2006 (3) TMI 670 - AT - Income Tax

Challenged the order u/s 263 passed by the CIT - erroneous and prejudicial - business being hiring of cranes - Depreciation on cranes fall under which block 25% or 40% - mounted on motor lorries and registered as such under the MV Act - HELD THAT - It is now a settled position of law that for coming to the conclusion as to whether the order of the Assessing Officer was erroneous or prejudicial to the interest of revenue, the relevant record would be record as was available to the CIT at the time when the record was perused by him for initiating proceedings u/s 263 of the Act. Thus, in the facts of the present case, the ld. CIT clearly had jurisdiction and he correctly held that the order of the Assessing Officer dated 31-3-1999 was erroneous and prejudicial to the interest of revenue. We therefore, hold that assumption of jurisdiction by the ld. CIT u/s 263 of the Act was correct. Whether the cranes can be said to be motor lorries used in the business of hiring - depreciation u/s 32 - Hon ble Gujarat High Court has held that the crane was integral part of the motor lorry. Thus, apparently, the case of the appellant is akin to that of the case in the case of Gujco Carriers 2002 (2) TMI 48 - GUJARAT HIGH COURT is directly on the issue and as the revenue has failed to show that any other High Court has expressed a contrary view, respectfully following the same, we hold that the appellant is entitled to depreciation at the rate of 40 per cent on the mobile cranes. This ground of the appellant is allowed. In the result, the appeal of the assessee is partly allowed.

Summary

Issues:
1. Allowance of depreciation on cranes at 40% under the Income-tax Act, 1961.
2. Jurisdiction of the Commissioner of Income-tax under section 263.
3. Interpretation of whether cranes qualify for depreciation at 25% or 40%.

Issue 1: Allowance of Depreciation on Cranes at 40%:
The appeal concerned the allowance of depreciation on cranes at 40% under the Income-tax Act, 1961. The Assessing Officer had allowed the claim of depreciation made by the assessee on the cranes at the rate of 40%, considering them as falling within the category of "motor lorries used in a business of running them on hire." However, the Commissioner of Income-tax directed the Assessing Officer to allow depreciation at 25% on the cranes, citing various case laws supporting the revenue's view. The appellant argued for the higher rate of depreciation based on the Hon'ble Gujarat High Court's decision in a similar case. The Tribunal, after considering the arguments and case laws, held in favor of the appellant, allowing depreciation at the rate of 40% on the mobile cranes.

Issue 2: Jurisdiction of the Commissioner of Income-tax under Section 263:
The Commissioner of Income-tax assumed jurisdiction under section 263 of the Act, holding that the assessment order passed by the Assessing Officer was erroneous and prejudicial to the interests of revenue regarding the allowance of depreciation on cranes at 40%. The Commissioner noted that the claim of the assessee was not supported by any case laws, unlike the revenue's view which was backed by relevant case laws. The Tribunal upheld the Commissioner's jurisdiction under section 263, emphasizing that the Commissioner correctly held the Assessing Officer's order as erroneous and prejudicial to the interest of revenue.

Issue 3: Interpretation of Depreciation Rate for Cranes:
The Tribunal analyzed whether the appellant was entitled to depreciation at 25% or 40% on the cranes in question. The Hon'ble Gujarat High Court's decision in a similar case was cited, where it was held that mobile cranes registered as heavy motor vehicles would fall within the category of "motor lorries" for depreciation purposes. Contrary decisions from other High Courts were also discussed, emphasizing the importance of the cranes being integral to motor lorries. The Tribunal ultimately ruled in favor of the appellant, allowing depreciation at the rate of 40% on the cranes, as they were considered mobile cranes mounted on motor lorries and given on hire to customers, akin to the case decided by the Hon'ble Gujarat High Court.

In conclusion, the Tribunal partly allowed the appeal of the assessee, granting depreciation at the rate of 40% on the mobile cranes in question, based on the interpretation of relevant case laws and the nature of the cranes' usage in the business.