2017 (1) TMI 1333 - AT - Income Tax

Depreciation on JCB Excavator, Motor Grader and Soil Compactor used in the business of construction of road exclusively - @ 15% OR 50% - Held that - The issue of allowability of depreciation on JCB and other equipments has been decided by the Hon ble Kerala High Court in the case of CIT vs. Galord Constructions (2009 (8) TMI 1156 - KERALA HIGH COURT ) it can be safely inferred that two views have been expressed by the different High courts and the Coordinate Benches. It is settled position of law by the judgment of Hon ble Supreme Court rendered in the case of Vegetable Products Ltd. (1973 (1) TMI 1 - SUPREME Court) that if there are two views possible, then the view which favours the assessee has to be adopted. Respectfully following the judgment of Hon ble Apex Court , we hereby direct the AO to allow the depreciation @ 50%.

Summary

Issues Involved:
1. Whether JCB Excavator, Motor Grader, and Soil Compactor used in the construction of roads qualify as commercial vehicles eligible for higher depreciation at 50%.
2. Conflicting judicial precedents on the classification of such machinery for depreciation purposes.

Issue-wise Detailed Analysis:

1. Eligibility for Higher Depreciation:
The primary issue in this appeal was whether the JCB Excavator, Motor Grader, and Soil Compactor used in road construction qualify as commercial vehicles, thereby entitling the assessee to claim higher depreciation at 50%. The assessee argued that these machines fall within the definition of heavy motor vehicles and are used commercially in the construction business. The assessee cited the Hon'ble Kerala High Court's judgment in CIT vs. Gloard Construction, which held that a JCB is a motor vehicle eligible for higher depreciation.

2. Conflicting Judicial Precedents:
The Revenue, on the other hand, relied on the judgment of the Hon'ble Jurisdictional High Court in CIT vs. M/s. Gotan Lime Stone & Others and other High Court judgments, arguing that these machines do not qualify as commercial vehicles for higher depreciation. The CIT (A) upheld the AO's decision, stating that these machines do not solely carry goods and therefore do not qualify as commercial vehicles under the Income Tax Act. The CIT (A) referenced the Motor Vehicles Act, which defines "goods carriage" as vehicles constructed or adapted solely for the carriage of goods. Since the machines in question are not used solely for carrying goods, they do not qualify as commercial vehicles.

Tribunal's Decision:
The Tribunal noted the conflicting views among various High Courts and Coordinate Benches regarding the classification of such machinery for depreciation purposes. The Tribunal cited the Hon'ble Supreme Court's judgment in Vegetable Products Ltd., which established that when two views are possible, the one favoring the assessee should be adopted. Consequently, the Tribunal directed the AO to allow the depreciation at 50%, favoring the assessee's claim.

Conclusion:
The appeal was allowed in favor of the assessee, with the Tribunal directing the AO to grant the claimed higher depreciation rate of 50% on the JCB Excavator, Motor Grader, and Soil Compactor. The Tribunal's decision was based on the principle of adopting the view that favors the assessee when there are conflicting judicial precedents.