DCIT, CEN. CIR-4(4), KOLKATA, KOLKATA vs. M/S PARIJAT VYAPAAR PVT. LTD., KOLKATA

This is an appeal filed by the revenue against the order of Ld. CIT(A)-9, Kolkata dated 30.07.2015 for AY 2010-11.

The sole issue involved in this appeal of revenue is against the order of Ld. CIT(A) in allowing depreciation on dumpers and tippers @ 30% as against depreciation @15% allowed by the AO. 3. We have heard rival submissions and gone through the facts and circumstances of the case and carefully perused the material available on record. We note that the assessee has claimed depreciation @ 30% on dumper and tipper. In earlier two assessment years the assessee also claimed depreciation @ 30% which was not allowed by the Revenue Authority. Based on the same facts and circumstances, the AO disallowed 15% excess depreciation in this year. Aggrieved, the assessee preferred an appeal before the Ld. CIT(A), who directed the AO to allow depreciation @ 30% on dumper and tipper by following various judgments of Hon’ble Gujarat High Court and Hon’ble Punjab & Haryana High Court. Aggrieved, revenue is now in appeal before us. We note that the issue is squarely covered in favour of the assessee by the decision of Hon’ble Karnataka High Court “INVESTMENT ALLOWANCE — ELIGIBILITY FOR ALLOWANCE — MACHINERY MUST BE OWNED AND WHOLLY USED FOR PURPOSES OF BUSINESS — PURPOSE OF BUSINESS INCLUDES EVERY ACTIVITY NECESSARY TO CARRY ON BUSINESS — BUSINESS OF CONSTRUCTION WORK — DUMPERS AND TIPPERS USED TO LIFT EARTH AND TRANSPORT SAME — RESULT IN PRODUCTION OF AN ARTICLE OR THING — ARE MACHINERY ENTITLED TO INVESTMENT ALLOWANCE — "THINGS", "ARTICLES", MEANING OF — INCOME-TAX ACT, 1961, SECTION 32A The word "thing" is shown in Earl Jowitt's Dictionary as meaning "the subject of dominion or property as distinguished from persons". There are three things: things real or immovable, comprehending lands, tenements and hereditaments; things personal or movable, comprehending goods and chattels, and things mixed; partaking of the characteristics of the former two, as a title deed. The civil law divided things into corporeal and incorporeal. The incorporeal items like debts would be things. Therefore, the word "things" comprehends incorporeal assets also. The term "article" is not confined to movable property only under section 32A of the Income- tax Act, 1961. Investment allowance is granted, inter alia, in respect of machinery or plant specified in sub-section (2) of section 32A which is owned by the assessee and is wholly used for the purpose of business carried on by the assessee. The purpose of business includes every activity which is necessary to carry on the business. It is not the final touches involved in a construction work that result in the carrying on of the business. The various activities from the beginning to the end will be part of the business. Machine used in the business of construction is eligible for investment allowance as is clear from section 32A(2)(b)(iii). The phrase "the business of construction is wide and, normally, a business of construction involves construction of buildings, dams, roads, channels, etc. Machinery which is necessary for business of construction involving several activities cannot be held as not contemplated by Parliament as covered for the purpose of investment allowance. The words and phrases used in a statute will have to be understood in the context in which they are used. Clause (b) in the second proviso to section 32A has to be read in the setting in which other clauses (a), (c) and (d) are used. Specially, clauses (a) and (b) in the second proviso make it clear that exclusion from the provision is only in respect of the machinery or plant or appliances connected with the administrative part of the business, i.e., those used in the office premises or residential accommodation of the assessee. Naturally, road transport vehicles referred to therein will have to be such vehicles which are made to carry the employees to the office and back home. The words "road transport vehicles" include vehicles like omnibuses, cars, etc., and not dumpers and tippers which are directly used in the activity of the business, at the place where the business is actually carried on. Dumpers and tippers are essentially machinery used to carry on a construction work. Therefore, the use of dumpers and tippers for the purpose of business of construction, i.e., used to lift earth and transport the same, results in the production of an article or thing and such machinery is entitled to investment allowance under section 32A of the Act.

In the result, the appeal of the revenue is dismissed. Order is pronounced in the open court on 18th October, 2017 Sd/- Sd/- (Dr. A. L. Saini) (Aby. T. Varkey) Accountant Member Judicial Member Dated : 18th October, 2017 Jd.(Sr.P.S.) Copy of the order forwarded to: