2019 (7) TMI 14 - AT - Income Tax

Depreciation on wheel loaders and wheel graders - @ 40% OR 25% - plant and machinery - HELD THAT - As decided in case of M/s. Quippo Construction Equipment Ltd 2019 (6) TMI 1343 - ITAT HYDERABAD moreover the wheel loaders and Graders are Motor vehicles and is certainly eligible for depreciation at 40% as per schedule and the case law on the subject. In view of this, no reason to interfere with the well reasoned order of the CIT(A), both on the issue of reopening and as well as allowance of depreciation at 40% on wheel loaders. Tribunal in the case of Ansari Holdings Investments (P) Ltd vs. DCIT 2006 (3) TMI 670 - ITAT HYDERABAD wherein mobile cranes registered as heavy motor vehicles were held to would fall within the expression of motor lorries and hence eligible for depreciation @ 40%. Disallowance of claim of leave encashment on provision basis - HELD THAT - Though the issue is covered in favour of the assessee by the decision of the Hon'ble Calcutta High Court in the case of Exide Industries Ltd vs. Union of India 2007 (6) TMI 175 - CALCUTTA HIGH COURT and the Coordinate Bench of the Tribunal in the case of DCIT vs. A.P Seeds Development Corporation Ltd 2014 (3) TMI 1004 - ITAT HYDERABAD has followed the same to hold that the provisions made towards leave encashment is allowable as a deduction, he submitted that the decision of the Hon'ble Calcutta High Court has been stayed by the Hon'ble Apex Court 2008 (9) TMI 921 - SC ORDER and the issue is pending for adjudication. He prayed that the issue may be remanded to the file of the AO to pass the final order after the Apex Court decides the issue - we deem it fit and proper to remand the issue to the file of the AO with a direction to give effect to the Hon'ble Supreme Court s decision in the case of Exide Industries Ltd (Supra). Thus, ground treated as allowed for statistical purposes

Summary

Issues:
1. Depreciation rate on plant & machinery
2. Interpretation of definition of commercial vehicles
3. Appeal on low tax effect
4. Disallowance of leave encashment claim

Depreciation Rate on Plant & Machinery:
The appeal was against the CIT (A)'s order directing to allow depreciation at 30% on plant & machinery instead of the eligible rate of 15%. The Tribunal dismissed the Revenue's appeal by referring to a similar case involving M/s. Quippo Construction Equipment Ltd where the Revenue's appeal was also dismissed. The Tribunal upheld the CIT (A)'s order as it found no merit in the Revenue's contentions. The Tribunal emphasized that the AO had allowed 40% depreciation on certain vehicles in the original assessment, indicating a conscious decision. The Tribunal held that any subsequent attempt to restrict the depreciation rate to 25% would be a change of opinion not permitted by law. The Tribunal also noted that the vehicles in question were considered motor vehicles eligible for 40% depreciation based on relevant case law.

Interpretation of Definition of Commercial Vehicles:
The issue revolved around the interpretation of the definition of commercial vehicles as defined in Entry III-(3)(II) of Appendix-1 of Income Tax Rules. The CIT (A) allowed the assessee's claim for depreciation at 40% on wheel loaders and graders, considering them as motor vehicles designed for special services. The Tribunal upheld the CIT (A)'s decision, stating that the wheel loaders and graders were indeed motor vehicles eligible for 40% depreciation based on relevant precedents and the assessee's registration of these vehicles as 'other vehicle-MMV'. The Tribunal cited specific judgments and tribunal decisions supporting the eligibility of such vehicles for higher depreciation rates.

Appeal on Low Tax Effect:
Contrary to the Revenue's argument that the appeal should be dismissed due to low tax effect, the Tribunal clarified that the appeal was disposed of on merits rather than tax effect. The Tribunal highlighted a judgment by the Hon'ble Gujarat High Court regarding the eligibility of vehicles registered as heavy motor vehicles for higher depreciation rates, emphasizing that the assessee's use of such vehicles for business purposes warranted the higher depreciation rate.

Disallowance of Leave Encashment Claim:
In the cross objection filed by the assessee, the issue of disallowance of the claim of leave encashment on a provision basis was raised. The Tribunal treated this ground of appeal as allowed for statistical purposes based on reasons given in a related case. The Tribunal remanded the issue to the AO for further consideration in light of a decision pending adjudication in the Hon'ble Supreme Court, indicating a procedural step for resolving the matter.

In conclusion, the judgment addressed various issues related to depreciation rates, interpretation of definitions, disposal of appeals on merits rather than tax effect, and procedural steps for resolving specific claims, providing detailed analysis and legal reasoning for each aspect of the case.