Income Tax Appellate Tribunal - Pune
Income Tax Officer vs Ghuge & Co. on 23 October, 1992
Equivalent citations: (1993)47TTJ(PUNE)33
ORDER
T. V. K. NATARAJACHANDRAN, A. M. :
These appeals filed by the Revenue are consolidated and disposed of by a common order for the sake of convenience, as they involve a common issue.
2. These appeals pertain to asst. yrs. 1983-84, 1984-85 and 1982-83 and arise out of the consolidated order of the CIT(A), Nashik dt. 5th Feb., 1987 relating to the asst. yrs. 1983-84 and 1984-85 and separate order dt. 31st Dec., 1987 relating to the asst. yr. 1982-83. The common issue involved in these appeals is whether the assessee, a registered firm, who carries on Government contract business, such as construction of dam is entitled to additional depreciation on trucks, dumpers, tippers and road roller and also investment allowance thereon.
3. The assessee is a registered firm and has executed contracts by constructing dams, canals in Jayakwadi project on Godavari river. It follows mercantile method of accounting and financial year as the previous year. For the asst. yr. 1983-84, it claimed investment allowance and additional depreciation on trucks and dumpers in the revised return filed. Similar claim was made by the assessee on trucks and dumpers in the asst. yr. 1984-85. In the asst. yr. 1982-83, original assessment order made on 30th March, 1985 was set aside by the CIT, Nashik under S. 263 on 12th Aug., 1986 with direction to adopt the correct particulars of figures of depreciation and terminal profits, etc. The Assessing Officer passed fresh order to give effect to that revisional order. In this fresh order, no investment allowance or additional depreciation was granted by the Assessing Officer on trucks and tippers and road roller for the asst. yr. 1982-83.
4. On appeal, the assessee reiterated the claim for additional depreciation and investment allowance and this claim was accepted by the CIT(A), Nashik presumably keeping in view of the judgment of the Bombay High Court in the case of CIT vs. Pressure Piling Co. (India) Pvt. Ltd. (1980) 126 ITR 333 (Bom) and the judgment of the Orissa High Court in the case of CIT vs. N. C. Budharaja & Co. (1980) 121 ITR 212 (Ori). Revenue is in appeal on common grounds to urge that the CIT(A) erred in directing the Assessing Officer to grant investment allowance and also the additional depreciation and, therefore, his order should be vacated and that of the Assessing Officer be restored.
5. At the time of hearing, the learned Departmental Representative heavily relied on the judgment of the Bombay High Court in the case of Shah Construction Co. Ltd. vs. CIT (1991) 188 ITR 537 (Bom) wherein it has been ruled that the dumpers being road transport vehicles and which were intended to transport goods and material from one point to another by plying it on road to secure an efficient system of transport, were not eligible for development rebate thereon. On the same analogy, he urged that the assessee is not entitled to investment allowance on the trucks and dumpers newly acquired by the assessee and used for construction work for these years under consideration. However, he conceded and did not press the ground relating to grant of investment allowance on road rollers which is relevant for the asst. yr. 1982-83, obviously because it is not a transport vehicle but machinery only. He further referred to the judgment of the Madras High Court in the case of CIT vs. Popular Borewell Service & Ors. (1992) 194 ITR 12 (Mad). He pointed out that only the rigs and compressors are used for drilling bore-wells and though mounted on the lorry could not be regarded as part of machinery for the purpose of grant of special rate of depreciation of 30% but they were all entitled to investment allowance. In this connection, he pointed out that only new machinery acquired during the period 1st April, 1980 and 31st March, 1985 alone would be eligible for additional depreciation as contemplated in S. 32(1)(iia) of the IT Act, 1961 but if such machinery happens to fall under cl. (b) of second proviso to S. 32A of the IT Act, 1961, namely "any office appliances of road transport vehicles", investment allowance is not admissible and also additional depreciation is also not admissible. The burden of the learned Departmental Representative was that the impugned trucks and dumpers and tippers under consideration are nothing but road transport vehicles and, therefore, they are not eligible of investment allowance or additional depreciation. Therefore, he vehemently urged that the CIT(A) was not justified in directing the Assessing Officer to grant investment allowance as well as additional on the impugned vehicles.
6. The learned counsel for the assessee, on the other hand, filed elaborate paper compilation and referred to them in the course of his arguments to support the decision of the CIT(A). In fact, he has filed year-wise particulars of new purchase of machinery for these years under consideration and also corresponding depreciation schedule for block of assets. As regards the eligibility for investment allowance, the learned counsel for the assessee relied on the judgment of the Karnataka High Court in the case of Shankar Construction Co. vs. CIT (1991) 189 ITR 463 (Kar) for the proposition that the business of construction of dams and channels was an industrial undertaking entitled to investment allowance. Reliance was also placed on the judgment of the Kerala High Court in the case of CIT vs. Bhageeratha Engg. Ltd. (1992) 193 ITR 674 (Ker) wherein it has been held that construction company acquiring plant and machinery and manufacturing and processing various materials such as reinforced concrete slabs is an industrial undertaking entitled to investment allowance. Reliance was also placed on the judgment of the Karnataka High Court in the case of CIT vs. Mahalinga Shetty & Co. (1992) 195 ITR 526 (Kar) wherein it was held that in the business of construction work dumpers and tippers were used to lift earth to transport the same and resulted in production of an article or thing and, therefore, they were machinery entitled to investment allowance. The Karnataka High Court held that machinery used in the business of construction is eligible for investment allowance under S. 32A(2)(b)(iii). The Karnataka High Court pointed out that the dumpers and tippers were essentially machinery used to carry on a construction work, i.e., to lift earth and transport the same and which resulted in production of an article and thing and, therefore, such machinery is entitled to investment allowance under S. 32A of the Act. It also referred to the phrase "road transport vehicles" and pointed out that the said phrase included vehicles like omnibuses, cars, etc., and not dumpers and tippers which were directly used in the activity of the business, at the place where the business is actually carried on, in contradistinction to the office premises or residential accommodation or administrative part of the business. He further referred to the case law vehemently relied upon by the learned Departmental Representative, namely, Shah Construction Co. Ltd. vs. CIT (supra) and pointed out that the judgment of the Bombay High Court could not be assailed in view of the admitted statement of the assessee in that case that dumpers were used for efficient system of transport and Tribunal has also given a finding in this regard. The learned counsel for the assessee also filed a copy of the order of the Tribunal, Pune Bench, in the case of Mulay Brothers, vs. ITO ITA No. 78/Pune/86 and 100 & 101/Pune/86 and 439/Pune/87 dt. 17th Aug., 1987 wherein the Tribunal has held that the Ashok Leyland Dumpers were eligible of investment allowance. He referred to page 3 of the paper compilation containing Circular as to whether fork-lift-trucks are road transport vehicles and whether development rebate is admissible or not. The Board reconsidered its earlier Instruction No. 617 dt. 13th Sept., 1973 and in Instruction No. 1011 dt. 24th Sept., 1976 clarified that in view of the use to which a fork-lift-truck is put ordinarily, it cannot be regarded as a road transport vehicle in the light of the definition of "motor vehicle" given in the Motor Vehicles Act, 1939. However, if it is used upon roads outside the factory premises or is registered with the transport authorities for being plied as a road transport vehicle, then it could be regarded as a road transport vehicle. Thus the Board clarified that the question whether it is a road transport vehicle or not would depend upon the user of the truck which is ordinarily put by the Assessee. In other words, the Board has laid down a functional test to ascertain the eligibility of fork-lift-truck for development rebate.
6. The learned counsel for the assessee advanced the same argument in respect of trucks also. However, he has taken pains to produce necessary registration certificates to show that the trucks were exempt from payment of road taxes because they were exclusively used on the site area only. The essential condition for exemption from road taxes was that they should be utilised only on the work site failure of which would be visited with severe penalty from the motor vehicle tax authorities.
7. In reply, the learned Departmental Representative vehemently supported the grounds and the orders of the Assessing Officer.
8. We have duly considered the rival submissions. We have already indicated the sum and substance of the ratio decidendi of several Courts both for and against grant of investment allowance and additional depreciation. At once it has to be stated that the bulwork of strength of the Revenue is the judgment of the Bombay High Court in the case of Shah Construction Co. (supra). A careful perusal of the judgment of the Bombay High Court shows that the High Court relied heavily on the findings of the Tribunal contained in para 7 of the judgment. It is pertinent to point out that in that case the assessees own case was that the dumpers were being purchased to secure "efficient system of transport" and the Tribunal also referred to the actual user of the dumpers for that purpose so as to come to the conclusion that except for tipping arrangement activated by an oil pressure pump, the dumpers were identical to trucks. The Bombay High Court has approved the decision of the Tribunal that a road transport vehicle meant a vehicle intended to transport goods or material from one point to another by plying it on a road and, therefore, the finding given by the Tribunal that the dumpers were road transport vehicles was upheld by the Bombay High Court. This fact is very much clear from para 8 of the judgment wherein it is stated that the conclusion of the Tribunal is essentially a conclusion of fact arrived at upon consideration of relevant material and such conclusion is not unreasonable, let alone perverse. Therefore, it is very clear from the said judgment of the Bombay High Court in the case of Shah Construction Co. Ltd. that it turned on the peculiar facts and findings given by the Tribunal in that case. On the other hand, the decision of the Karnataka High Court in the case of CIT vs. Mahalinga Shetty & Co. (supra) had not only considered the user of the dumpers and tippers for the purpose of business of construction, but also the relevant question whether they could be considered as road transport vehicles and came to the conclusion that the phrase "road transport vehicles" would not include dumpers and tippers which are directly used in the activity of business at the place where the business is actually carried on because dumpers and tippers are essentially machinery used to carry on construction work, namely, lifting of earth and transporting the same which helped to produce article or thing and, therefore, such machinery is entitled to investment allowance under S. 32A. The case laws marshalled by the learned counsel for the assessee all go to support the claim of the assessee for investment allowance and additional depreciation and therefore, we uphold the decision of the CIT(A) on this point.
9. As regards the question whether the trucks, dumpers and tippers should be regarded as road transport vehicle, we have looked into the registration certificates of these vehicles. Although the vehicles are subject to taxation initially when they are registered but they were exempt from periodical taxation by the RTO a fact which goes to establish that these vehicles were all used at the site of work where business is carried on. It also goes to show that these vehicles are not meant to be road transport vehicles nor were used as road transport vehicles so as to fall within the mischief of the judgment of the Bombay High Court in the case of Shah Construction Co. (supra). Further, the Board has given clarification for adopting the functional test to come to the conclusion whether a particular vehicle is to be regarded as road transport vehicle or not. Even from this point of view there could be no doubt because there is no finding brought on record to show that these vehicles were used in the administrative office or on road or brought on road repairs or for transporting men or material. Taking the depreciation schedule for the asst. yr. 1982-83 it is admitted by both the parties that investment allowance and additional depreciation is not admissible on truck MTV 9873 and truck MTV 9893, because they do not satisfy the functional test laid down by the Board Correspondingly we hold that the assessee is not eligible for proportionate investment allowance and additional depreciation on these two trucks because the functional test laid down by the Board is not satisfied in this case. Coming to the depreciation schedule for the asst. yr. 1983-84, there were 8 tippers and one truck, and are eligible for investment allowance and additional depreciation. No registration is needed for two stone crushers and one cement mixure. For the asst. yr. 1984-85 all were contractors machinery eligible for investment allowance and additional depreciation. In view of the factual and legal position stated above, subject to the directions given for the asst. yr. 1982-83, we uphold the decision of the CIT(A) directing the Assessing Officer to grant investment allowance and additional depreciation for the dumpers, tippers and trucks.
10. The appeals are dismissed.