Sri Saravanan Mandthiramno v. The Income Tax Officer,Business Ward - V(1)Chennai

IN THE HIGH COURT OF JUDICATURE AT MADRAS DATED: 23.01.2017 CORAM: THE HONOURABLE MR.JUSTICE HULUVADI G.RAMESH&THE HONOURABLE DR. JUSTICE ANITA SUMANTH Sri Saravanan MandthiramNo.169, Karaneeshwarar KoilPakoda Street, II Floor,Mylapore, Chennai 600 004. .. Appellant Vs The Income Tax Officer,Business Ward - V(1)Chennai .. Respondent Prayer:- Tax Case Appeal filed under Section 260A of the IncomeTax Act, 1961 against the order of Income Tax AppellateTribunal, "A" Bench, Chennai in I.T.A.No.1172/Mds/2014 dated20.11.2015. against the order of commissioner of Income Tax(Appellats-V) Nungambakkam Chennai-34 in order dated 24/02/2014in ITA.NO.62/12-13 (A)-V and arising out of the Assessment orderof Income-Tax Officer Business-Ward V(1) Chennai-34 order dated27/12/12 in PAN NO. This appeal filed by the assessee in respect of assessmentyear 2010-2011 challenges an order of the Income Tax AppellateTribunal dated 20.11.2015 and raises the following substantialquestions of law. '1. Whether the Appellate Tribunal is correct inlaw in sustaining the addition of excessdepreciation on the wrong presumption of the https://hcservices.ecourts.gov.in/hcservices/ business of garbage clearing pursued by theappellant as against the business of hiring thetrucks establishing the perversity in recordingfactual findings? 2. Whether the Appellate Tribunal is correctin law in sustaining the disallowance ofdepreciation on Truck No.4 without making thedistinction between the legal ownership and thebeneficial ownership especially in the context ofSection 32 of the Act and further especially whilenot disputing the possession and use of the saidtruck vesting with the appellant herein? 3. Whether the Appellate Tribunal iscorrect in law in not adjudicating the other issueemanated from the disallowances /additions made inthe computation of taxable total income for theAssessment Year 2010-11 by recording perversefindings in para 7 of the impugned order?' 2. We have heard the submissions of Mr.Sridhar appearing forthe assessee and Mr. J.Narayanasamy, appearing for theDepartment. 3. The brief facts involved are as follows:- (i) At the relevant point in time, the assessee appears tohave owned four trucks and was utilizing the same for thecollection of garbage. The bone of contention between theassessee and the Revenue is whether the assessee is acontractor for the collection of garbage in which case he wasentitled to depreciation on the trucks at the rate of 15% or acontractor hiring out lorries utilised for the collection ofgarbage through the agency of a third party in which case theentitlement to depreciation was 30%. With respect to trucknumbers 2 and 3, the assessing officer was of the view that theactivity engaged in was the collection of garbage itself and assuch the rate of depreciation that the assessee was entitled towould be 15% against 30% claimed. With respect to truck No.4,the assessing officer noted that the truck was owned by the wifeof the appellant and as such the appellant was not entitled todepreciation at all in so far as he was not the owner of thetruck, which is a mandatory pre-condition for the claim.Overuling objections of the assessee to the effect that he wasin the business of hiring of lorries, the assessment wascompleted holding that the entitlement to depreciation was 15%only. (ii) The appeal filed by the assessee before theCommissioner of Income Tax (Appeals) was dismissed vide orderdated 24.2.2014 and the same was confirmed by the Income TaxAppellate Tribunal (Tribunal 'in short') by order dated20.11.2015, which order is assailed in appeal before us. (ii) The appeal filed by the assessee before theCommissioner of Income Tax (Appeals) was dismissed vide orderdated 24.2.2014 and the same was confirmed by the Income TaxAppellate Tribunal (Tribunal 'in short') by order dated20.11.2015, which order is assailed in appeal before us. 4. At the time of hearing , we sought clarity on the actualnature of work engaged in by the assessee as the order of thelower authorities were silent in this regard. A copy of a workorder was circulated before us. Mr.Narayanasamy would howeverpoint out that the work order was for the period 1.11.13 to31.10.14 and there was nothing on record to indicate that theassesse has entered into an identical work order for thepresent period as well viz. Financial year 2009-2010. We alsonote that orders of re-assessment in respect of AY 2008-09 and2009-10 have been passed accepting the assessee's claim fordepreciation at the rate of 30%. However, the orders arecryptic and contain no reasoning on the basis of which the claimstands accepted. 5. In so far as this is an exercise of fact finding, notembarked upon by any authority thus far, we remand the issue tothe file of the assessing officer for decision afresh after dueopportunity to the assessee and consideration of all relevantmaterials. 6. Depreciation claimed in respect of Truck No.4 at therate of 30% has been disallowed by the assessing authority onthe ground that the truck stands in the name of a third party.The contention of the assessee was to the effect that sincepossession of the asset was with him and there was no disputethat it is actually utilized in business he was entitled to thegrant of depreciation. Reliance was placed on the judgmentof the Supreme Court in Mysore Minerals Ltd. vs Commissioner ofIncome Tax (239 ITR 775). The Supreme Court, in the aforesaidjudgment holds that as per section 32 of the Income Tax Act, aperson in possession of the property, exercising domain overthe property and having the right to use and occupy theproperty in his own right would, for all intents and purposes,be treated as an 'owner' for the purposes of grant ofdepreciation. 7. In the present case, as we have noted earlier, there is noclarity with respect to the facts in issue. In fact, the findingof the assessing officer was to the effect that nothing hasbeen produced to show that the assessee has the right to useand exploit the asset in his business. The learned counsel seeksto persuade us to allow the claim on the ground that the incomegenerated by the utilization of truck 4 has infact, beenbrought to tax. We are however of the view that theallowability of depreciation is a separate issue in law thathas to be considered de-hors this aspect. 8. Substantial Questions of Law 2 stands remanded to thefile of the assessing officer for examination after affording https://hcservices.ecourts.gov.in/hcservices/ due opportunity to the assessee. The entire exercise may becompleted within a period of three months from the date ofreceipt of a copy of this order. 9. Learned Counsel for the petitioner does not presssubstantial Question No.3 and the same is hence dismissed. Sd/- Asst.Registrar (CO) /true copy/ Sub Asst. RegistrarmsrTO:1The Income Tax Officer, Business Ward - V(1)Chennai2The Commissioner of Income Tax(Appeals V), Nungambakkam,Chennai-600 0343The Income Tax Appellate Tribunal,Rajaji Bhavan, IIIrd Floor,Besant Nagar,Chennai-600 090+ 1 cc to M/s.S.Sridhar, Advocate,SR.4694+ 1 cc to Mr. J. Narayanasamy Advocate,SR.4863T.C.A.NO.673 OF 2016VGII(CO)NR 05/10/2017