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2007 DIGILAW 1758 (RAJ)

Commissioner of Income Tax v. Kota Builders

2007-09-18

GYAN SUDHA MISRA, SANGEET LODHA

body2007
JUDGMENT 1. - This reference has been made by the learned Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (in short 'the Tribunal' hereinafter) under section 256(1) of the IT Act, 1961 (in short 'the Act' hereinafter), at the instance of Revenue, whereby the following question of law arising out of the order dated 28th Oct., 1988 in ITA Nos. 461 and 462/Jp/1987 has been referred for the opinion of this Court : "Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee was entitled to depreciation on trucks at the rate of 40 per cent as against 30 per cent allowed by the ITO." 2. Briefly stated the facts of the case are that the respondent assessee is a contractor engaged in business of construction of roads and buildings. During the relevant asst. yrs. 1981-82 and 1982-83, the assessee claimed depreciation on two trucks owned by it at the rate of 40 per cent. The claim of the assessee was allowed by the AO for both the years i.e., 1981-82 and 1982-83 vide assessment orders dated 27th Aug., 1982 and 28th March, 1983 respectively. However, later on it was found that the excessive depreciation at the rate of 40 per cent has been allowed to the assessee instead of 30 per cent allowable under the law, therefore, in order to withdraw the excessive depreciation, the assessment proceedings were reopened under section 147 of the Act. 3. After due consideration, the AO passed the reassessment orders dated 26th July, 1985 and 27th July, 1985 for the asst. yrs. 1981-82 and 1982-83 respectively. The AO arrived at the findings that only those assessees, who carry on business of the transportation, are entitled for depreciation at the rate of 40 per cent on trucks/dumpers. It was found that the assessee's main business is not transportation but it is a building contractor and plies the trucks for its own business but sometimes when spare same are let on hire, therefore, the depreciation at the rate of 40 per cent cannot be allowed. Accordingly, the depreciation was restricted by the AO to 30 per cent on both the trucks. 4. Being dissatisfied with the orders passed by the AO, the respondent assessee preferred appeals before the Commissioner of Income-tax (Appeals) Rajasthan Jaipur [in short 'CIT(A)']. Accordingly, the depreciation was restricted by the AO to 30 per cent on both the trucks. 4. Being dissatisfied with the orders passed by the AO, the respondent assessee preferred appeals before the Commissioner of Income-tax (Appeals) Rajasthan Jaipur [in short 'CIT(A)']. The appellate authority while disposing of the appeal by a common order dated 19th Feb., 1987, by merely recording its ipse dixit held that assessee is entitled to depreciation at the rate of 40 per cent and accordingly directed the ITO to allow the depreciation. 5. Aggrieved by the aforesaid order dated 19th Feb., 1987, the Revenue preferred the appeals before the learned Tribunal for both the assessment years. The learned Tribunal relying on its earlier decision in the matter of Manjeet Stone Co. v. CIT (1985) 21 TTJ (Jp) 266: (1985) Tax World 19 (Jp) proceeded to dismiss the appeals preferred by the Revenue and confirmed the order dated 19th Feb., 1987 passed by the CIT(A). On an application being preferred by the Revenue under section 256(1) of the Act, the learned Tribunal being of the opinion that the matter involves the question of law referred the question for the opinion of this Court in the terms mentioned herein above. 6. It has been contended by Mrs. Parinitoo Jain learned counsel for the Revenue that the respondent assessee is engaged in the business of construction of roads and buildings and the trucks owned by it are being mostly used for its own business, but occasionally, the same are hired out to others. Since the assessee's main business is not of hiring of the trucks, therefore, the assessee is not entitled for depreciation at the rate of 40 per cent instead it is entitled for the depreciation at the rate of 30 per cent. Learned counsel for the Revenue further submits that the question of law referred by the learned Tribunal, in the present case, stands answered by this Court, in identical facts and circumstances, in the matter of CIT v. Manjeet Stone Co. (1991) 91 CTR (Raj) 239: (1991) 190 ITR 183 (Raj) , in favour of the Revenue and against the assessee. 7. We have considered the submissions made by learned counsel for the Revenue and have gone through the record. 8. (1991) 91 CTR (Raj) 239: (1991) 190 ITR 183 (Raj) , in favour of the Revenue and against the assessee. 7. We have considered the submissions made by learned counsel for the Revenue and have gone through the record. 8. The r. 5 of the IT Rules, 1962 provides that the depreciation eligible for any of the block assets shall be calculated at the percentages specified in the second column of the Table in Appendix I to the Rules on written down value of such block assets as are used for the purposes of business or profession of the assessee at any time during the previous year. In the Table, in Appendix I, the two entries, which relate to depreciation on motor buses and motor lorries, are as under : III (ii) D(9) Motor buses and motor lorries other than those used in the business of running them on hire 30% III (ii) E(1A) Motor lorries and motor taxies used in business of running them on hire 40% 9. The question referred in the case of Manjeet Stone Co. (supra) for the opinion of this Court reads as under : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to depreciation at 40 per cent and not 30 per cent on the trucks used by it in its business." 10. After examining the ambit and scope of the entries referred in the matter of Manjeet Stone Co. (supra), this Court categorically held that: "A plain reading of both these entries, i.e., Entry Nos. III(ii)D(9) and III(ii)E(1A) given in Part I of Appendix I, appended to the Rules, shows that if the motor buses, motor lorries and motor taxis are used in a business of running them on hire, then those motor vehicles are covered under Entry No. III(ii)E(1A) of Appendix I and are entitled to depreciation at 40 per cent and the motor buses and motor lorries other than those used in the business of running them on hire are entitled to depreciation at 30 per cent. It is true that the relevant clause does not lay down the requirement of hiring wholly or exclusively but the entry has maintained the distinction about the entitlement to depreciation at 40 per cent and 30 per cent. ......... It is true that the relevant clause does not lay down the requirement of hiring wholly or exclusively but the entry has maintained the distinction about the entitlement to depreciation at 40 per cent and 30 per cent. ......... If a small portion of its income is received from the business of hiring from two or three transactions of hiring, then it will not make the business of the assessee as one of hiring the trucks. Even otherwise, when we look into the finding arrived at by the Tribunal regarding the business of the assessee, then we find that the findings are to the effect that the business of the assessee of quarrying and selling stones and the trucks are mainly used for carrying the stones from the mines to the sales depot. As the trucks were mainly used by the assessee in its own business for carrying the stones from the mine site to the sales depot, the case of the assessee is covered by Entry No. III(ii)D(9) and not by Entry No. III(ii)E(1A), and as such the assessee is entitled to depreciation at 30 per cent and not at 40 per cent. In this view of the matter, we are of the opinion that the Tribunal was not right in holding that the assessee is entitled to depreciation at 40 per cent and not at 30 per cent on the trucks and dumpers used by it for its business." 11. The judgment in the matter of Manjeet Stone Co. (supra) has been further followed by this Court in the matter of CIT v. Sardar Stones (1995) 125 CTR (Raj) 197: (1995) 215 ITR 350(Raj) .12. Since, identical question of law referred by the Tribunal in the similar facts and circumstances of the case has already been answered by this Court, therefore, we are not required to examine the question in detail any further. In the instant case, admittedly, the business of the assessee is construction of road and building on contract basis. The trucks owned by it are mainly used for its own business and the assessee was not using the trucks in the business of running them on hire, therefore, it is entitled to depreciation at the rate of 30 per cent only.13. The trucks owned by it are mainly used for its own business and the assessee was not using the trucks in the business of running them on hire, therefore, it is entitled to depreciation at the rate of 30 per cent only.13. In view of discussion above, we are of the considered opinion that the Tribunal was not justified in holding that the assessee was entitled to depreciation on trucks at the rate of 40 per cent as against 30 per cent allowed by the ITO. Accordingly, the reference is answered in negative i.e., in favour of the Revenue and against the assessee. The copy of the judgment be sent to the Tribunal in conformity with the provisions of section 260(1) of the Act. *******