THE DCIT, CIRCLE-1(1)(2),, AHMEDABAD vs. DHOLU CONSTRUCTION & PROJECTS LTD.,, AHMEDABAD

We have also perused the order passed by the Coordinate Bench in assessee’s own case in 3145 & 3146/Ahd/2016 for A.Y. 2010-11, 2012-13 & 2013-14. While deciding the issue in favour of the assessee the Hon’ble Bench was pleased to observed as follows: “16.Now we come to ground relating to restricting depreciation on hire of heavy goods vehicles from 30% to 15%. 17.On verification of the depreciation chart, it is noticed that the assessee has claimed deprecation of Rs. 28,05,595/- at 50% on loader vehicles as against allowable depreciation at 15%. As such, vide Point No. 1 of notice u/s, 142(1) dated 03/02/2015, the assessee was requested to justify its claim of depreciation at 50% on loader vehicles. In response thereto, the assessee vide letter dated 16/02/2015 stated that the heavy goods vehicle owned by us are used on hire a/id, as such the depreciation at 50% is allowable. In support of the same, the assessee furnished copy of New Appendix-l in item No. 3(via) of machinery and plant. The submission made by the assessee has been gone through carefully but the same is found to be not acceptable. The 50% depreciation is allowable as per New Appendix-l in item No. 3(via) new commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of ^[October], 2009 and is put to use before the 1st day of ^[October], 2009 for the purposes of business or profession [See paragraph 6 of the Notes below this Table]. A careful perusal of the above, it can be seen that the condition for 50% depreciation is only that the assets should be covered in the note-6 of table defines "Commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not” include "maxi-cab", "motor-cab", "tractor" and "road-roller". The expressions "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "road-roller"

We have heard both the parties and gone through the material available on record. And in support of its contention, ld. A.R. cited an order of Jurisdictional High Court in the matter of Pr. CIT vs. Durga Construction Co. [2018] 93 taxmann.com 436 (Guj.) wherein in similar circumstances, claim of the assessee was allowed and relevant para is reproduced: 5. The assessee has been awarded contract for providing equipments on hire with manpower to execute the work of excavation, loading and removal of minerals from one place to another. The entire operation is scheduled and controlled by the principal. The assessee is required to provide stipulated equipments and vehicles on hire. The assessee would not be allowed to remove any equipments or vehicles provided under the contract without prior permission of the principal. The business of the assessee-firm itself was providing equipments and motor vehicles on hire.

CIT [A] accepted the assessee's contention and reversed the decision of Assessing Officer, relying on the earlier decision. The Appellate Commissioner has also relied on CBDT Circular No. 652 which provides that under sub-item 2[ii] of Item III of Appendix I to the Rules, higher rate of depreciation would be admissible on motor buses, motor lorries and motor taxis used in the business of running them on hire. It was clarified that higher depreciation will also be admissible on motor lorries used in the assessee's business of transportation of goods on hire.

The revenue carried the matter in appeal before the Tribunal. The Tribunal confirmed the view of the CIT [A] taking note of the scope of work awarded to the assessee under the tender terms as also placing reliance on the CBDT Circular No. 652 dated 14th June 1993.

Against such judgment, the Revenue has filed the present appeal.

Facts in all other appeals are substantially similar and are therefore not separately recorded.

Section 32 [1] of the Income-tax Act, 1961 ["the Act" for brevity] provides for depreciation in respect of buildings, machinery, plant or furniture, being tangible assets as well as certain intangible assets owned wholly or partly by the assessee and DCIT vs. Dholu Construction & Projects Ltd. Asst.Year –2014-15 - 4 - used for the purpose of the business or profession, at the prescribed rates. New Appendix I, which is applicable for AY 2006-2007 and onwards, in Part-A contends specific rate of depreciation for "tangible assets". Capital-Ill thereof pertains to "machinery and plant". Under sub-item [2] of Item [3] (iii), the rate of depreciation on "motor buses, motor lorries and motor taxis used in the business of running them on hire" is prescribed @ 30%. It is in this context, we have to test the correctness of the view taken by CIT [A] and the Tribunal. Revenue's main contention appears to be that the assessee had not given the said machinery on hire since the assessee was awarded the contract for mining. However, we have noticed some of the leading terms of the tender. These terms inter alia required the assessee to provide machinery for hire for excavation of overburden; transportation of such excavated overburden minerals; transportation of minerals from mines to pit-head, stock piles or at any other place, and the transportation of overburden of minerals and excavated minerals to be done by running motor vehicles such as tippers, dumpers, etc. Essentially, therefore, the assessee was awarded contract for providing such equipments on hire. It was in this context, the assessee has highlighted that the assessee has no control over the equipments so hired and it was the principal which would decide to deploy the equipments at the appropriate place.

From the material available on record though the assessee essentially was awarded contract for providing specialized equipments and trained manpower for mining and transportation of excavated minerals on hire, the terms of the tender and the eventual contract awarded would suggest that the assessee was given the work of mining. The assessee was essentially required to provide equipments and manpower on hire. In view of such discussion, we find no error in the view taken by the Tribunal. Even if the assessee had used such equipments and manpower for its direct mining operations for the contract, if it was so awarded, we wonder whether that would make any difference particularly in view of CBDT Circulars No. 609 and 652 and the decision of the Supreme Court in case of I.C.D.S. Ltd. v. CIT [2013] 350 ITR 527/212 Taxman 550/29 taxmann.com 129. However, when this issue does not arise for direct consideration, we need not conclude the same.

All in all, we see no error in the view taken by the Tribunal. No question of law arises. Tax Appeals are dismissed.

Respectfully following the aforesaid Jurisdictional High Court order, we allow the claim of the depreciation on commercial vehicle retained by the assessee to 15% to 50%. Therefore, we allow this ground of appeal.”