2023 (10) TMI 549 - AT - Income Tax

Revision u/s 263 - Additional / Higher rate of depreciation @30% on heavy vehicle (Hyva and Tipper) - PCIT observed that the assessee is engaged in mining contract, these vehicles are primarily used on assessee own business and furthermore, no hire income was shown from the heavy vehicle, therefore, depreciation @15% only should have been allowed - HELD THAT - Main condition for availing of additional depreciation as carved out in the Act is that the motor buses/motor lorries and motor taxis are to be used in a business of running them on hire could not be satisfied by the assessee by way of any supporting documents like any hire charges which were separately paid to the assessee by the contractee company or any condition which may support the contention of the assessee that the heavy vehicles were used in hire by the assessee. Since, the MDO contract was a composite contract for Excavation loading, Sorting Sizing Stacking, Hauling, Drilling Blasting, Loosening, Feeding to fixed screen plant etc. The hiring of vehicles in terms of Section 32 could not be specified and therefore, the Learned PCIT has rightly observed to disallow such additional depreciation when the vehicles are used in the own business of the assessee and not on hire. No merit in the contention of the assessee and infirmity in the order of PCIT, therefore PCIT was correct in invoking the provision of Section 263, since the order of Learned AO was satisfactorily held to be erroneous so far as prejudicial to the interest of Revenue.

Summary

Issues Involved:
1. Delay in filing the appeal.
2. Legitimacy of the higher depreciation claim on heavy vehicles.
3. Validity of the Principal Commissioner of Income Tax (PCIT)'s invocation of Section 263 of the Income Tax Act, 1961.

Summary:

1. Delay in Filing the Appeal:
The appeal by the assessee was delayed by 44 days. The delay was attributed to the assessee's involvement in mining projects in remote areas with limited internet access. The tribunal found the justification satisfactory and condoned the delay, allowing the appeal for adjudication.

2. Legitimacy of the Higher Depreciation Claim on Heavy Vehicles:
The assessee, engaged in mining contracts, claimed and was allowed depreciation at 30% on heavy vehicles (Hyva and Tipper). The PCIT observed that these vehicles were used primarily in the assessee's own business and no hire income was shown, suggesting that only 15% depreciation should have been allowed. The assessee argued that the vehicles were used exclusively for transporting ores within the mining sites, falling under the category of motor lorries used in the business of running them on hire, thus justifying the higher depreciation rate. The tribunal, however, found that the assessee could not provide sufficient evidence to show that the vehicles were used on hire as required under Section 32 of the Income Tax Act.

3. Validity of PCIT's Invocation of Section 263:
The PCIT invoked Section 263, considering the assessment order erroneous and prejudicial to the interest of revenue due to the excess allowance of depreciation. The tribunal noted that the assessee failed to show any specific query or discussion regarding the additional depreciation during the original assessment proceedings. The PCIT's decision to disallow the higher depreciation was upheld as the assessee could not establish that the vehicles were used on hire. The tribunal distinguished the present case from the cited case of M/s H.D. Enterprise, where the assessee was found to be engaged in providing equipment and motor vehicles on hire.

Conclusion:
The tribunal upheld the PCIT's order, confirming that the original assessment was erroneous and prejudicial to the interest of revenue. Consequently, the assessee's appeal was dismissed.