2016 (11) TMI 653 - AT - Income Tax

Benefit of higher depreciation for pay loaders, dozers and water tankers - transportation of goods in its business of transportation of goods on hire - Held that - Assessee was engaged in the business of transportation and the work of cleaning and loading were incidental to this. Having a look at Circular No.652 dated 14.6.1993 says that motor lorries used by the assessee in the business of transportation of goods on hire would be eligible for higher rate of depreciation. In other words, by virtue of this Circular, higher rate of depreciation @ 30% mentioned in Part II(3)(ii) of Appendix to the Income Tax Rules would get an extended meaning than what literally follows on their reading. The extended meaning would bring into its fold use of motor vehicles in a business of transportation of goods on hire. In our opinion, the agreement entered by the assessee with M/s Anand Transport clearly shows that its duty was to transport the goods provided by M/s Anand Transport from one place to another. We cannot say that element of hiring was absent. The Bombay High Court in the case of CIT vs M/s SC Thakur & Bros 2009 (1) TMI 20 - BOMBAY HIGH COURT has clearly held that Circular No.652(supra) was admissible when the motor lorries were used by the assessee in its own business of transporting of goods on hire. Thus the assessee is entitled for depreciation on dumpers and pay loaders at the higher rate - Decided in favour of assessee

Summary

Issues involved:
1. Eligibility for higher depreciation on pay loaders, dozers, and water tankers used by the assessee.
2. Interpretation of Circular No.652 dated 14.6.1993 by the Assessing Officer and the Commissioner of Income-tax (Appeals).
3. Application of higher rate of depreciation based on the business activity of the assessee.

Detailed Analysis:
Issue 1: The Revenue appealed against the order of the Commissioner of Income-tax (Appeals) regarding the eligibility of the assessee for higher depreciation on pay loaders, dozers, and water tankers. The Assessing Officer disallowed the claim of higher depreciation, allowing only 15% depreciation instead of the claimed 30%. The dispute centered around whether the assessee's activities qualified for the higher rate of depreciation.

Issue 2: The Assessing Officer relied on Circular No.652 dated 14.6.1993, which clarified the conditions for availing higher depreciation on motor lorries used in the business of transportation of goods on hire. The Commissioner of Income-tax (Appeals) appreciated the assessee's contention that an element of hiring was present in its activities, supported by the agreement with M/s Anand Transport. The interpretation of this circular was crucial in determining the eligibility for higher depreciation.

Issue 3: The Tribunal analyzed the agreement between the assessee and M/s Anand Transport, highlighting the transportation activities involving pay loaders, dozers, and water tankers. Referring to Circular No.652, the Tribunal concluded that the assessee's business of transporting goods on hire qualified for the higher rate of depreciation. Precedents from the Bombay High Court and Kolkata Bench of the Tribunal supported this interpretation, emphasizing the use of vehicles for transporting goods of other persons.

In conclusion, the Tribunal dismissed the Revenue's appeal, affirming the eligibility of the assessee for higher depreciation on the vehicles used in its business of transportation of goods on hire. The decision was based on a comprehensive analysis of the business activities, contractual agreements, and legal interpretations, aligning with precedents and relevant circulars.