1986 (4) TMI 134 - AT - Income Tax

Summary

Issues Involved:
1. Rate of depreciation on Terex pay loader.
2. Additional depreciation under Section 32(1)(iia).
3. Rate of depreciation on motor trucks.

Detailed Analysis:

1. Rate of Depreciation on Terex Pay Loader:

The primary issue was whether the Terex pay loader should be depreciated at 10% or 30%. The CIT directed the ITO to grant depreciation at 10%, while the assessee contended that 30% was appropriate. The ITO described the pay loader's functions as limited to loading coal at the railway siding and not being used in heavy construction or open cast mining. The CIT (A) allowed 30% depreciation, classifying the machine as earth moving equipment used in mining, as per clause III(D)(8) of Appendix I of the IT Rules. The Tribunal agreed with the CIT (A), noting that the machine was used in the mining area for loading coal and thus fell within the specified category entitled to 30% depreciation. The Tribunal also referenced a certificate from the machine's manufacturers and instructions from the CMST, which supported the 30% depreciation rate for such equipment.

2. Additional Depreciation Under Section 32(1)(iia):

The second issue was whether the assessee was entitled to additional depreciation under Section 32(1)(iia). The ITO argued that the pay loader, being movable, could not be considered "installed" and thus was not eligible for additional depreciation. The Tribunal rejected this argument, clarifying that "installed" means making a machine ready for use, not necessarily immovable. The Tribunal concluded that the pay loader was indeed installed by the assessee and thus entitled to additional depreciation. Consequently, the Revenue's appeal on this ground was dismissed.

3. Rate of Depreciation on Motor Trucks:

The final issue concerned the correct rate of depreciation for motor trucks. The assessee claimed a 40% depreciation rate, arguing that the trucks were used for transporting coal for Central Coal Fields Ltd., thus falling under the category of motor vehicles used in a business of running them on hire. The ITO allowed only 30% depreciation, classifying the trucks under the general category. The Tribunal found that the CIT (A) did not adequately address whether the trucks were used on hire. The Tribunal remanded this issue to the CIT (A) for a fresh decision, instructing them to determine the trucks' usage and relationship between the assessee and Central Coal Fields Ltd.

Conclusion:

- The assessee's appeal regarding the pay loader's depreciation rate was allowed, restoring the ITO's original order granting 30% depreciation.
- The Revenue's appeal challenging the additional depreciation on the pay loader was dismissed.
- The issue of the correct depreciation rate for the motor trucks was remanded to the CIT (A) for further examination and decision.