2010 (1) TMI 1278 - AT - Income Tax

Summary

Issues Involved:
1. Allowance of depreciation at the rate of 40% versus 25% on certain vehicles.
2. Deletion of addition on account of bad debts amounting to Rs. 3,08,890/-.

Summary:

Issue 1: Allowance of Depreciation at 40% vs. 25% on Vehicles

The first issue for consideration relates to allowance of depreciation at the rate of 40 per cent as against 25 per cent on dumpers, trucks/tippers, TATA 407, TATA 709, TATA Tankers, and other similar vehicles. The assessee company, engaged in the business of mining, loading, and transportation, claimed depreciation at 40% on these vehicles, arguing they were used for transportation of coal on hire. The AO treated these as machinery, allowing only 25% depreciation. The ld. CIT (Appeals) held that vehicles used by the assessee in the business of transportation were eligible for 40% depreciation, noting that most were registered as heavy vehicles under the Motor Vehicle Act. The ld. CIT (Appeals) differentiated between vehicles like dumpers, trucks, and tippers, which were eligible for higher depreciation, and machinery like excavators and bulldozers, which were not. The Tribunal upheld the CIT (Appeals)'s decision, citing precedents from Hon'ble Gujarat High Court and Hon'ble Madhya Pradesh High Court, confirming that the assessee was entitled to 40% depreciation on the specified vehicles used for transportation.

Issue 2: Deletion of Addition on Account of Bad Debts

The second issue for consideration relates to deleting the addition on account of bad debts amounting to Rs. 3,08,890/-. The AO disallowed the bad debt claim, stating the conditions u/s 36(1)(vii) read with section 36(2) were not met. The ld. CIT (Appeals) found that the amounts written off were either loans given in the ordinary course of money lending by merged entities or represented income in earlier years. The Tribunal agreed with the CIT (Appeals), noting that the conditions of section 36(2) were satisfied as the amounts were either previously included in income or given as loans in the ordinary course of business. Thus, the deletion of the addition was upheld.

Conclusion:

In the result, the appeal filed by the Revenue is dismissed.

The order pronounced in the open court on: 29th January, 2010.