the case of the assesseefor the previous year which has attained finality. It is further|Submitted that identical issue was deait with by the Tribunalin the case of the assessee vide order dated 07.09.2013 Inrespect of previous year. Therefore, the order passed by theTribunal does not call for any interference. In support of |aforesaid submission, reliance has been placed on the decision of the Supreme Court in|‘COMMISSIONER OFINCOME-TAX Vs. A.M.CONSTRUCTIONS (1999) 238ITR 775 (AP), ‘COMMISSIONER OF INCOME-TAX Vs.LAKE PALACE HOTELS AND MOTELS P. LTD. (2006)286 ITR 589 (RAJ) AND ‘COMMISSIONER OF INCOME-TAX Vs. S.C.THAKUR AND BROS." (2010) 322 ITR 463(BOM). decision of the Supreme Court in|‘COMMISSIONER OFINCOME-TAX Vs. A.M.CONSTRUCTIONS (1999) 238ITR 775 (AP), ‘COMMISSIONER OF INCOME-TAX Vs.LAKE PALACE HOTELS AND MOTELS P. LTD. (2006)286 ITR 589 (RAJ) AND ‘COMMISSIONER OF INCOME-TAX Vs. S.C.THAKUR AND BROS." (2010) 322 ITR 463(BOM). 5. We have considered the submissions made on both|sides and have perused the record. Tne Supreme Court in|=RADHASOAMT|SATSANGYs.COMMISSIONEROF|INCOME-TAX’ (1992) 60 TAXMAN 248 (SC)has held that|even though principles of res Judicatado not apply to incometax proceedings, but where a fundamental aspect permeatingthrough the different Assessment Years has been found asthe fact one way or the other and the parties have allowed|tne position to be sustained by not challenging the order, itwould not be at all appropriate to allow the position to be|changed in subsequent year. In the instant case, the|Commissioner of Income Tax (Appeals) has recorded thefollowing findings: "3.2 The AR of the appellant has relied upon the.decision of the Hon'ble ITAT, Bangalore 'C’|Bench in the appellant's own case (ITA.NO. 961to963/Bang/1998,dated17.09.7013).TheSaldorder1S|forassessment year 1993-94 to 1995-96 and wasclaimed to be on the same set of facts. In thesaid order, the Hon'ble ITAT has upheld the|order of the CIT(Appeals) who had allowed|higher rate of depreciation to the appellant.The concluding decision of the Hon'ble ITAT ts-reproduced below: “Considering all the aforesaid facts, we donot find any infirmity in the orders of thelearned|CIT(Appeals).NothingWasbrought on record by the revenue tosuggest|thettheassessee'’shiringbusiness is a stray incident. On the otherhand, there are enough material toconclude that the business activity of theassessee in the hiring of vehicles hasregularity. Therefore, the orders of the|learned CIT(Appeals) are confirmed.” 3.3 The AR of the Appellant also relied upon theratio of the decision of the Hon'ble ITAT|Chennai 'C' Bench In the case of DCIT VSs SuthanthnerAssumthnereported|InJ)5Taxmann.com 6/7. In the said case, the|assessee was engaged in the business of transport and claimed depreciation at tne rateof 30% on loaders, dozers and water tankers.TheAOdisallowedthenignerrateOf|adepreciation as tne assessee was using Nisown vehicles for nire and also neld that nigner|rate of depreciation was availabie for buses,|lorries and taxis. The Hon'ble ITAT relying onthe decision of Hon'ble Bombay High Court in|the case of CIT Vs S.C. Thakur and Brothers|reported in 322 ITR 463 neld that higher rate|of depreciation was admissible when motor|lorries were used by the assessee in its own|business of transportation of goods on hire.The Hon'ble ITAT also relied upon Circular|No.652 issued by CBDT that the motor lorries|used by the assessee in the business oftransportation of goods on hire would be|eligible for higher rate of depreciation. 3.4 I have gone tnrougn the assessment orderand the submissions made by the AR of the|appellant including the decisions of the ITAT in|the appellants own case and tne _ otherdecision reported in 75 Taxmann.com. 6/7.There is no dispute that tne appellant is 3.4 I have gone tnrougn the assessment orderand the submissions made by the AR of the|appellant including the decisions of the ITAT in|the appellants own case and tne _ otherdecision reported in 75 Taxmann.com. 6/7.There is no dispute that tne appellant is engaged in the business of stevedoring,|clearing and forwarding at Mangalore Port|Trust, whicn involves transportation, loading.and unloaaing of clients’ goods. Basically, tnegoods whicn are imported are unloaded from|the ships and loaded on to the trucks orrailway wagons. Similarly, for export ofgoods, the goods are unloaded from tne!trucks or railway wagons in tne premises ofthe ports and tney are loaded on tne snips.This activity reguires the use of various|vehicles like tippers, excavators, loaders etc|apart from the labours. The rate charged per|ton consists of charges for tippers and other|machineriesandthelabouraS|well.Therefore, it is true that the appellant isrecovering the hire charges for tippers and|machineriesfromthecompositechargerecovered from its clients. The appellant doesnot nave tne goods of his own as appellant is neither a manufacturer nor a trader. Thus,the appellant is recovering tne hire charges|for the tippers and the machineries in the|compositereceiptsrecelvedauringtneprevious year relevant to the assessment year|in appeal. Furtner, the appellant nas also|freCeIVedhire CNargesamountingTo Rs.1,00,34,856/- apart from the composite|charges received for rendering of various|services at tne port. Tnis goes to prove that|the business of niring of the appellant is not aStray incident. The hire charges received ofRs.100.34 lakhs apart from the hire charges|recoveredIncompositeDININgIS|thesubstantial amount of receipt wnicn cannot Defor tne stray incident of niring. 3.5 Considering all these facts of the appellant'scase and supported by tne decisions of tne|Hon'ble ITAT in the appellant's own case andother similar cases, the appellant is found to be using tne venicles and tne macnineries inthe business of hire and thus, its entitled fornighner rate of depreciation. Thus, tne|aisallowance made by tne AO towards excess|depreciation|claimedamountingTO Rs.23,/0,5/74/- is hereby deleted. Ground|nos.1 and 72 are allowegd.case and supported by tne decisions of tne|Hon'ble ITAT in the appellant's own case andother similar cases, the appellant is found to be using tne venicles and tne macnineries inthe business of hire and thus, its entitled fornighner rate of depreciation. Thus, tne|aisallowance made by tne AO towards excess|depreciation|claimedamountingTO Rs.23,/0,5/74/- is hereby deleted. Ground|nos.1 and 72 are allowegd. 6. The Tribunal, after having note of the order dated07.09.2013 passed in the case of the assessee for the|Assessment Years 1993-94 to 1995-96 nas held as follows: “We neard Ld D.R. and perused the record. Wenoticed that the learned CIT(A) has followed the.adecision rendered by the Coordinate Bencn inassessees own case in earlier years. No contrarydecision was cited before us. It was also not|shown to us that the decision rendered by co-ordinate bencn in earlier years nas beenreversed. Hence, we do not find any reason to.interfere witn tne order passed by learned.CIT(A) in all the years under consideration, as.he has followed the decision rendered by the.Coordinate Bench of ITAT in assessee's own Caseon an identical issue in earlier years. | 7. Thus, in view of the law laid down by the SupremeCourt In.RADHASOAMI SATSANG,|SUDIdand taking intoaccount that the identical issue has been held in favour of the assessee by the Tribunal vide order dated 07.09.2013 in|respect of Assessment Years 1993-94 and 1995-96 and theparties have allowed it to attain finality, it is not appropriateto allow the position to be changed in subsequent year. In the result, the substantial question of law framed inthis appeal is answered against the revenue and in favour of the assessee. ��������������������������������������������������������������������������������������������� ������������������������ ���