Wp(C)/15013/2012 Of Kottinattu Transports v. Commissioner Of Income Tax

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT: THE HONOURABLE SMT. JUSTICE P.V.ASHA THURSDAY, THE 25TH DAY OF JUNE 2015/4TH ASHADHA, 1937 WP(C).No. 15013 of 2012 (B) ---------------------------- PETITIONER: -------------------- KOTTINATTU TRANSPORTS THROUGH ITS PARTNER, K.P.SHINCE, POOCHACKAL CHERTHALA, ALAPUZHA DISTRICT. BY ADVS.SRI.P.SREEKUMAR SRI.P.S.SIDHAN SRI.V.K.RAJANANDAN RESPONDENT(S): ---------------------------- 1. COMMISSIONER OF INCOME TAX OFFICE OF THE COMMISSIONER OF INCOME TAX PUBLIC LIBRARY BUILDING, SHASTRI ROAD KOTTAYAM 686 001. PUBLIC LIBRARY BUILDING, SHASTRI ROAD KOTTAYAM 686 001. 2. DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1, ALLEPPEY 688 001. R1 & 2 BY ADV. SRI.JOSE JOSEPH, SC, FOR INCOME TAX THIS WRIT PETITION (CIVIL) HAVING BEEN FINALLY HEARD ON 25-06-2015,THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: APPENDIX PETITIONER(S) EXHIBITS EXHIBIT P1:TRUE COPY OF THE AGREEMENT DATED 6TH JUNE 2005. EXHIBIT P2:TRUE COPY OF THE ASSESSMENT ORDER PASSED BY DEPUTY COMMISSIONER OF INCOME TAX CIRCLE 1, ALAPPUZHA. EXHIBIT P3:TRUE COPY OF THE REVISION PETITION FILED BY THE PETITIONER DATED 20.01.2012 EXHIBIT P4:TRUE COPY OF THE ADDITIONAL GROUNDS FILED BY PETITIONER IN REVISION PETITION. EXHIBIT P5:TRUE COPY OF THE ORDER PASSED BY THE COMMISSIONER OF INCOME TAX IN REVISION PETITION FILED BY THE PETITIONER DATED 20.03.2012. RESPONDENTS' EXHIBITS :NIL /TRUE COPY/ P.A. TO JUDGE SKV P.V.ASHA, J. =================== W.P.(C). No.15013 OF 2012 ======================= Dated this the 25[th] day of June, 2015 JUDGMENT The petitioner is challenging Exts.P2 and P5 ordersdenying depreciation allowance at the rate of 30% for thevehicles given on hire. 2. Petitioner is doing the business of letting outlorries owned by him on hire under the name and style of“Kottinattu Transports”. Based on Ext.P1 agreement withM/s KSE Ltd., petitioner has been letting out trucks to themfor their use and has been submitting the returns regularly.In the returns filed, petitioner had claimed depreciationallowance at the rate of 30%. By Ext.P2, the DeputyCommissioner of Income Tax (Circle -1) Alappuzha, whileassessing the income tax, under Section 143(1) of that Act,allowed depreciation allowance only at the rate of 15%. Inthe assessment order Ext.P2 it was held that the assessee isa contractor employed by/engaged in supply/transport ofgoods and in the TDS certificate, the nature of payment was W.P.(C). No.15013 OF 2012 2 noted as “Payment to Contractor”. The Assessing Authorityheld that the payment received by petitioner was not hirecharges but it was only a contract receipt for letting outlorries on hire and therefore depreciation allowance at therate of 30% is not admissible. 3.The petitioner submitted a revision petition beforethe Commissioner of Income Tax. The Commissioner of Income Tax by Ext.P5 rejected the same and upheld thefindings of the Assessing Authority. The contention of thepetitioner before the Commissioner was also that thepetitioner was engaged in the business of letting out lorriesand therefore depreciation allowance at the rate of 30%should have been allowed. However, the Commissioner ofIncome-tax (Appeals), without going into the contentions,held that the finding of the Assessing Officer is correct.Petitioner has filed this Writ Petition aggrieved by theseorders claiming depreciation allowance in terms of Appendix1 2(ii) under the Income Tax Rules. 4.The respondents have filed a statement statingthat the firm was engaged in the business of letting out W.P.(C). No.15013 OF 2012 3 Income Tax by Ext.P5 rejected the same and upheld thefindings of the Assessing Authority. The contention of thepetitioner before the Commissioner was also that thepetitioner was engaged in the business of letting out lorriesand therefore depreciation allowance at the rate of 30%should have been allowed. However, the Commissioner ofIncome-tax (Appeals), without going into the contentions,held that the finding of the Assessing Officer is correct.Petitioner has filed this Writ Petition aggrieved by theseorders claiming depreciation allowance in terms of Appendix1 2(ii) under the Income Tax Rules. 4.The respondents have filed a statement statingthat the firm was engaged in the business of letting out W.P.(C). No.15013 OF 2012 3 lorries and the main source of income was the contractreceipts from M/S KSE Ltd. Irinjalakuda and the TDScertificate issued by M/s KSE Ltd. shows that the paymentmade to the assesee in the nature of supply of goods/lorries. It is stated that under Appendix 1-Cl. III(3)(ii), motorbuses, motor lorries and motor taxies used in the businessof running them on hire alone are eligible for 30%depreciation. In the case of the petitioner he was engaged incontract business of transporting goods and not in thebusiness of running lorries on hire. Therefore the firm wasentitled only for depreciation allowance @ 15%. 5.I heard the learned counsel appearing for thepetitioner and the learned Standing Counsel for the IncomeTax Department. 6.It is clear from the order Ext.P2 thattheassessment has been made on the basis of the TDS issuedand Ext.P1 agreement entered into between the petitionerand the KSE Ltd. As per the agreement it is seen that thecontractor had submitted a quotation offering rates forsupply of trucks for a period of one year with effect from W.P.(C). No.15013 OF 2012 4 10.6.2005 to 9.6.2005 and the company has accepted thesame on the terms and conditions fixed therein. Clause (1) ofthe agreement provides for the rates of charges per metrictonne and the number of daily requirement of such trucksfor each destination as well as the distance fromSwaminathapuram to the destination as follows: It was further stated that the number of trucks indicated may increase or decrease depending upon theproduction and market conditions. 7.Appendix 1 under Rule 5 of the Income Tax Rulesprovide for the rates of depreciation allowance. Clause (III)(2)under Part A tangible assets of the New Appendix I, providesfor depreciation allowance for 'motor cars other than thoseused in a business of running them on hire, acquired or putto use on or after1[st] April 1990 as : 15%. Clause III (3) (ii)provides for percentage of depreciation as 30% for motor buses, motor lorries and motor taxis used in a business ofrunning them on hire. The relevant provisions in theAppendix I read as follows: W.P.(C). No.15013 OF 2012 6 8. In Ext.P2 assessment order the assessing authoritylimited the depreciation allowance to 15% in respect of thepetitioner, only because of the TDS certificate in which thenature of payment was shown as payment to contractor andnot as hire charges. The contention of the learned Standingcounsel is that Ext.P1 agreement provides for the rate ofcharges for the vehicles per metric tonne, whereas the usualprocedure is to show the charges at the rate per kilo metre.But there is no provision which provides that the hirecharges for vehicles should be provided per kilometer or thatit cannot be provided depending upon the capacity of thevehicle i.e per metric tonne. W.P.(C). No.15013 OF 2012 6 8. In Ext.P2 assessment order the assessing authoritylimited the depreciation allowance to 15% in respect of thepetitioner, only because of the TDS certificate in which thenature of payment was shown as payment to contractor andnot as hire charges. The contention of the learned Standingcounsel is that Ext.P1 agreement provides for the rate ofcharges for the vehicles per metric tonne, whereas the usualprocedure is to show the charges at the rate per kilo metre.But there is no provision which provides that the hirecharges for vehicles should be provided per kilometer or thatit cannot be provided depending upon the capacity of thevehicle i.e per metric tonne. 9.Merely on the basis of the TDS certificatefurnished by M/s KSE Ltd. and the hire charges received permetric tonne, the claim of petitioner should not have beenrejected. It is pertinent to note that the assessing authorityas well as revisional authority, while rejecting the claim ofpetitioner refers to the contract receipt as one “for letting outlorries on hire”. When they themselves admit that thepetitioner firm was “letting out lorries on hire” the petitioner W.P.(C). No.15013 OF 2012 7 firm comes under Clause III(3)(ii) of Appendix I to the IncomeTax Rules and is entitled to depreciation allowance @ 30%, Itwas engaged in the business of hiring trucks and thosetrucks cannot be treated as 'motor vehicles other than thoseused in the business of running them on hire' so as to limitthe depreciation allowance to 15%. Accordingly, the orders Exts.P2 and P5 are quashed to theextent the depreciation allowance at the rate of 30% isdenied to the petitioner. It is declared that the petitioner willget the benefit of depreciation allowance at the rate of 30% . Accordingly, this writ petition is disposed of. SKV Sd/- P.V.ASHA, JUDGE