1999 (5) TMI 67 - AT - Income Tax

Summary

Issues:
1. Restriction of additional depreciation on dumpers used as mining machinery.
2. Disallowance of investment allowance on dumpers.

Issue 1: Restriction of additional depreciation on dumpers used as mining machinery

The assessee appealed against the restriction of depreciation to 75% on dumpers used as mining machinery under section 38(2) of the IT Act. The ITAT held that dumpers were primarily used for mining purposes and sometimes for transportation, which did not amount to personal use. The CIT(A) restricted the depreciation on the ground of non-exclusive use for mining business. However, the ITAT disagreed, deeming the restriction unreasonable. The ITAT directed the AO to allow full additional depreciation on dumpers, emphasizing that the transportation use did not qualify as personal use and, therefore, the restriction was unwarranted.

Issue 2: Disallowance of investment allowance on dumpers

The second ground of appeal by the assessee was the disallowance of investment allowance on dumpers. The CIT(A) disallowed the claim by citing a Supreme Court decision related to construction activities. However, the ITAT differentiated the facts of the appellant's case from the Supreme Court case. The ITAT highlighted that dumpers were considered mining machinery by the CBDT and were not treated as road transport vehicles. The ITAT emphasized that dumpers were primarily used in industrial and mining areas, not on roads, aligning with previous tribunal orders and High Court decisions. Consequently, the ITAT allowed the ground of the assessee, stating that the CIT(A) was unjustified in rejecting the investment allowance claim on dumpers, which were deemed mining machinery in the case.

Judgment Summary:
The ITAT, in a consolidated order, addressed appeals related to the restriction of additional depreciation and disallowance of investment allowance on dumpers used as mining machinery. Regarding the depreciation restriction, the ITAT found the CIT(A)'s decision unreasonable and directed the AO to allow full additional depreciation on dumpers, emphasizing the primary industrial and mining use of the machinery. Concerning the investment allowance disallowance, the ITAT differentiated the appellant's case from a Supreme Court decision, highlighting the classification of dumpers as mining machinery and not road transport vehicles. The ITAT allowed the appeal, stating that the CIT(A) erred in rejecting the investment allowance claim. Ultimately, the ITAT dismissed the Revenue's appeals and fully allowed the assessee's appeals.