2003 (6) TMI 17 - HC - Income Tax

Whether, in law and on facts, the assessee is entitled to depreciation at the rate of 30 per cent. on two items, namely, (1) hot mixing plant, and (2) paver finishing machine used by the assessee in its activity of road building ? - The Tribunal was not right when it allowed the appeal and directed the Income-tax Officer to grant depreciation at 30 per cent. in respect of the said machineries. - We answer the question in the negative, i.e., in favour of the Revenue and against the assessee.

Summary

Issues:
- Entitlement to depreciation at 30% on hot mixing plant and paver finishing machine used in road building.

Analysis:
The High Court of GUJARAT was tasked with determining the entitlement to depreciation at 30% on a hot mixing plant and a paver finishing machine used in road building. The assessee claimed depreciation at 30%, citing the machines as "earth-moving machinery employed in heavy construction works." However, the Income-tax Officer allowed depreciation at 15%, classifying the machines as "road making plant and machinery." The Commissioner of Income-tax (Appeals) and the Appellate Tribunal upheld the Income-tax Officer's decision. The Tribunal referred to a previous case involving dumpers and a circular categorizing earth moving machinery, but the High Court found these references irrelevant to the current case.

The High Court analyzed the nature and function of the hot mixing plant and paver finishing machine. The hot mixing plant is used for making concrete mixtures, not for moving earth, making it unsuitable for classification as earth-moving machinery. Similarly, the paver finishing machine is used to apply pressure on road surfaces during construction, indicating its role in road making rather than earth moving. Therefore, the High Court concluded that both machines were not earth-moving machinery but fell under the category of "road making plant and machinery."

Based on the usage and function of the machines for road construction purposes, the High Court determined that the machines were not employed for moving earth but specifically for road making activities. Consequently, the machines did not qualify for depreciation at 30% as claimed by the assessee. The High Court disagreed with the Tribunal's decision to grant depreciation at 30% and ruled in favor of the Revenue, directing that the assessee should have been granted depreciation at 15% for the hot mixing plant and paver finishing machine. The judgment resolved the issue by answering the question in the negative, supporting the Revenue's position over the assessee's claim for higher depreciation.

In conclusion, the High Court's detailed analysis focused on the specific functions and purposes of the hot mixing plant and paver finishing machine to determine their classification for depreciation entitlement. By emphasizing the machines' usage in road construction rather than earth moving, the court established that the assessee was not entitled to depreciation at the higher rate of 30% as claimed. The judgment clarified the distinction between earth-moving machinery and road making machinery based on the machines' intended functions and applications in construction activities.