SAMARTH LIFTERS P.LTD,THANE vs. ADDL CIT RG 3, THANE

2 4. The facts in brief are that the assessee is engaged in the business of providing vehicles like crawler cranes, dozers etc. on hire. During the course of scrutiny assessment the AO disallowed the depreciation to the extent of Rs.9,18,44,052/- holding that crawler cranes and dozers were plant and machinery entitled for depreciation @ 15% and not @ 30% as claimed by the assessee. The assessee has claimed these vehicles to be „motor lorries‟ used in the business of running them on hire and therefore entitled for higher depreciation. The Hon‟ble CIT(A) has confirmed the disallowance.

At the outset learned AR placed on record the order of ITAT, Mumbai Bench in assessee‟s own case in dated 20.12.2004 for the A.Y.1998-99 wherein Tribunal has allowed higher depreciation @ 40% (then prevailing rate) holding cranes to be motor vehicles and not plant and machinery. It was further submitted that the revenue had filed appeal before the Hon‟ble High Court but requested for withdrawal and therefore the Hon‟ble High Court dismissed the appeal. The order of the Hon‟ble Tribunal granting higher depreciation on cranes in the assessee‟s own case therefore became final. Copies of the relevant orders are also placed on record.

We have gone through the orders to the authorities below as well as the order of ITAT and Hon‟ble High Court wherein appeal filed by the revenue is dismissed as withdrawn. On merits, as per entry III(3)(ii) of Part A of Appendix I to I.T.Rules 1962, motor buses, motor lorries and motor taxies used in a business of running them on hire are entitled for 3 depreciation @ 30%. (New Appendix it appears at pg. No. 82 to 89 of compendium separately submitted). From the record we found that the assessee owns several transport vehicles which are given on hire and in respect of which depreciation is claimed @ 30% as per the above referred entry. Crawler Cranes and Dozers are part of such transport vehicles, in respect of which depreciation is claimed @ 30%. The ld. AO/Hon‟ble CIT(A) have held crawler cranes / dozers to be plant & machinery entitled for depreciation @ 15% and not motor vehicles entitled for depreciation @ 40%.

So far as nature of assets is concerned we found that a crawler crane is a crane having a power plant like a motor vehicle which runs mostly on a diesel engine which sufficient power / torgue and other features of a motor vehicle like cooling systems, starter, radiator, throttle with sufficient fuel tank capacity. Normally, the crawler crane has hydraulic system, boom hoisting system, load hoist system, swing system, enclosed or open cab with lower structure operating on a crawler belt. The crawler crane is capable of moving on its own accord on surface areas. A dozer is a continuous tracked tractor type vehicle used to move large quantities of sand, rubble etc. from one place to another. A dozer also has engine with regular power plant to help it move on its own accord one place to another.

As per our considered view registration is not mandatory for claiming depreciation. The term motor vehicle has not been defined under the Income Tax Act 1961. Accordingly, we have to rely on the 4 definition of the said term as contained in Sec. 2(28) of the Motor Vehicles Act 1988. The term “motor vehicle” as per the said act reads as under. Sec.2(28) “Motor vehicles”, or “Vehicle” means any mechanically propelled vehicle adopted 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 vehicles of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than 4 wheels fitted with engine capacity of not exceeding twenty five cubic centimetres.”

The term used in above definition is of a “mechanically propelled vehicle adapted for use upon road........”. Thus, if a vehicle is capable of being run on road (adapted) then it is sufficient to categorize such vehicle as a motor vehicle. (copy of relevant page of Motor Vehicles Act, 1988 is enclosed at pg no.90&90 of paper book so filed before us). Registration of the vehicle under the Motor Vehicle Act, 1988 is not the requirement for claiming higher depreciation. Appendix I of IT Rules or Section 32 of the I.T.Act 1961 does not mandate that a vehicle should be registered under the Motor Vehicles Act, 1988 for claiming higher depreciation.

The Hon‟ble Supreme Court in the case of I.C.D.S. Ltd. Vs. CIT, 350 ITR 0527 (SC) (2013) has held that depreciation u/s.32 could not be denied for the reason that vehicle was not registered in the name of the 5 assessee under the Motor Vehicle Act. Similar view is taken by the jurisdictional High Court in the case of CIT Vs. Dilip Singh Sardarsingh Bagga, 201 ITR 0995 (Bombay High Court)(1994).

Accordingly, reliance of the AO/Hon. CIT (A) of crawler cranes / dozers not holding permanent registration under the Motor Vehicles Act, 1988 is misplaced for declining higher claim of depreciation.

The crawler cranes / dozers were not permanently registered under the Motor Vehicles Act, 1988 due to the fact that these vehicles through capable are not piled on public roads. The vehicles are deployed in port / factory premises and therefore do not require permanent registration under the Motor Vehicles Act, 1988. In the course of asst. proceedings, it was further explained that even though the crawler cranes were not registered with road transport authorities directly, in certain states, it was required to pay vehicle tax by obtaining temporary permit for the period of its operation in the state. The ld. AO unfortunately has assumed such payments to be in the nature of temporary entry tax. The transport vehicles in Gujarat are governed of Bombay Motor Vehicle Tax Act 1958 which extends to the whole state of Gujarat. The fees paid for temporary permits issued by Gujarat Motor Vehicle department permitted operation of the crawler cranes on public roads also for the given period of time. The assumption made by the ld.AO that such fees are some sort of entry tax is factually in-correct. The copes of RTO tax paid receipts for crawler cranes to operate in Gujarat are at pg nos. 12 to 18 of paper book. A certificate from Govt. Approved RTO consultant, M/s.Sama Auto 6 Consultant explaining the nature of tax paid appears at pg. No.19 of paper book. It is thus the case that under the Bombay Vehicle Tax Act, 1958, the crawler cranes owned by the appellant are recognised as heavy motor vehicles.

The ld. AO in the Asstt. Order has further discussed the type of work carried out by cranes and arrived at the conclusion that cranes unless registered under the Motor Vehicle Act could not be termed as “Motor Lorry” entitled for depreciation @ 30%. In the said regards, we observe that it is not possible to include each and every type of vehicle in the depreciation schedule. Due to rapid industrialization, the various types of machines used in transport business are increasing day after day with each machine carrying out a particular type of activity in a more efficient manner. These machines do not find direct representation in the depreciation schedule. In such situation, the functional similarly with the nature of activity performed by the listed machine has to be done to determine under what category a particular machine would fall.

We also found that CBDT vide Instruction No.617 dated 13.09.1973 has even included “forklift” in the category of motor vehicle entitled for higher depreciation of 30%. The Hon. Supreme Court in the case of Chairman Rajasthan State Road Transport Corp and Other-vs-Santosh and Others 7 SCC 94 (SC)(2013) have analyzed the definition of the term motor vehicle to hold even a tractor to be motor vehicle as it is capable of being adapted to run on public roads.