1988 (9) TMI 69 - AT - Income Tax

Dumpers in Road Construction: Qualify as 'Earth-Moving Machinery' for 30% Depreciation

The Tribunal held that dumpers used in road construction work qualify as 'earth-moving machinery' and are entitled to 30% depreciation, overturning the ... Assessment Year, Orders Prejudicial To Interests Issues:1. Incorrect depreciation rate on dumpers allowed by the Income-tax Officer.2. Jurisdiction of the Commissioner of Income-tax under section 263 of the IT Act, 1961.3. Classification of dumpers as 'earth-moving machinery' for depreciation purposes.4. Interpretation of relevant rules and circulars regarding the classification of dumpers.Detailed Analysis:1. The judgment involves an appeal against the Commissioner of Income-tax's consolidated order under section 263 of the IT Act, 1961, regarding the incorrect depreciation rate allowed on dumpers used by a Registered Firm engaged in road construction business for the assessment years 1978-79, 1980-81, and 1981-82.2. The Commissioner invoked his jurisdiction under section 263 based on the opinion that the depreciation rate of 30% allowed by the Income-tax Officer was erroneous, as he believed it should have been 15% as per the relevant rules. The assessee contended that the dumpers were used for earth-moving work and were entitled to 30% depreciation, not classified under 'Road Making Plant and Machinery.'3. The judgment extensively discusses the classification of dumpers as 'earth-moving machinery' for depreciation purposes. The Tribunal analyzed the relevant rules and circulars, including Item III-D(4) of Appendix I, Part 1, Rule 5, and a circular issued by the Ministry of Industry and Company Affairs classifying dumpers as 'earth-moving machinery.'4. The Tribunal ultimately held that dumpers used in road construction work qualify as 'earth-moving machinery' and are entitled to 30% depreciation. The judgment emphasized the importance of proper jurisdictional actions under section 263 to avoid unnecessary litigation and harassment for the assessee, setting aside the Commissioner's order and restoring that of the Income-tax Officer for all three years under consideration.