D.C. AGRAWAL, A.M. : ORDER This is appeal filed by assessee against order of learned CIT(A) wherein he has confirmed finding of AO that income earned by assessee from hiring of motor car would be assessed under head Income from business or profession instead of under head Income from other sources as claimed by assessee. 2. facts of case are that assessee filed return of income on 13th Jan., 2006 disclosing taxable income of Rs. 12,35,000 in status of individual. She had declared sources of income as salary and income from other sources being income from car hire charges and interest income. return was processed under s. 143(1) on 20th Jan., 2006. Later, on 25th July, 2006 return was revised to income of Rs. 12,50,470. assessee had claimed depreciation on new car which was purchased on 4th March, 2005. AO, thereafter, picked up case for scrutiny and issued notices under s. 143(2)/142(1). During course of assessment proceedings, AO scrutinized sheet of computation of income annexed with return and noticed that assessee has shown car hire charges amounting to Rs. 1,86,000. Assessee has claimed thereon, depreciation, car insurance, interest paid to bank and driver s salary amounting to Rs. 1,39,464, Rs. 20,953, Rs. 69,763 and Rs. 42,000 respectively. This resulted in loss from car hire charges. AO asked assessee to substantiate claim of loss from car hiring charges and its setting off against salary income in same financial year. It was explained that claim has been made under s. 57(ii) of Act. AO, however, took different view. He noted that loss from hiring of car has been claimed to set it off against salary income. He, however, assessed it under head Income from business or profession and accordingly, set off of loss was not allowed against salary income, by virtue of s. 71(2A) which was introduced in IT Act, 1961 w.e.f. 1st April, 2005. 3. learned CIT(A) confirmed order of AO by holding that assessee is engaged in organized activity and therefore, is carrying on business. In this regard, we refer to para 4 of learned CIT(A) as under : "4. I have considered facts of case and I am unable to agree with learned counsel. assessee has bought car on taking loan and given it on hire to M/s Jai Prakash Industries. fact that this arrangement has been going on for quite sometime and in this year assessee has bought new car, probably selling old, confirms contention of AO that car hiring is being run in systematic manner. Business can be defined as organized activity and in present case merely because assessee has been hiring her car to M/s Jai Prakash Associates out of borrowed funds for long time denotes that there is systematic activity for purposes of obtaining profit. Though in present case arrangement appears to be set off of part salary. In such circumstances contention of assessee fails. action of AO is as per law and same is upheld." 4 . Before us, learned Authorised Representative submitted that in all earlier years income from car hiring has been assessed as income from other sources. assessment is made under s. 143(3). In fact, there is no change of facts in present year. assessee has not been carrying on business of hiring of motor car in organized manner. All deductions claimed in working out income from car hiring are allowable under s. 57(iii) of Act. learned Authorised Representative further submitted that learned CIT(A) is incorrect in holding that assessee is carrying on business activity simply on ground that new car has been purchased during this year and put it on hire. He further submitted that assessee has only one vehicle in all these respective years and is given on hire to M/s Jai Prakash Associates. For there being any organized activity there should be number of vehicles which assessee does not have. He submitted that AO has not doubted on genuineness of car hiring. Since facts are same, following principles of consistency AO should have assessed car hiring charges only under head income from other sources. learned Authorised Representative referred to decision of Hon ble Supreme Court in case of Radhasoami Satsang vs. CIT (1991) 100 CTR (SC) 267 : (1992) 193 ITR 321 (SC), for proposition that even though principle of res judicata is not applicable but where facts are same and there is absence of any material change justifying Department to take different view is absence of any material change justifying Department to take different view from that taken in earlier proceedings, then they should not have changed their view. 5 . Against this, learned Departmental Representative submitted that AO had not carried out any enquiry in earlier years and had not applied his mind in earlier years, therefore, it would not be correct to say that error which crept in earlier years should have been allowed to continue in subsequent years. assessee has been doing business of car hiring and therefore, its income should have been assessed under head Income from business or profession . He referred to concept of business as per s. 2(13) which, according to him is very wide and would include even single transaction. He referred to decision in case of Mahammad Faruq, In re (1938) 6 ITR 1 (All) rendered by Hon ble Allahabad High Court wherein Hon ble Court elaborated concept of word business . It was held that business must be some activity which has for its object acquirement of some profits which can be claimed as legal right. Thus, activities which resulted in profit should be treated as business activity. 6. He then referred to Hon ble Madras High Court decision in case of Dr. P. Vadamalayan vs. CIT (1969) 74 ITR 94 (Mad), for elaborating concept of word business . It has been held that wherever assessee carried on combined activities it would constitute business. assessee in that case was carrying on running of nursing home which was treated as business activity. definition of business was held to be inclusive definition and it is indicative of extension and expansion and not restriction. 7 . learned Departmental Representative further referred to decision of Hon ble Supreme Court in case of Barendra Prosad Ray vs. ITO (1981) 22 CTR (SC) 157 : (1981) 129 ITR 295 (SC), for explaining meaning o f word business . It was held therein that expression of business does not necessarily mean trade or manufacture only; it is being used as including within its scope, professions, vocations and callings for fairly long time. word business is one of wide import and it means activity carried on continuously and systematically by person by application of his labour and skill with view to earn income. 8 . learned Departmental Representative then took us to decision of Hon ble Madras High Court in case of CIT vs. R.M. Meenakshisundaram (1995) 127 CTR (Mad) 329 : (1995) 212 ITR 220 (Mad), wherein concept of word business was further explained. It is held therein that question whether particular source of income is business must be decided according to ordinary notions of what business is. activity from which income is derived must have set purpose. motive for activities must be profit and not sport or pleasure. Even single or isolated transaction can constitute business if it bears clear indicia of trade, although activity would normally be systematic and organized by course of dealings which are frequent, regular and continuous. 9. learned Authorised Representative, in rejoinder, submitted that deductions which are lawfully permissible should be allowed and if loss is legally adjustable against salary income then such set off should be allowed. He referred to decision of Hon ble Orissa High Court in case of Industrial Development Corporation of Orissa Ltd. vs. CIT (2004) 189 CTR (Ori) 417 : (2004) 268 ITR 130 (Ori). 10. We have considered rival submissions and perused material on record. Undisputed facts are that assessee has only one car which was given on hire to M/s Jai Prakash Associates. She was assessed to tax under s. 143(3) wherein she had declared income from car hire charges under head Income from other sources . In some years there was loss which was set off against salary income and was accepted by AO. For sake of convenience, we give below figures of income/loss assessed under s. 143(3) in earlier years : Assessment Asst. framed under s. Description year 143(3) vide order dated Loss of Rs. 45,036 from car 2000- 1.3.2003 hiring adjusted against salary and 01 other income. Loss of Rs. 1,28,529 from car 2002- hiring adjusted against income from 15.3.2005 03 salary, house property and other sources. Loss of Rs. 1,74,203 from car 2003- hiring adjusted against income from 29.3.2006 04 salary and income from other sources. Loss from car hiring charges of 2004- 21.12.2006 Rs. 80,641 adjusted against income 05 from salary. 11 . Now question is whether income from car hire charges could now be taxed under head Income from business or profession when it is already accepted and assessed by Department as income from other sources and set off of resulting loss is allowed against other income. In our considered view, Department should have followed principle of consistency and in this year also it should have assessed car hiring charges under head Income from other sources . Reasons are that there is no change of facts as compared to earlier years. Even though principles of res judicata are not applicable to IT proceedings but Courts have held that AO should have followed their decisions of earlier years unless there are changes in facts and circumstances in current year as compared to earlier years. 12. Hon ble Delhi High Court in case of CIT vs. Lagan Kala Upvan (2003) 179 CTR (Del) 243 : (2003) 259 ITR 489 (Del), held that in absence of any change in objectives and activities of assessee, AO was not justified in taking different view only in respect of present assessment year when from asst. yr. 1970-71, exemption under said provisions of Act was being allowed to assessee consistently. Therefore, there is no question of denying exemption under s. 10(22). Department has allowed such exemption in earlier years but in year in question such exemption was denied. 1 3 . Similar view was held by Hon ble Delhi High Court in case of Director of IT (Exemptions) vs. Lovely Bal Shiksha Parishad (2004) 186 CTR (Del) 384 : (2004) 266 ITR 349 (Del), wherein it was held that if there is no change in nature of activities and assessee had been granted exemption under s. 10(22) not only in respect of earlier year but also in subsequent years then assessee is entitled for exemption under that section. 14. Similar view was taken by Hon ble Delhi High Court in case of Director of IT (Exemptions) vs. Escorts Cardiac Diseases Hospital Society (2008) 300 ITR 75 (Del). 15. Therefore, apparently there is no reason or material placed on record which could justify different decision this year. Notwithstanding, we are of view that under facts and circumstances of present case, income from hiring of car cannot be assessed under head Income from business or profession . reasons are that business constitutes organized activity which involves assessee physically/mentally. If assessee hands over its assets/income earning apparatus to somebody else and enjoys fruits thereof then it could not said that he is engaged in organized business activity. 16. Hon ble Supreme Court in case of Barendra Prasad Roy vs. ITO (supra) held that word business is one of wide import and it means activity carried on continuously and systematically by person by applying his labour or skill with view to earn income. 17. Hon ble Supreme Court in case of CST vs. Sai Publication Fund (2002) 177 CTR (SC) 1 : (2002) 258 ITR 70 (SC) held that where main activity is not business then any transaction incidental or ancillary would not normally amount to business unless independent intention to carry on business in incidental or ancillary activity is established. In such cases, onus of proving of independent intention to carry on business in incidental o r voluntary activity rests on Department. Tribunal, Delhi Bench in case of Bharatiya Janta Party vs. Dy. CIT (2002) 75 TTJ (Del)(TM) 209 : (2002) 258 ITR 1 (Del)(TM)(AT), held that under IT law or sales-tax law, business includes some real, substantial and systematic and organized course of activity or conduct with set purpose and motive of profit which in fact may not arise or be earned. Business cannot include activities which are gratis to one party i.e. to buyer. activity to be treated as business should have semblance of trade, attribute of commercial activity and expectation to earn income over reasonable period. 18. Hon ble Allahabad High Court in case of CIT vs. Jai Bharat Theatre (2001) 167 CTR (All) 274 : (2001) 247 ITR 295 (All), defined word business to include every trade, occupation and profession. question whether particular letting amount to business has to be decided in circumstances of each case and each case has to be looked at from businessman s point of view to find out whether letting was doing of business or exploitation of his property by owner. It is actual activity carried on by assessee that has to be seen and not object for which company or firm is established. 19. Hon ble Madras High Court in case of CWT vs. K. Vijayakumar (2001) 166 CTR (Mad) 246 : (2000) 243 ITR 271 (Mad), held that to regard activity as business, there must be course of dealings either actually continued or contemplated to be continued with profit motive and not for sport or pleasure. activity to be called business should necessarily involve time, devotion and labour and also profit motive. 20. When we examine facts and circumstances of present case, we find that assessee had one car which was given on hire to M/s Jai Prakash Associates. It incurred expenses only on salary of driver, insurance and interest paid to bank. It was submitted by learned Authorised Representative that car maintenance and expenditure on petrol/diesel is borne by hirer. From this point of view, we find that assessee is only enjoying hire charges. There is no activity as such except letting car to hirer and making payments in respect of insurance and driver s salary. If hiring of car is to be treated as business activity then it should have engaged in day-to-day or periodical activities, like giving car on hire to one person for short time and then to another, arranging customer for giving car on hire like taxi is given on hire to various persons. For this purpose, assessee would organize herself to search customers. If there are number of vehicles with her then organizing activity would be more apparent. It would require labour of assessee, his skill and attention and intention to earn more profit by reducing expenses thereon. In present case, receipts are apparently fixed being hire charges set out at beginning of assessment year, driver s salary is fixed and so are insurance and interest. There is apparently no application of mind during year by assessee in earning more profit which is practically ascertained at beginning of year. Thus, neither there is engagement of labour or skill nor there is any organized activity in giving on hire one car to fixed customer throughout year. It is simply enjoyment of income from income generating apparatus i.e. car, handed over to customer. There is no organized activity called business. 21. We notice that case for change of head for assessing car hire charges from income from other sources to income from business or profession was made out by lower authorities due to change in law whereby sub-s. (2A) was introduced in s. 71 which denies set off of losses from income from business or profession against salary income. As facts, as compared to earlier years have not changed, authorities should have taken consistent view. 22. In this regard, we refer to observation of Hon ble Supreme Court in case of Radhasoami Satsang vs. CIT (supra) wherein it was observed as under : "We are aware of fact that, strictly speaking, res judicata does not apply to IT proceedings. Again, each assessment year being unit, what is decided in one year may not apply in following year but where fundamental aspect permeating through different assessment years has been found as fact one way or other and parties have allowed that position to be sustained by not challenging order, it would not be at all appropriate to allow position to be changed in subsequent year." 2 3 . Now we consider whether mere claim of assessee of various expenses such as depreciation, car insurance, interest and driver s salary could bring income from car hire charges under head Income from business or profession . In this regard, we notice that depreciation is also allowable to assessee under s. 57(ii) in addition to s. 32(2) as s. 32(2) has been made applicable for computation of income under head Income from other sources also. Driver s salary, car insurance and interest would be allowable under s. 57(iii) being expenditure which is not considered in nature of capital expenditure and is let out or expended wholly and exclusively for purposes of making or earning such income. Merely because similar claims can also be made while computing income under head Income from business or profession , it cannot be said that any claim or deduction which is otherwise legally permissible under s. 57(iii) would automatically shift head from income from other sources to income from business or profession . 2 4 . There is another aspect argued by learned Departmental Representative. He submitted that this is colourable device assessee had adopted for reducing her tax liability by offering income from hire charges under head Income from other sources . We do not consider that this is acceptable argument. Once Department has accepted position in earlier years and no corrective step has been taken then assessee could not be blamed for offering income from car hire charges under head Income from other sources . Because of stand taken by Department in earlier years assessee has been allowed to take particular position and now assessee cannot be put to disadvantage by changing stand by Department in present year without there being any apparent reasoning or material on record or any change in facts and circumstances. Notwithstanding, we have held that income from hiring of car to one customer for entire year would be assessable only under head Income from other sources . 25. Regarding claim of assessee about insurance charges, AO will verify same and if it is paid/payable (on mercantile basis) by assessee during year it will be allowed as deduction under s. 57(iii). 26. As result, appeal filed by assessee is allowed. *** SMT. RITA DIXIT v. DEPUTY COMMISSIONER OF INCOME TAX