COMMISSIONER OF INCOME-TAX vs. HINDUSTAN CONSTRUCTION CO.

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ITR/35/1989HC GujaratGJHC24012818198905 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 Tribunal was right in law and on facts. The Court referred to its own prior decision in Shiv Construction Co. vs. Commissioner of Income-tax (1987) 165 ITR 160, which confirmed that dumpers are machinery or tools used for the business and are entitled to depreciation at 30%, and not to be denied this claim on the ground that they are road transport vehicles. Since the facts of the present case were identical to the cited case and no distinguishing features were pointed out, the Court concluded that the assessee was entitled to depreciation at the rate of 30% on the dumpers employed in the business of road construction. The question referred was answered in the affirmative, in favour of the assessee and against the Revenue. The reference was disposed of with no order as to costs.

What were the facts?

The Income Tax Officer (ITO) allowed depreciation at 30% to Hindustan Construction Co. (the assessee) for 'dumpers'. The Commissioner of Income-tax (CIT) initiated proceedings under Section 263 of the Income Tax Act, 1961, arguing that dumpers were 'road making plant and machinery' eligible for only 15% depreciation, making the ITO's order prejudicial to revenue. The assessee contended dumpers were 'earth moving machinery' eligible for 30% depreciation. The CIT directed the ITO to allow only 15% depreciation. The Appellate Tribunal, however, held dumpers were entitled to 30% depreciation, setting aside the CIT's order and restoring the ITO's order. The Revenue appealed to the High Court.

What were the issues?

1. Whether the Tribunal was right in law and on facts in holding that the 'dumpers' were used as 'earth moving machinery' by the assessee and entitled to depreciation at the rate of 30%? (Question of law and fact, concerning the classification of dumpers for depreciation purposes under the Income Tax Rules, 1962). Assessee's Contention: The dumpers fall under the classification of 'earth moving machinery' covered by item III D(4) of Appendix I, entitling them to 30% depreciation. Revenue's Contention: The dumpers are covered under 'Road making plant and machinery' at item No. III B(14) of Appendix I Part I of Rule 5 of the I.T. Rules, 1962, and are only entitled to 15% depreciation. The CIT initiated proceedings under Section 263 on this basis.

Which sections of the Income-tax Act were involved?

Section 263

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

INCOME TAX REFERENCE No 35 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? :

========================================================= COMMISSIONER OF INCOME-TAX Versus HINDUSTAN CONSTRUCTION CO. --------------------------------------------------------- Appearance: 1. INCOME TAX REFERENCE No. 35 of 1989 MR Mauna BhattHfor 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: 05/07/2002

ORAL JUDGEMENT (Per : MR.JUSTICE M.S.SHAH)

At the instance of the Revenue, the following

question of law is referred to this Court for its opinion:-

"Whether, the Tribunal was right in law and on facts in holding that the "dumpers" were used as "earth moving machinery" by the assessee and entitled to depreciation at the rate of 30% ?"

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 ITO 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 after considering the relevant Entries of Appendix-I as well as Circular issued by C.B.D.T., 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. Mauna Bhatt, learned Standing Counsel appearing for the Revenue. No one appears on behalf fo 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 fo 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. ]

rmr. [ K.A. Puj, J. ]

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