Wheel loaders Graders are Motor vehicles eligible for higher depreciation rate at 40% – ITAT

Wheel loaders, Graders are Motor vehicles and are certainly eligible for higher depreciation rate at 40% as per Appendix I of Rule 5 of the Income Tax Rules, 1962 – ITAT

ABCAUS Case Law Citation:
970 2016 (07) ITAT
Assessment Year 2005-06
Date/Month of Judgment: July 2016

Important Case Laws Cited:
Kelvinator India Pvt. Ltd., Vs. CIT (2010) in 32 ITR 561 (SC)
Abraham Vs. State of Kerala [AIR 2001 SC 835]
Gujco Carriers Vs. CIT [256 ITR 50] (Guj.)
Bothra Shipping Services Vs. CIT (ITATKol)
CIT Vs. Gaylord Construction (2010) 190 Taxmann 406 (Ker).

Brief Facts of the Case:
In the assessment was originally completed u/s. 143(3)by allowing the depreciation as claimed by assessee on wheel loaders and wheel graders at 40%. After completion of the assessment, the subsequent AO noticed that these two items qualify for depreciation at 25% only under the head ‘Machinery and Plant’ and allowance of depreciation at 40% as motor-vehicle has resulted in escapement of income. Consequently, a notice u/s 147 was issued and the re-assessment was completed accordingly rejecting assessee’s objection regarding re-opening and also rate of depreciation.

On appeal, the CIT(A) accepted the contentions of the assessee with reference to the reopening of assessment and rate of depreciation. CIT(A) placing reliance on Supreme Court judgment in Kelvinator India (supra) held that since no new material was on record nor relied on by the Assessing Officer to initiate the reassessment proceedings, the same could not be said to be validly initiated.

Regarding rate of  depreciation, CIT(A) allowed assessee’s claim holding as under: 

The submissions of the assessee, the factual position as brought out by the Assessing Officer in the assessment order and the documents placed on record are considered. It is seen that though the motor graders and wheel loaders are not depicted as motor vehicles by the appellant, the same have been registered as ‘other vehicle-MMV’ by the Registration Authorities. In view of the ratios laid down by Hon’ble Supreme Court and followed by various Tribunals holding that the motor vehicles designed for special services are to be treated as motor vehicles, the appellant is eligible for depreciation @ 40% as claimed. Reliance is specially placed on the decisions of Hon’ble Karnataka Tribunal in the case of Bothra Shipping Services Vs. CIT (ITA No. 586/Kol/2010) and CIT Vs. Gaylord Construction (2010) 190 Taxmann 406 (Ker). Accordingly, the ground of appeal is allowed”.

Aggrieved by the order of CIT(A), the Revenue contested both the issues before the Tribunal.

Important Observations made by the ITAT:

The Tribunal observed that as per the assessment order passed u/s. 143(3) originally, AO has considered the claim of depreciation and made certain disallowances out of various depreciation claims made in the schedule. Thus initially the AO found the claim of 40% depreciation on the above said vehicles appropriate and allowed the same. Since there is specific discussion on the depreciation claims in the first assessment order, allowance of 40% depreciation by the AO certainly indicated that he had consciously allowed the depreciation at that rate after due examination.

Therefore, the Tribunal opined that any action by the subsequent AO to restrict the same to 25% was a change of opinion, which was not permitted under the provisions of law.

The ITAT held that the wheel loaders and Graders are Motor vehicles was certainly eligible for depreciation at 40% as per schedule and the case law on the subject.