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2012 (5) TMI 7 - HC - Income TaxDepreciation @ 40% or 15 % on Tippers, Vibrator and Vibrator Soil Compactor - AO allowed depreciation at the rate of 15% only - Section 32 - held that - According to explanation, the commercial vehicle is to include heavy goods vehicle, heavy passenger motor vehicle, light motor vehicle, medium goods vehicle but is not to include maxi-cab, motor-cab, tractor and road-roller - The reasoning adopted by the Tribunal would not suffer from any legal infirmity because the Tippers are registered under the Motor Vehicles Act, 1988 (for brevity the 1988 Act ) as road transport vehicle as would be vibrator and vibrator soil compactor In the case of Karnataka High Court in the case of CIT v. Mahalinga Setty & Co. 1991 (3) TMI 36 - KARNATAKA High Court - Income Tax has opined against the revenue by giving the benefit of investment allowance to the assessee. If that be so then Vibrator and the Vibrator Soil Compactor would follow the suit because the reasoning adopted is that the vehicles are registered under the 1998 Act and it is essential machinery to carry on the construction work - Decided in favor of the assessee
Issues Involved:
1. Depreciation rate on Tippers, Vibrator, and Vibrator Soil Compactor. 2. Classification of these vehicles as commercial vehicles or plant and machinery. 3. Eligibility for additional depreciation on the mentioned items. Issue-wise Detailed Analysis: 1. Depreciation Rate on Tippers, Vibrator, and Vibrator Soil Compactor: The primary issue raised by the revenue is whether the depreciation at the rate of 40% on Tippers, Vibrator, and Vibrator Soil Compactor is permissible. The revenue contends that these vehicles should be classified as plant and machinery, which are eligible for a depreciation rate of 15%, not 40%. The Assessing Officer (AO) allowed depreciation at 15%, classifying the items as part of machinery used in civil construction and contract work. This classification was based on the brochure of the company "Dynapac," which categorized the Vibrator/Soil Compactor under 'Road Roller' equipment, and the AO's view that these items are heavy machinery used for road construction, not heavy commercial vehicles. 2. Classification as Commercial Vehicles or Plant and Machinery: The CIT(A) and the Tribunal both accepted the functional tests and rationale for granting 40% depreciation, treating the Tippers, Vibrator, and Vibrator Soil Compactor as commercial vehicles. The CIT(A) reasoned that these vehicles are registered with the Department of Transport (DOT) as commercial vehicles and are used to move earth, akin to trucks. Therefore, they should be treated at par with commercial vehicles rather than stationary plant and machinery. The Tribunal supported this view, emphasizing that the vehicles fall within the ambit of commercial vehicles and are subject to rigorous and hard use, justifying the higher depreciation rate. 3. Eligibility for Additional Depreciation: The Tribunal noted that the assessee never pressed any claim for additional depreciation before the AO or the CIT(A). Consequently, the Tribunal vacated the observations of the CIT(A) regarding the entitlement to additional depreciation on the mentioned items. Legal Reasoning and Conclusion: The Court examined the provisions of Section 32(1)(ii) of the Income Tax Act, 1961, which deals with the depreciation of tangible assets, including buildings, machinery, plant, or furniture. The Court highlighted the explanation in the unnumbered proviso 3 of Section 32(1)(ii), which defines 'commercial vehicle' to include heavy goods vehicles, heavy passenger motor vehicles, light motor vehicles, medium goods vehicles, but excludes maxi-cab, motor-cab, tractor, and road-roller. The Court reasoned that since Tippers, Vibrator, and Vibrator Soil Compactor are registered under the Motor Vehicles Act, 1988, as road transport vehicles, they should be considered commercial vehicles. The Court also referenced the Karnataka High Court's judgment in CIT v. Mahalinga Setty & Co., which supported the classification of such vehicles as commercial vehicles eligible for higher depreciation. Final Judgment: The appeals by the revenue were dismissed. The Court upheld the Tribunal's decision that Tippers, Vibrator, and Vibrator Soil Compactor qualify as commercial vehicles eligible for 40% depreciation. The Court also vacated the CIT(A)'s observations regarding additional depreciation, as the claim was never pressed by the assessee.
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