Earth Moving Machines (like JCB) treated as Asset or Vehicle

[Mathurthi RamKumar]

Dear All,

Greeting of the day..Kindly clarify my doubt..earth moving machine - JCB treated as vehicle or asset in a manufacturing unit.

Regards

M.RamKumar

[Mahir S]

Sir,

You have not elaborated nor specified the reason of your query.

However, the functioning and operation of a JCB machine cannot be equated either with a motor lorry or a motor truck.

The JCB machine invariably falls within the scope of a particular type of machinery for the sole purpose of excavation of soil/earth which comes under the purview of 'Plant and Machinery' (Assets) and so the applicable rate of depreciation in respect of JCB machines shall accordingly be based on its being 'Plant and Machinery' (Assets) and not based on it being as a Vehicle; as seems to be your indirect query.

In view of above, you are therefore eligible to claim lesser amount of depreciation under the category of Assets rather than under Vehicles.

[Mathurthi RamKumar]

Dear Sir,

Thank you for quick reply. I am working in a power plant and we also have Kraft paper manufacturing unit. We are using a JCB in for both plants. like lifting of raw material and coal etc...

Hope my doubt is clear.

Regards

M.RamKumar

[Mahir S]

Sir,

The definition of `motor vehicle' from the Motor Vehicles Act, 1988 (MV Act) as per the MV Act is as follows:

"Motor vehicle or vehicle means any mechanically propelled vehicle adapted for use upon roads...; but does not include ... .a vehicle of a special type adapted for use only in a factory or in any other enclosed premises... "

Further, Earth moving machinery is primarily used in the infrastructure sector. It is also a fact that the JCB Earth Movers are not been registered as heavy motor vehicles (like Mobile Cranes) with the Regional Transport Authorities.

.T he Income-Tax Act also had made a distinction between earth moving machinery and motor vehicles.

Hence, the fact that in your case that JCB is also being used for lifting of raw material and coal etc. shall not changed its identity.

Therefore, there is no change in the views expressed in my above reply, as the legal position on the issue is already settled.

[DR.MARIAPPAN GOVINDARAJAN]

In my view also JCB will not come under the definition of ''vehicle' and therefore it is to be considered as Plant and Machinery.

[KASTURI SETHI]

I am thankful to both experts, Sh.Mahir S and SH. MARIAPPAN GOVINDARAJAN, Sir. Really your views have enriched my knowledge.Concept is clear to me know.

[YAGAY and SUN]

Dear Mathurthi Ramkumar

You may find this judgment useful

2010 (12) TMI 913 - ITAT, Bangalore Magtron Earth Movers Versus ITO

[Mahir S]

Thanks M.Govindarajanji and K. Sethiji for the endorsement and appreciation of my views.

[KASTURI SETHI]

Thanks to M/S.YAGAY AND SUN for providing case law in support of the contention of the experts. It is really useful.

AI Summary

Classification of earth-moving machinery as plant and machinery for depreciation when used in industry, not as motor vehicle.
Earth-moving machinery such as JCBs used in industrial operations are to be treated as Plant and Machinery (assets) rather than as motor vehicles, so depreciation and accounting treatment follow asset classification; functional use for lifting within a plant does not alter this identity, and statutory guidance (Motor Vehicles Act exclusions, non-registration as heavy motor vehicles) and tax practice distinguish earth-moving machinery from motor vehicles.