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TMI Blog2007 (9) TMI 207X X X X Extracts X X X X X X X X Extracts X X X X ..... n of lime stone and sale thereof. The Assessing Officer allowed investment allowance of Rs. 3,30,292 while making the assessment under section 143(3) of the Act for the assessment year 1990-91 on the cost of loaders and dumpers vide annexure I but the Commissioner of Income-tax passed the order under section 263 of the Act and held that the assesses is not entitled to investment allowance under section 32A of the Act by holding that the dumper/loader is a motor vehicle vide annexure 2. In appeal, the Income-tax Appellate Tribunal, Jodhpur, set aside the order of the Commissioner of Income-tax and restored the order of Assessing Officer granting investment allowance on dumpers and loaders as not being road transport vehicle vide annexure 3. (ii) D. B. Income-tax Appeal No. 42/2002: 4 In this appeal also, the assesses was carrying on the business of exca vation of lime stone and sale thereof and was granted investment allowance on dumpers for a sum of Rs. 2,70,747 while making the assessment under section 143(3) of the Act for the assessment year 1989-90 vide annexure 1, but in appeal, the Commissioner of Income-tax, Jodhpur, passed the order under section 263 of the Act that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... les are not used for the purpose of the business carried on by the assesses, therefore, the Tribunal has wrongly allowed investment allowance on these So-called machines, which are used by the assesses for his own business, have been claimed by the assesses for his own business in Appeal Nos 41 and 42 of 2002 and used on hire basis in Appeal No. 77 of 2002. In 1pport of his contention, he has placed reliance on the following judgment - (1) Birla Cement Works v. State of Rajasthan reported in [2003]129 749 (Raj) (2) Chief General Manager, Jagannath Area v. State of reported in [1996] 10 SCC 676 ; (3) CIT v. Shiv Constructions reporte in [1987] 165 ITR 159 (Guj); (4) CIT v. N. C. Budharaja and Co.' in [1993] 204 ITR 412 (SC); (5) Builders Associations of India v. Union of India [1994] 209 ITR 877 (SC) ; and (6) CIT v. Khaders Inter national Constructions Ltd. [1995] 213 ITR 869 (Ker). 8 On the contrary, Mr. Vikas Balia and Mr. Anjay Kothari, learned counsel for the assesses respondents, have vehemently argued that dumpers, tippers and hydraulic excavators are not road transport vehicles within the four corners of the proviso to sub-section (1) of section 32A of the Act and ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of development rebate. Though section "32A. Investment allowance. (1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assesses and is wholly used for the purposes of the business carried on by him, there shall, in accordance with and subject to the provisions of this section, be allowed a deduction, in respect of the previous year in which the ship or aircraft was acquired or the machinery or plant was installed or, if the ship, aircraft, machinery or plant is first put to use in the immediately succeeding previous year, then, in respect of that previous year, of a sum by way of investment allowance equal to twenty-five percent . Of the actual cost of the ship, aircraft, machinery or plant to the assesses : Provided that in respect of a ship or an aircraft or machinery or plant specified in sub-section (8B), this sub-section shall have effect as if for the words "twenty five per cent.", the words "twenty per cent." had been substituted : Provided further that no deduction shall be allowed under this section in respect of (a) any machinery or plant installed in any office premises or any residential accommo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppers, dumpers and hydraulic excavators, which are either used as road transport vehicles or not? 11 Under the scheme of the Motor Vehicles Act, 1939, the "road transport vehicle" has not been specifically defined but the "motor vehicle" or "vehicle " has been defined under section 2(28) of the said Act, which reads as under: "(28) 'motor vehicle' or 'vehicle' means any mechanically propelled vehicle adapted for use upon roads whether the power of propulsion is transmitted thereto from an external or internal source and includes a chassis to which a body has not been attached and a trailer; but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding twenty-five cubic centimeters." 12 From a bare reading of this sub-section, it is clear that any mechanically propelled vehicle adapted for use on roads is a motor vehicle but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 2(28) of the Act. Disentitlement of investment allowance under Section 32A of the Act is for the road transport vehicles and not on all motor vehicles including "construction equipment vehicles" which are "non-transport vehicles". Whether the owners of the dumpers, tippers or hydraulic excavators are entitled for investment allowance under section 32A of the Act or not, has been elaborately discussed by various High Courts and the hon'ble Supreme Court. 15 In CIT v. Gujarat Narmada Valley Fertilizer Co. Ltd. [2006] 281 ITR 297, the Gujarat High Court while interpreting the words "road transport vehicle", has held that the tractor-trailers would not fall within the meaning of road transport vehicles and that the assesses is entitled to claim investment allowance. 16 In CIT v. Bajrang Enterprises [2002] 258 ITR 448, the Madras High Court held that the investment in the dumpers have been made by the assesses and the dumpers having been used for the purpose of mining, investment allowance was clearly allowable. 17 In CIT v. Shriram Transport Finance Co. Ltd. [2006] 254 ITR 558 (Mad), the same proposition was laid down by the Madras High Court on the mobile crane used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i are road transport vehicles and are not entitled to development rebate under section 33A of the Act. That was a case of development under section 3A of the Act and the question was not examined on the merits, as counsel for the assesses conceded that the dumpers are road transport vehicles. In that case, the court further served that the Revenue cannot take up an inconsistent stand that the n dumpers were road transport vehicles for the purpose of development : and that they were not so for the purpose of depreciation. 25 Thus, from the decisions, referred-to above, it can safely be said that the Motor Vehicles Act, 1939, the dumpers, tippers and hydraulic excavators are construction equipment vehicles within the definition of 2(ca) of the Act and are non-transport vehicles by virtue of the Explanation attached to this definition and cannot be categorized as road transport vehicles for the purpose of entitlement of investment allowance under section 32A of the Act. 26 The definition of construction equipment vehicle being a non-transport vehicle was inserted as late as in the year 2000 and the matters in hand are of earlier assessment year but while interpreting th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... him, a contractor or lessee or licensee engaged in the business of contract, cannot claim benefit under section 32A of the Act, whereas learned counsel appearing for the assesses have countered the arguments with the scheme of the Act and also on the basis of the law cited by them. 29 It is not in dispute that the tippers and hydraulic excavators which are used by the assesses in Appeal No. 77 of 2002 are owned by him but they are engaged in the business of letting out the same on hire basis for cement factories. As referred to above, the scheme of investment allowance introduced with effect from April 1, 1976, by the Finance Act of 1976 has taken the shape of development rebate which is granted under section 33 of the Act. The assessed cannot of course claim benefit of both the sect in the same assessment year. Now, section 32A of the Act has been omitted by the Finance Act of 1990. During the applicability of these provisions under section 32A of the Act, the words "wholly used for the purpose of the business carried on by the assesses" have been interpreted by the courts on the facts of a given case, but while interpreting the language of this provision on investment allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... usiness of hire or license because if the definition of business is read in the light of section 28 of the Act which prescribes tax on profits and gains of business or profession, it includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture by virtue of clause (13) of section 2 of the Act, which reads as under: "2. Definitions . In this Act, unless the context otherwise requires, (13) 'business' includes any trade, commerce or manufacture or any adventure or concern in the nature of trade, commerce or manufacture." 32 When any commercial activity is performed by way of a transaction of business and tax is charged on its profits and gains which are carried on by the assesses, then it cannot be said that the person giving plant or machinery on licence or hire, is not doing any commercial activity of business. Therefore, the assesses, who owns machinery and plant and gives them on licence or hire to various manufacturers as part of his business, cannot be deprived of the machines purchased by him of which he is the owner and are installed for the business of any other industrial undertaking producing an article ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s which give the machinery on hire as in the present case." 35 It was also a case of leasing out machinery on hire basis by the finance companies which purchased machinery and hired out the same to the manufacturer under the agreement of hire and the following reference was answered in the affirmative (page 310): "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that in respect of the machinery owned by the assesses, but leased to third parties and used by them for the manufacture of article or thing, investment allowance was allowable under section 32A?" 36 Learned counsel for the Revenue has mainly relied upon the decision of CIT v. N. C. Budharaja and Co. [1993] 204 ITR 412 (SC), in which the point in dispute was about the construction of dam and the assesses was doing execution of civil engineering and structure work and consequently, deducations under section 80HH and investment allowance under section 32A was not granted. While interpreting section 32A of the Act, the court was of the opinion that sub-clause (iii) of clause (b) of sub-section (2) of section 32A of the Act does not comprehend within its ambit construction ..... X X X X Extracts X X X X X X X X Extracts X X X X
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