2019 (7) TMI 1655 - HC - Income Tax

Court grants 30% depreciation for cranes in hiring business, criticizes Revenue's assumptions.

M/s Prasad Multi Services Private Limited Versus The Deputy Commissioner of Income Tax

The Court allowed the appeal, ruling in favor of the appellant, and granted the claimed depreciation at the rate of 30% for the cranes used in the hiring ... Higher rate of depreciation on cranes - @ 15% or 30% - CIT(A) took the view that only the Hydra Cranes can be termed as “Motor Cranes” and accordingly allowed depreciation at the rate of 30% - why depreciation on cranes used in the business of running the same on hire should not be restricted to 15% instead of 30%? - Tribunal confirming the order of the Respondent in limiting allowance of depreciation to 15% as against the claim at the rate of 30% on various types of cranes used in hiring business under Section 32? - HELD THAT:- Disallowance is not sustainable. The Revenue has tried to dismiss the entire issue in the name of a mistake but it does not appear to be a mistake. We are saying so, because even independent of the principle of consistency, the assessee has a good case on merits. We fail to understand as to on what basis the Revenue authorities have come to the conclusion that the assessee is not in the business of hiring and that the main business of the assessee is construction. According to the Revenue authorities, the cranes are used by the assessee for his own business of construction. There is thumping documentary evidence on record to indicate that the assessee is very much in the business of hiring. The depreciation at the higher rate could not have been declined merely on the assumption that the cranes might have been used by the assessee for his own business of construction. In fact, it would be an error to take the view that for the purpose of claiming depreciation at the rate of 30% the assessee is obliged to establish that the cranes are used exclusively for the hiring business and that they are not used for any other purpose. Decision of this Court in the case of Deputy Commissioner of Income-Tax v. Pradip N.Desai (HUF), [2011 (7) TMI 304 - GUJARAT HIGH COURT] wherein this Court took the view that if the assessee is not involved in the business of hiring the vehicle on rent, then he is not entitled to claim higher depreciation under clause (2)(ii) of Entry-III of Appendix-I. There need not be any debate on the proposition of law as explained by this Court in the said judgment. However, as discussed above, there is thumping evidence on record to indicate that the assessee is involved in the business of hiring the cranes. He might be using the cranes for his personal construction business too, but that does not disentitle him to claim higher depreciation once it is shown that the assessee is in the business of hiring the cranes. - Decided in favour of assessee. Issues Involved:1. Whether the Income-tax Appellate Tribunal was right in confirming the order of the Respondent in limiting the allowance of depreciation to 15% as against the claim at the rate of 30% on various types of cranes used in the hiring business under Section 32 of the Income Tax Act, 1961Rs.Issue-wise Detailed Analysis:1. Limitation of Depreciation Rate:The appellant-assessee filed a return of income claiming depreciation at the rate of 30% on various types of cranes used in their hiring business. The Assessing Officer (AO) restricted the depreciation to 15%, arguing that the cranes did not fall under the category of Motor Bus, Motor Lorries, and Motor Taxis used in the business of running them on hire, and the cranes were not registered with the RTO.2. Show-Cause Notice and AO's View:The AO issued a show-cause notice to the appellant, questioning the claim of 30% depreciation. The AO concluded that the cranes were possibly used for the appellant's construction business, thus limiting the depreciation to 15%.3. Appeal to CIT(A):The appellant appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who partially allowed the appeal by granting 30% depreciation only on Hydra Cranes, considering them as 'Motor Cranes,' but confirmed the disallowance on other types of cranes.4. Tribunal's Decision:The Income Tax Appellate Tribunal upheld the CIT(A)'s decision, stating that the appellant failed to provide sufficient evidence to justify the higher depreciation rate for other cranes. The Tribunal distinguished the appellant's case from previous cases where higher depreciation was allowed for cranes mounted on vehicles registered as heavy motor vehicles.5. Submissions on Behalf of the Assessee:The appellant's counsel argued that the principle of consistency should apply as the AO had allowed 30% depreciation in the past for similar cranes. The counsel cited Supreme Court decisions supporting the principle of consistency and argued that the cranes used for hiring should qualify for higher depreciation regardless of their registration status with the RTO.6. Submissions on Behalf of the Revenue:The Revenue's counsel contended that the assessee was primarily in the construction business and used the cranes for its own purposes, thus justifying the lower depreciation rate. The counsel also argued that the previous allowance of higher depreciation was a mistake and should not be binding.7. Analysis by the Court:The court emphasized the principle of consistency, citing various Supreme Court and High Court decisions. It noted that the same cranes were involved in previous assessments where higher depreciation was allowed. The court found no substantial change in circumstances to justify a different view in the current assessment year.8. Court's Conclusion:The court concluded that the Revenue authorities erred in limiting the depreciation to 15%. It held that the appellant was entitled to claim 30% depreciation on the cranes used in the hiring business, regardless of their registration status with the RTO. The court also criticized the Revenue's assumption that the cranes were used for the appellant's construction business without substantial evidence.Judgment:The court allowed the appeal, quashing the Tribunal's order, and ruled in favor of the appellant, granting the claimed depreciation at the rate of 30%. The substantial question of law was answered in favor of the assessee and against the Revenue.