Commr.of Income Tax,Gujarat
Vs. Gupta Global Exim (P) Ltd. [2008] INSC 808 (6 May 2008)
CIVIL APPELLATE JURISDICTION CIVIL
APPEAL NO. 3342 OF 2008 (Arising out of SLP(C) No.12846 of 2007) Commr. of
Income Tax, Gujarat ... Appellant(s) Versus Gupta Global Exim (P) Ltd. ...
Respondent(s) ORDER Leave granted.
This Civil Appeal is filed by the
Department against the judgment of the Gujarat High Court in Tax Appeal No.203
of 2006.
The short question which arose for
determination before the High Court was : Whether the respondent-assessee was 2
entitled to depreciation at the rate of 40% on trailers and loaders? Briefly,
the facts are as follows:
The assessee is a private limited
company engaged in the business of importing timber logs from abroad and
selling them in India. During the previous year relevant to the Assessment Year
1998-99, the respondent-assessee had purchased trailers and loaders and put
them to use on hire.
The Assessment Officer (AO) took
the view that the assessee was, during the relevant assessment year, in the
business of timber trading and it is only occasionally that the trucks owned by
the assessee were given out on hire to outside parties and, therefore, the
assessee was not in the business of running the trucks on hire and, therefore, the
assessee was not entitled to claim higher rate of depreciation at 40%. This
finding of the AO was reversed by CIT(A) vide order dated 29th October, 2004. It was held
by CIT(A) that transportation income of Rs.12,50,639/- by was of running 3 the
subject vehicles on hire was an integral part of the assessee's business and
that its inclusion under the head `Business Income' was not disputed even by
the AO. This finding of CIT(A) was affirmed by the Tribunal. By the impugned
judgment, the High Court has refused to interfere on the ground that the matter
involved essentially questions of fact. Hence, this Civil Appeal by the
Department.
Generally, this Court does not
interfere with the concurrent finding of facts recorded by the authorities
below.
However, we are of the view that
in this case, a neat substantial question of law arose for determination which
needed interpretation of the Depreciation Table given in Appendix-I to the
Income-tax Rules, 1962. The said Table gives rates at which depreciation was admissible.
We quote herein-below clause III
which reads as under:
"Block of assets Depreciation
allowance as percentage of written down value III. Machinery and Plant 4 (i)
Machinery and plant other 25 than those covered by sub- items (1A), (2) and (3)
below (1A) Motor cars, other than those used in a business of running them on
hire, 20 acquired or put to use on or after the 1st day of April, 1990 (2)(i)
Aeroplanes-Aeroengines I I (ii) Motor buses, motor lorries I 40 and motor taxis
used in a I business of running them on I hire." I Under sub-item 2(ii) of
Item III, higher rate of depreciation is admissible on motor trucks used in a
business of running them on hire. Therefore, the user of the same in the
business of the assessee of transportation is the test.
In the present case, none of the
Authorities below (except the AO) has examined the matter by applying the above
test.
The AO has given his finding that
the assessee was not in the business of transportation as he was only in the
business of 5 trading in timber logs. That, the burden was on the assessee to
establish that it is the owner of motor lorries and that it used the said motor
lorries/trucks in the business of running them on hire.
In our view, the entire approach
of CIT(A) was erroneous when he has stated that the transportation income of
Rs.12,50,639/- by way of running the subject vehicles on hire is an integral
part of the appellant's business and its inclusion in the head `business
income' is not disputed even by the AO.
In our view, mere inclusion of
Rs.12,50,639/- in the Total Business Income is not the determinative factor for
deciding whether trucks were used by the assessee during the relevant year in a
business of running them on hire. In our view, the CIT(A) had erred in relying
upon the accrual of income as a determinative factor for coming to the
conclusion that trucks were used in a business of running them on hire.
What is relevant for consideration
under sub-item 2(ii) of Item III of Appendix I to the Income-tax Rules, 1962 is
6 whether the assessee was in the business of hiring out his trucks in addition
to his business of trading in timber. The order of assessment clearly indicates
that the assessee was only in the business of trading in timber. We do not have
the Returns filed by the assessee before us. We do not have the constitution of
the assessee Company before us. There is no evidence to indicate that the
assessee was in the business of hiring out motor lorries for running them to
earn business income. The entire inference is drawn by CIT(A) only on the
footing that the AO had treated Rs.12,59,639/- as part of Total Business Income
which is not determinative of the above test, viz., whether the trucks were
used in the transportation business as claimed by the assessee.
For the aforestated reasons, we
set aside the impugned judgment of the High Court and we remit the matter to
Commissioner of Income Tax (Appeals) for de novo examination of the case in
accordance with law. Needless to add that before deciding the matter afresh,
the CIT (A) would give opportunity to the assessee to present its case and, if
so 7 advised assessee herein can seek amendments of grounds of appeal to which
the Department may put its additional say.
However, we make it clear that we
express no opinion on the merits of the case as to whether the assessee was in
the business of running the motor lorries on hire. In that regard contentions
are kept open.
Accordingly, the Appeal stands
allowed with no order as to costs.
......................
..............J.
(S.H. KAPADIA)
............................
........J.
(B. SUDERSHAN REDDY) New Delhi;
May 06, 2008.
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