2015 (9) TMI 701 - AT - Income Tax

Depreciation on the written down value of the vehicles used in the business of transportation of municipal solid waste - @ 30% OR @15% - Entitlment for higher rate of depreciation - Held that - CIT (A) has failed to construe the circular in right perspective. According to the learned CIT (A) the circular is applicable if an assessee has used the motor vehicle for transporting the goods on hire or the higher rate of depreciation would be applicable or given on hire like Taxis. In the present case, the assessee has been transporting the solid waste of municipality on hire. Thus, the very nature of the assessee s business is such which bring him in the ambit of the circular. It is not the case where a person is running any consultancy firm and used a motor car for himself. Here the vehicles are used for transporting the goods of third concern by virtue of a contract. There is a commercial exploitation of the vehicles for transporting the goods on hire. Therefore, the assessee is entitled for higher rate of depreciation. We allow the appeal of the assessee and delete the disallowance.- See Urmila and Co. Vs. DCIT 2011 (1) TMI 1227 - ITAT MUMBAI - Decided in favour of assessee.

Summary

Issues:
- Depreciation rate on vehicles used in the business of transportation of municipal solid waste
- Charging of interest under sections 234B and 234C of the Income Tax Act

Depreciation Rate Issue:
The appeal concerns the depreciation rate on vehicles used for transporting municipal solid waste. The assessee argued for a higher rate of 30% instead of the 15% allowed by the Assessing Officer and upheld by the CIT (A). The dispute revolved around the interpretation of circulars and relevant provisions of the Income Tax Act. The assessee relied on Circular No. 652 and a judgment of the Bombay High Court regarding the correct application of depreciation rates. The Board's circular clarified that higher depreciation is admissible for vehicles used in the business of transportation of goods on hire. The assessee contended that since they were transporting municipal solid waste on hire, they were entitled to the higher rate of depreciation. The Tribunal agreed with the assessee, noting that the vehicles were commercially exploited for transporting goods on hire, justifying the higher depreciation rate. Consequently, the disallowance was deleted, and the appeal was allowed in favor of the assessee.

Interest Charging Issue:
The second issue involved the charging of interest under sections 234B and 234C of the Income Tax Act. The assessee contested the charging of interest, but no specific arguments were advanced in this regard. The Tribunal, having decided the appeal in favor of the assessee on the depreciation rate issue, found the interest arguments to be inconsequential and rejected any contentions related to interest. Consequently, the charging of interest under sections 234B and 234C was upheld without further discussion.

In conclusion, the Appellate Tribunal ITAT Bangalore ruled in favor of the assessee regarding the depreciation rate on vehicles used in the transportation of municipal solid waste, allowing the appeal and deleting the disallowance. However, the Tribunal rejected any contentions related to the charging of interest under sections 234B and 234C of the Income Tax Act, deeming them inconsequential in light of the decision on the depreciation rate issue.