2023 (7) TMI 341 - AT - Income Tax

Higher rate of depreciation on dumpers - @30% OR 15% - vehicle/dumpers were given on hire - HELD THAT - To claim higher depreciation it is required that goods transported must belong to someone else and use of motor vehicles for transportation is a key to claim higher depreciation. After perusal of material on record we find that the assessee is engaged in providing equipment and motor vehicle on hire. As relying in assessee s own case for the earlier assessment years 2011-12 to 2013-14 we have no hesitation in following the same, and allow the benefit of higher rate of depreciation @ 30% on Dumper, Tipper etc. Thus the grounds raised by the Revenue is devoid of merits.

Summary

Issues involved:
The appeal filed by the Revenue against the Appellate order dated 14.03.2018 passed by the Commissioner of Income Tax (Appeals)-3, Rajkot arising out of the assessment order passed u/s 143(3) of the Income Tax Act, 1961 for the Assessment Year 2014-15.

Issue A: Nature of business and higher rate of depreciation
The Revenue contended that the Ld.CIT(A) erred in defining the nature of business as transporter and allowing higher rate of depreciation @30% on dumpers instead of 15% allowed by the AO. The Revenue argued that if the vehicles were given on hire, the assessee should have earned income from hiring out the equipment. The Revenue further claimed that if the assessee took the equipment on hire, there should be no claim for depreciation. The Revenue prayed for setting aside the order of Ld. CIT(A) and restoring that of AO.

Issue B: Failure to appreciate income from hiring out equipment
The Revenue argued that the Ld.CIT(A) failed to appreciate that if the vehicles were given on hire, the assessee should have earned income from hiring out the equipment. The Revenue contended that the Ld.CIT(A) did not consider that if the assessee had taken the equipment on hire, claiming depreciation would not be justified.

Issue C: Failure to consider equipment on hire
The Revenue claimed that the Ld.CIT(A) failed to appreciate that if the assessee had taken the equipment on hire, there should be no claim for depreciation. The Revenue argued that the Ld.CIT(A) did not properly consider the aspect of equipment being given on hire and the implications on claiming depreciation.

The ITAT, after considering the arguments and perusing the materials on record, upheld the decision of the Ld. CIT(A). The ITAT noted that the assessee was engaged in providing equipment and motor vehicles on hire, which led to the receipt of income from contracts involving various operations, including transportation. The ITAT found that to claim higher depreciation, it was necessary that the goods transported belonged to someone else, and the use of motor vehicles for transportation was crucial. Based on the facts, judicial pronouncements, and the findings of the Ld. CIT(A), the ITAT concluded that there was no reason to interfere with the Ld. CIT(A)'s decision. Consequently, the appeal of the Revenue was dismissed. The ITAT followed a Co-ordinate Bench decision and allowed the benefit of higher rate of depreciation @ 30% on Dumper, Tipper, etc., as the grounds raised by the Revenue were deemed devoid of merits.