Ebenezer International Foundation v. Assistant Commissioner of Income Tax, Circle-1, Kottayam

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT THE HONOURABLE MR.JUSTICE S.V.BHATTI & THE HONOURABLE MR.JUSTICE BASANT BALAJI TUESDAY, THE 2[ND] 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-** ## **J U D G M E N T** 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'). **-3-** ## **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 **-4-** ## **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** **-5-** 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** **-6-** 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. Ltd_[1] ; _Commissioner of Income Tax v. Rajasthan & Gujarati Foundation_[2] ; _Commissioner of Income Tax v. Institute of Banking Personnel Selection (IBPS)_[3] ; _Commissioner of Income Tax v. K R Jayachandran_[4] ; 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 **-7-** ## **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** **-8-** 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 . The matter had to be decided on the rate would not apply 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 't _herefore, the user of the same in the business of the assessee of_ 6 [2008] 305 ITR 132 (SC) **I.T.A. No.50/2018** **-9-** _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. 5. The only argument canvassed is that the receipts received by the assessee in this behalf are included in the business income and, therefore, the assessee is automatically entitled to additional rate of depreciation. The judgment of the Supreme Court in _Gupta Global Exim P. Ltd_ is a complete answer to the said contention canvassed by the assessee. _Gupta Global Exim P. Ltd_ held that the user of vehicles in the business of the assessee is the test and that the receipt/income is included in the business income would not i.e., qualify for additional depreciation. Except the above, no other point is urged. In our **-10-** ## **I.T.A. No.50/2018** view the point urged is no more _res integra_ and the test laid down by the Supreme Court in _Gupta Global Exim P. Ltd_ is clear on the point. By appreciating the circumstances and also following the judgment in _Gupta Global Exim P. Ltd_ the questions are answered in favour of the Revenue and against the assessee. Hence the appeal stands dismissed. No order as to Costs. Sd/S.V.BHATTI JUDGE Sd/BASANT BALAJI JUDGE jjj **-11-** ## **I.T.A. No.50/2018** ## **APPENDIX OF ITA 50/2018** PETITIONER ANNEXURE ANNEXURE A ANNEXURE B ANNEXURE C TRUE COPY OF THE ASSESSMENT ORDER DATED 16.12.2009 FOR THE YEAR 2007-08 ISSUED TO THE APPELLANT. TRUE COPY OF THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS),FOR THE YEAR 2007-08 ISSUED TO THE APPELLANT. TRUE COPY OF THE ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH DATED 17.11.2017.