COMMISSIONER OF INCOME TAX vs. H.M.T.CONSTRUCTION CO.

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ITR/164/1989HC GujaratGJHC24012944198903 July 2002Bench: HONOURABLE MR. JUSTICE MOHIT S. SHAH,HONOURABLE MR. JUSTICE K.A.PUJ3 pages
AI SummaryAllowed

What did the High Court hold?

The High Court held that the assessee is entitled to depreciation at the rate of 30% on the dumpers employed in its business of road construction. The Court relied on its own earlier decision in the case of Shiv Construction Co. vs. Commissioner of Income-tax (1987) 165 ITR 160. In that case, the Court had confirmed the Tribunal's view that dumpers are machinery or tools used for the business and should not be denied depreciation at 30% on the ground that they are road transport vehicles. Since the facts of the present case were identical to Shiv Construction Co. and no distinguishing features were presented, the Court answered the referred question in the affirmative, in favour of the assessee. The reference was disposed of accordingly.

What were the facts?

The Income Tax Officer (ITO) allowed depreciation at 30% to the assessee, H.M.T. Construction Co., on dumpers used in its road construction business. The Commissioner of Income-tax (CIT) initiated proceedings under Section 263, holding the ITO's order erroneous and prejudicial to revenue. The CIT contended that dumpers fell under 'Road making plant and machinery' (Appendix I, Part I, Rule 5 of IT Rules, 1962) eligible for 15% depreciation, not 'earth moving machinery' (Appendix, III D(4)) eligible for 30%. The CIT directed the ITO to allow depreciation at 15%. The Appellate Tribunal, following its earlier decision in M/s. Hindustan Construction Company, held dumpers eligible for 30% depreciation, setting aside the CIT's order.

What were the issues?

1. Whether the assessee is entitled to depreciation at the rate of 30% on the Dumpers employed in its business of road construction, as per the Income Tax Act, 1961. Assessee's contention: The assessee argued that dumpers fall under the classification of 'earth moving machinery', which is eligible for depreciation at the rate of 30% as per the relevant Appendix of the Income Tax Rules. Revenue's contention: The revenue, through the Commissioner of Income-tax, contended that dumpers are covered under 'Road making plant and machinery', which is eligible for depreciation at a lower rate of 15%. The revenue argued that the ITO's order allowing 30% depreciation was erroneous and prejudicial to the interest of the revenue.

Which sections of the Income-tax Act were involved?

Section 263,Section 68

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 164 of 1989

For Approval and Signature:

Hon'ble MR.JUSTICE M.S.SHAH and Hon'ble MR.JUSTICE K.A.PUJ

============================================================ 1. Whether Reporters of Local Papers may be allowed : NO to see the judgements?

2.

To be referred to the Reporter or not? : NO

3.

Whether Their Lordships wish to see the fair copy : NO of the judgement?

4.

Whether this case involves a substantial question : NO of law as to the interpretation of the Constitution of India, 1950 of any Order made thereunder?

5.

Whether it is to be circulated to the Civil Judge? : NO @ COMMISSIONER OF INCOME TAX Versus H.M.T.CONSTRUCTION CO. -------------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 164 of 1989 MRS MONA BHATT for Petitioner No. 1 SERVED BY RPAD - (N) for Respondent No. 1

--------------------------------------------------------------

CORAM : MR.JUSTICE M.S.SHAH and MR.JUSTICE K.A.PUJ

Date of decision: 03/07/2002

ORAL JUDGEMENT (Per : MR.JUSTICE K.A.PUJ)

At the instance of the Revenue, the following question of law is referred to this Court for its opinion:-

"Whether, the assessee is entitled to depreciation at the rate of 30% on the Dumpers employed in its business of road construction?"

2.

The Income-tax Officer in the course of assessment proceedings allowed depreciation at the rate of 30% to the assessee.

3.

The Commissioner of Income-tax initiated proceedings under section 263 of the I.T. Act on the ground that the order passed by the I.T.O. was erroneous in so far as it was prejudicial to the interest of the revenue. According to the Commissioner of Income-tax the Dumpers were covered in "Road making plant and machinery" appearing at item No.III B(14) of Appendix I Part I of Rule 5 of the I.T. Rules, 1962 and depreciation was available at the rate of 15% only. The assessee contended that Dumpers came under the classification of "earth moving machinery" covered by item III D(4) of the Appendix. The Commissioner of Income-tax turned down the objections raised by the assessee and directed the ITO to allow depreciation at the rate of 15%.

4.

The Appellate Tribunal relying on its earlier decision in the case of M/s. Hindustan Construction Company ITA No.1515 to 1517/Ahd/1986 held that Dumpers would be entitled to depreciation at the rate of 30%. The Appellate Tribunal, therefore, set aside the order made by the Commissioner of Income-tax under section 263 and restored the order made by the I.T.O..

5.

We have heard Mrs. Mona Bhatt, learned Standing Counsel appearing for the revenue. No one appears on behalf of the respondent though notice was duly served.

6.

At the time of hearing of this Reference, our attention is drawn to the decision of this Court in the case of Shiv Construction Co. vs. Commissioner of Income-tax (1987) 165 ITR 160 wherein this Court has confirmed the view taken by the Tribunal that dumpers were machinery or tools used for the business of the assessee and that for that reason, the assessee cannot be denied the claim of depreciation at the rate of 30% on the ground that the dumpers were road transport vehicles.

7.

Since the facts of the present case are identical with the facts of the case of Shiv Construction Co. vs.

CIT (supra) and no distinguishing feature has been pointed out, we are of the view that the assessee is entitled to depreciation at the rate of 30% on the dumpers employed in the business of road construction.

8.

We, therefore, answer the question referred to us in the affirmative i.e. in favour of the assessee and against the revenue.

9.

The Reference is accordingly disposed of with no order as to costs.

(M.S. Shah,J) (K.A. Puj,J) zgs/-

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