IMPORTANT POINT
Cranes used in hiring businesses are entitled to higher depreciation rates under the Income Tax Act, regardless of their classification as motor vehicles.

ORDER :

BHARGAV D. KARIA, J.

1. Heard learned advocate Mr. Rudram Trivedi for learned advocate Mrs. Kalpana Raval for the appellant – Revenue.

2. By this Tax Appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”), the appellant – Revenue has proposed the following substantial questions of law arising from the Judgement and Order dated 21st December 2023 passed by the Income Tax Appellate Tribunal, Surat (for short, “the Tribunal”) in ITA No.499/SRT/2023 for the Assessment Year 2013-14:

“1. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is right in allowing depreciation 30% on cranes and thereby deleting the addition of Ra 1,32,63,580/- made on account of disallowance of the excess claim of depreciation on Cranes by not considering the fact that the Cranes do not fall in the category of "Heavy Motor Vehicle?

2. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is right in allowing depreciation 30% on cranes ignoring the fact that it is nowhere provided in the Income tax Act, 1961 as well as in the Income tax Rules, 1967 that cranes are motor vehicles and these are eligible for the higher depreciation rate?

3. Whether on the facts and circumstances of the case and in law, the Hon'ble ITAT is justified in allowing the higher rate of depreciation in this case though the assessee has failed to establish that the crane mounted on truck and registered as heavy commercial vehicle and "crawler crane" mounted on continuous tracks are motor lorry as mentioned in the decision of Hon'ble Jurisdictional High Court in the case of Gujco carriers Vs CTT 2002 256 TTR 50 Guj]?

4. Whether on the facts and circumstances of the case and in law, the decision of the Hon'ble ITAT is not perverse in allowing depreciation @ 30% on cranes ignoring the fact that it is nowhere provided in the income tax Act, 1961 as well as in the Income tax Rules, 1967 that cranes are motor vehicles and these are eligible for the higher depreciation rate and also the assessee could not prove along with evidences that the crane mounted on truck and registered as heavy commercial vehicle and "crawler crane" mounted on continuous tracks are motor lorry?”

3. The brief facts of the case are that the respondent – assessee company is engaged in the business of material handling and erection of heavy equipment on contract basis and providing equipment on hire during the year under consideration.

3.1. The return of income was filed by the respondent assessee for the Assessment year 2013-14 showing total income at Rs.Nil with a carried forward loss of Rs.38,98,418/- on 26th August 2013.

3.2. Thereafter, the case of the respondent – assessee was selected for scrutiny and order dated 4th March 2016 was passed by the Assessing Officer under Section 143(3) of the Act determining the total loss at Rs.37,52,614/- by making addition on account of disallowance under Section 36(1)(va) of the Act at Rs.1,46,271/-.

3.3 It appears that thereafter, the learned Principal Commissioner of Income Tax, Surat, vide order dated 19th March 2018, set aside the case with regard to the issue of granting higher rate of depreciation on cranes at the rate of 30% in stead of 15% under Section 263 of the Act to the file of the Assessing Officer for making fresh inquiry and accordingly, the notice under Section 142(1) of the Act was issued on 19th July 2018 with a specific questionnaire and asked the assessee to submit its reply on 27th July 2018. The respondent – assessee furnished documents along with its reply dated 1st August 2018. However, the Assessing Officer rejected the claim of the assessee and held that the assessee was eligible for depreciation at the rate of 15% only on the cranes and disallowed the excess depreciation claimed by the assessee on the cranes amounting to Rs.1,32,63,580/-.

4. Being aggrieved, the respondent – assesse preferred appeal before the CIT(A) who followed the decision of this Court in the case of Prasad