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2007 (9) TMI 207 - HC - Income TaxInvestment allowance u/s 32A machinery given on hire by owner construction equipment vehicles like dumpers, tippers, and hydraulic excavator are not road transport vehicles so profit gained by letting them out on hire could not debar the owner of machinery from claiming allowance there is no condition that machinery should be used by owner himself to claim investment allowance
Issues Involved:
1. Entitlement of investment allowance under section 32A of the Income-tax Act, 1961, for dumpers, loaders, tippers, and hydraulic excavators. 2. Classification of dumpers, loaders, tippers, and hydraulic excavators as road transport vehicles or non-transport vehicles. 3. Eligibility for investment allowance for machinery used on hire basis. Detailed Analysis: Issue 1: Entitlement of Investment Allowance under Section 32A The primary issue in these appeals is whether the assesses are entitled to investment allowance under section 32A of the Income-tax Act, 1961, for the cost of loaders, dumpers, tippers, and hydraulic excavators. The Assessing Officer initially granted the investment allowance, but the Commissioner of Income-tax reversed this decision, stating that these machines are road transport vehicles and thus not eligible for the allowance. The Income-tax Appellate Tribunal, however, set aside the Commissioner's order and restored the Assessing Officer's decision, granting investment allowance on the grounds that these machines are not road transport vehicles. Issue 2: Classification as Road Transport Vehicles or Non-Transport Vehicles The court examined whether dumpers, loaders, tippers, and hydraulic excavators fall under the category of road transport vehicles, which are excluded from investment allowance under section 32A. According to section 2(28) of the Motor Vehicles Act, 1939, a "motor vehicle" is any mechanically propelled vehicle adapted for use upon roads. However, "construction equipment vehicles" such as dumpers and hydraulic excavators are defined under rule 2(ca) of the Central Motor Vehicles Rules, 1989, as non-transport vehicles. The court concluded that these machines are non-transport vehicles and thus not excluded from investment allowance under section 32A. Issue 3: Eligibility for Investment Allowance for Machinery Used on Hire Basis In one of the appeals (D.B. Income-tax Appeal No. 77/2002), the assesses used hydraulic excavators and tippers on a hire basis. The Assessing Officer denied the investment allowance, stating that the machinery was not used for the assesses' own business. However, the Commissioner of Income-tax and the Tribunal allowed the investment allowance, interpreting the term "wholly used for the purpose of the business carried on by him" to include machinery used on hire basis. The court supported this interpretation, citing that the business of hiring out machinery is a commercial activity and thus qualifies for investment allowance under section 32A. The court referenced several judgments to support its decision: - CIT v. Gujarat Narmada Valley Fertilizer Co. Ltd.: Tractor-trailers were not considered road transport vehicles, and investment allowance was granted. - CIT v. Bajrang Enterprises: Investment in dumpers used for mining was eligible for investment allowance. - CIT v. Shriram Transport Finance Co. Ltd.: Mobile cranes used in quarrying operations were not road transport vehicles and were eligible for investment allowance. - CIT v. C. S. Anand: Dumpers were not road transport vehicles, and investment allowance was allowed. - CIT v. Sibson Construction and Co.: Dumpers used in heavy construction work were eligible for investment allowance. - Goodyear India Ltd. v. Union of India: Emphasized that the principal use of the vehicle determines its classification. Conclusion The court concluded that dumpers, loaders, tippers, and hydraulic excavators are non-transport vehicles and thus eligible for investment allowance under section 32A of the Income-tax Act, 1961. The court also held that machinery used on a hire basis qualifies for investment allowance as it is used for the purpose of the business carried on by the assesses. Consequently, all three appeals filed by the Revenue were dismissed, and the findings of the Income-tax Appellate Tribunal were confirmed. The parties were left to bear their own costs.
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