Kerala High Court

Ebenezer International ... vs The Asst.Commissioner Of Income ... on 2 November, 2021

                IN THE HIGH COURT OF KERALA AT ERNAKULAM
                                PRESENT
                  THE HONOURABLE MR.JUSTICE S.V.BHATTI
                                    &
                 THE HONOURABLE MR.JUSTICE BASANT BALAJI
     TUESDAY, THE 2ND 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 FOUNDATION
          EBENEZER GARDENS RATNAGIRI, PATTITHANAM, ETTUMANOOR,
          KOTTAYAM-686631

          BY ADVS.
          ANIL D. NAIR
          SRI.R.SREEJITH
          KUM.MEKHALA M.BENNY
          SRI.ACHYUT K PADMARAJ



RESPONDENT/S:

          THE ASST.COMMISSIONER OF INCOME TAX
          CIRCLE-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:
 I.T.A. No.50/2018
                                     -2-




                            JUDGMENT

S.V. Bhatti, J.

Heard Mr Anil D Nair, learned counsel for the appellant

and Mr P K R Menon, learned Senior Advocate, for the

respondent.

2. Ebenezer International Foundation, Ettumanoor

Kottayam/assessee is the appellant. The Assistant

Commissioner of Income Tax, Circle-1, Kottayam/Revenue is

the respondent. The assessee being aggrieved by the order in

ITA No.545/Coch/2015 dated 17.11.2017 of the Income Tax

Appellate Tribunal (for short 'the Tribunal') Cochin Bench has

filed the subject appeal under Section 260A of the Income Tax

Act, 1961 (for short 'the Act').

I.T.A. No.50/2018

2.1 The appeal has been admitted on the following

substantial questions of law:

"i. In the facts and circumstances of the case, ought not the Tribunal have held that the appellant is entitled for additional depreciation as he was hiring buses?

ii. In the facts and circumstances of the case, ought not the Tribunal have held that the ratio of the judgment in ITA. No.130 of 2012 squarely applies and that the appellant is entitled for additional depreciation?"

2.2 The circumstances relevant for considering the above

substantial questions are a few. The assessee is a Trust

registered under Section 12A of the Act. The Trust is running a

Residential CBSE School in Ettumannoor. The assessee has

provided transport facility/school buses for attending the

school, by picking up and dropping both the students and the

teachers. The assessee claimed additional depreciation for the

school buses operated by the assessee provided for the above I.T.A. No.50/2018

additional service. The claim for additional depreciation has

been rejected by the authorities including the Tribunal under

the Act. We find it convenient and useful to excerpt the

operative portion of the findings recorded by the Tribunal

which read thus:

"6. We have considered the rival contentions and perused the orders of the authorities below. Assessee was a trust registered u/s.12A of the Act and was claiming its income exempt u/s.11 of the Act. Thus assessee was not at in any business at all. It was doing a charitable activity of education. Entry III(3) (ii) of new Appendix 1 clearly specifies "motor buses, motor lorries and motor taxis used in the business of running them on hire". When assessee itself is not doing any business it cannot say that bus fees received from students and staff were from a business incidental to its main business. That apart, in the case of Lake Palace Hotels & Motels Pvt. Ltd (supra) relied on by the ld.

Authorised Representative, the assessee concerned was in hotel business and they were also carrying on a business of running cars on hire for tourists who stayed in their hotel. In our opinion, this case will not help the assessee since it was not engaged 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 and they is reproduced hereunder:

"Under item 2(ii) of heading III, the 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 our view, the entire approach of the Commissioner of Income tax (Appeals) 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 by the Assessing officer. 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 Commissioner of Income tax (Appeals) had erred in relying upon the accrual of income as a determinative factor for coming to the conclusion that the trucks were used in a business of running them on hire".

Thus in our opinion, assessee was never in the business of running buses on hire and could not claim enhanced deprecation relying on entry III(3) (ii) of new Appendix 1. We do not find any reason to interfere with the orders of the lower authorities."

I.T.A. No.50/2018

Hence the appeal.

3. Mr Anil D Nair places reliance on the judgments

reported in Commissioner of Income Tax v. Lake Palace Hotels and

Motels P. Ltd1; Commissioner of Income Tax v. Rajasthan & Gujarati

Foundation2; Commissioner of Income Tax v. Institute of Banking

Personnel Selection (IBPS)3; Commissioner of Income Tax v. K R

Jayachandran4; and unreported judgment in The Commissioner of

Income Tax v. M/s. Kallungal Trading Company 5, and contends that

the assessee since is subjected to business income as well, the

assessee is automatically entitled to claim additional

depreciation. The rejection of additional depreciation by the

Tribunal and the authorities is illegal and liable to be set aside.

4. Senior Advocate Mr P K R Menon argues that the

claim 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) 5 Judgment dated 07.11.2017 in ITA 130/2012 I.T.A. No.50/2018

and law. The entitlement to additional depreciation by an

assessee is dependent upon the nature of activity carried on by

the assessee and the purpose for which the vehicles are used by

the assessee. The judgments relied on by the appellant are

clearly distinguishable to the fact situation of the case. He

invites our attention to the findings recorded by the Tribunal

on the nature of activity being undertaken by the assessee and

the consideration the assessee receives either from the students

or the teachers in this behalf. According to him, at best, what

is received by the assessee could be treated as reimbursement

to the School by the students and teachers on cost-to-cost basis

but not as consideration in any business transaction. For the

purpose of additional depreciation what is important is the

vehicles must have been used for the business purpose of the

assessee. The assessee since is running the school cannot be

said to be doing business in plying passengers from one place to I.T.A. No.50/2018

another. He places strong reliance on the judgment of the

Supreme Court in Commissioner of Income Tax v. Gupta Global Exim

P. Ltd.6 on:

"Held, setting aside the decision of the High Court and remanding 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-tax Rules, 1962, the higher rate was 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 was the test. Merely because the income from the letting of the trucks on hire was included in the business income the higher rate would not apply. The matter had to be decided on the question as to whether the assessee was in the business of running the trucks for hire."

(emphasis supplied)

4.1 He placed reliance on the consideration by the Apex

Court by laying much emphasis on the following sentences

'therefore, the user of the same in the business of the assessee of

6 [2008] 305 ITR 132 (SC) I.T.A. No.50/2018

transportation was the test. Merely because the income from the

letting of the trucks on hire was included in the business income the

higher rate would not apply'. (emphasis supplied) He concludes by

arguing that the assessee is subjected to business income does

not mean that the assessee is automatically entitled to

additional depreciation as well.