Gujarat High Court
Principal Commissioner Of Income Tax 1 vs M/S S D Material Handlers Pvt. Ltd on 9 July, 2024
Author: Bhargav D. Karia
Bench: Bhargav D. Karia
NEUTRAL CITATION
C/TAXAP/454/2024 ORDER DATED: 09/07/2024
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IN THE HIGH COURT OF GUJARAT AT AHMEDABAD
R/TAX APPEAL NO. 454 of 2024
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PRINCIPAL COMMISSIONER OF INCOME TAX 1
Versus
M/S S D MATERIAL HANDLERS PVT. LTD.
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Appearance:
MR RUDRAM TRIVEDI ADVOCATE WITH MRS KALPANA K RAVAL(1046)
for the Appellant(s) No. 1
for the Opponent(s) No. 1
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CORAM:HONOURABLE MR. JUSTICE BHARGAV D. KARIA
and
HONOURABLE MR. JUSTICE NIRAL R. MEHTA
Date : 09/07/2024
ORAL ORDER
(PER : HONOURABLE MR. JUSTICE BHARGAV D. KARIA) [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:
Page 1 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined "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 Page 2 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined 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 4 th 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/-.Page 3 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024
NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined [3.3] It appears that thereafter, the learned Principal Commissioner of Income Tax, Surat, vide order dated 19 th 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 27 th 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 Multi Service (P) Ltd. vs. Deputy Commissioner of Income Tax reported in [2020] 122 taxmann.com 73 (Gujarat) and deleted the additions made by the assessing officer.Page 4 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024
NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined [5] Being aggrieved, the appellant - Revenue preferred appeal before the Tribunal. The Tribunal, after considering the submissions, held as under:
"9. After giving our thoughtful consideration to the submission of the parties and perusing the judicial decisions relied upon by the Ld. Counsel, we find that the issue involved in the present appeal is no longer res integra. The question as to whether where assessee was in business of hiring out cranes, even if, such cranes were also used for personal construction business, same would not disentitle assessee to claim higher depreciation, that is, the assessee is entitled to claim higher depreciation, and the issue was considered by various judicial forums across India. The Hon'ble jurisdictional High Court of Gujarat in the case of Prasad Multi Services (P.) Ltd. vs. DCIT [2020] 122 taxmann.com 73 (Guj)/[2020] 423 ITR 542 (Guj)[16-07- 2019]..."
[6] The Tribunal after following the decision of this Court in the case of Prasad Multi Service (P) Ltd. (supra) dismissed the appeal filed by the appellant - Revenue. The Tribunal also followed the decision of this Court in the case of Gujco Carries vs. CIT reported Page 5 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined in [2002] 122 taxmann.com wherein it is held that the assessee can claim higher depreciation on cranes at the rate of 30%.
[7] The Tribunal, thereafter, in view of the settled legal position following the above two binding judgements of this Court, held that the assessee can claim higher depreciation on cranes at the rate of 30% and did not find any infirmity in arriving the conclusion by the CIT(A).
[8] In view of the concurrent findings of CIT(A) and the Tribunal and following the decision of this Court in the case of Prasad Multi Services (P) Ltd (supra) wherein it is held as under:
"34. 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 Page 6 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined
35. We may refer to a decision of this Court in the case of Gujco Carriers (supra), on which the assessee has placed strong reliance. The issue before this Court in Gujco Carriers (supra) was that the assessee had purchased a mobile crane and claimed depreciation at 40% thereon stating that it was being used in the business of running it on hire and so it will fall under entry No.IIIE(1A) of Part I of Appendix I to the Income Tax Rules, 1962. This Court, after due consideration of all the relevant aspects of the matter, ultimately held that the mobile crane of the assessee which was registered as a heavy motor vehicle would clearly fall within the expression "Motor Lorries" in entry No.IIIE(1A) of the Table in Appendix I under rule 5 of the said Rules, since it was used by the assessee in its business of running the crane on hire. This Court, ultimately, ruled that the assessee was entitled to depreciation at the rate of 40% on the crane mounted on a motor-truck.
36. This Court, in the case of Gujco Carriers (supra), had the occasion to consider the question with regard to the rate of depreciation and the meaning of "Motor Lorry". We may quote the relevant observations made by this Court thus :
"The controversy centres around the question whether mobile crane registered as a heavy motor vehicle under the Motor Vehicles Act and the Rules made thereunder with the R.T.O. would fall within the expression 'motor lorries' contained in item III E(1A) of Appendix 1 of the said Rules. The Tribunal has confirmed the orders of the Income Tax Authorities holding that since 'cranes' are not mentioned as independent item in Appendix 1, depreciation at the rate of 40% was not admissible to cranes, and that only the rate of 10% was admissible being the general rate applicable to machinery. The Tribunal, rejected the plea of the assessee that crane was an integral part of the motor lorry on which it was mounted and was worked by the same machine which provided traction to the lorry, on the ground that this required ascertainment of facts and fresh investigation.Page 7 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024
NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined The Tribunal also rejected the assessee's contention that benefit of depreciation at 30% should be given to it since it was given to 'fork-lift trucks' under Instructions No. 617 issued on 13-9-1973 by the C.B.D.T. classifying 'fork-lift trucks' under item III (ii-D
9) of Appendix 1.
Under the heading 'Machinery and plant' of item III of Appendix 1, Part I of the Table of Rates at which depreciation is admissible, read with Rule 5 of the Income Tax Rules, various items of machinery and plant are specified with the rates at which depreciation is to be allowed as are mentioned against them.
The assessee claimed depreciation at 40% on its crane under Item III E(1A) of Appendix 1, which reads as follows :
"E. (1A) Motor buses, motor lorries and motor taxis used in a business running them on hire."
In the alternative, the assessee claimed depreciation before the Tribunal on the basis of the C.B.D.T. Instruction No. 617 dated 13-9-1973, which has been reproduced in the order of the Tribunal, as under:
"132. Fork lift trucks - Rate of depreciation prescribed in Part 1 of Appendix 1 to Income Tax rules. Fork lift trucks would be classified under item III (ii) - D(9) of Appendix I to the Income Tax Rules, 1962 and would be entitled to depreciation at the rate of 30 per cent."
Item III (ii) - D(9) which is referred to in the aforesaid Instruction No. 617 which relates to fork lift trucks, reads as under : "Motor buses and motor lorries other than those used in a business of running them on hire."
In the year 1973, the entry D(9) read as under :
Page 8 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined "Motor buses, motor lorries, motor taxis, motor tractors"
The origin of word 'lorry' is uncertain. 'Lorry' means, (i) "a large strong motor vehicle for transporting goods etc.", (ii) "a long flat low wagon, or, (iii) "a truck used on railways or tramways", as per the Concise Oxford Dictionary. As per Webster's II New River Side University Dictionary, the word 'lorry', in the meaning relevant to the present context, would mean, 'a motor truck'. As per the Encyclopedia Britannica, truck is "also called lorry". Thus, the expression "motor lorries" in Entry III E (1A) of Appendix 1 would mean "motor trucks".
"Truck" is introduced in following terms in the Encyclopedia Britannica : "
Truck also called lorry any motor vehicle designed to carry freight or goods or to perform special services such as fire fighting. The truck was derived from horse- driven wagon technology, and some of the pioneer manufacturers came from the wagon business. Because of their speed and flexibility, trucks have come to carry a quarter of the intercity freight in the United States, and they enjoy an almost total monopoly in intracity freight delivery.
In 1896 Gottlieb Daimler of Germany built the first motor truck. It was equipped with a four-horsepower engine and a belt drive with two speeds forward and one in reverse. In 1898 the Winton Company of the United States produced a gasoline-powered delivery wagon with a single-cylinder six-horsepower engine.
In World War I motor trucks were widely used, and in World War II they largely replaced horse-drawn equipment. A notable vehicle was the four-wheel-drive, quarter-ton-capacity, short-wheelbase jeep, capable of Page 9 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined performing a variety of military tasks."
Lorry or truck would, therefore, mean not only any motor vehicle designed to carry freight or goods but also to perform special services like fire fighting. Fire engine also called fire truck is a self propelled mobile piece of equipment used in fire fighting. There can be other special services to be performed by motor vehicles designed for such services. Thus, a lorry i.e. truck adapted or designed to carry a crane is meant for special services of lifting load, moving it side by side, rotating it or moving it horizontally. Most industrial trucks permit mechanized pickup and deposit of the loads, eliminating manual work in lifting as well as transporting. The crane truck is a portable boom crane mounted on an industrial truck. It may be used with hooks, grabs, and slings for bundled or coiled material. Industrial trucks which would also come within the expression 'motor lorries' are described as follows in the Encyclopedia Britannica :
"Industrial truck carrier designed to transport materials within a factory area with maximum flexibility in making moves. Most industrial trucks permit mechanized pickup and deposit of the loads, eliminating manual work in lifting as well as transporting. Depending on their means of locomotion, industrial trucks may be classified as hand trucks or power trucks.
Hand trucks with two wheels permit most of the load to be carried on the wheels, but some of the load must be assumed by the operator to balance the truck during movement. Common two-wheel hand trucks include the barrel, box, drum, hopper, refrigerator, paper-roll, and tote-box trucks. Four-wheel hand trucks are found in many more varieties, including dollies, high and low- bed flat trucks, carts, rack carriers, wagons, and various hand-lift trucks having mechanical or hydraulic lifting Page 10 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined mechanisms for raising and lowering a load.
Power trucks are propelled by batteries and an electric- motor or by an internal - combustion engine with either a mechanical drive or a generator and electric - motor drive. Propane and diesel engines are used in place of gasoline engines on some types. The non-lift platform truck is used simply for hauling, but other power trucks are provided with mechanisms, usually hydraulic, for lifting the loads. Forklift trucks are quipped with a forklike mechanism on the front end designed to pick up loads on specially designed platforms, called pallets, elevate the load to the desired height, transport it, and deposit it at the desired location and height. Ram trucks have a single protruding ram for handling coiled material. The crane truck is a portable boom crane mounted on an industrial truck; it may be used with hooks, grabs, and slings for bundled or coiled material. The straddle truck resembles a gantry crane on four pneumatic - tired wheels; the operator rides above the inverted Uframe, within which the load - lumber, bar steel, or pipe is carried on elevating bolsters. Other common types include high and low lift platform trucks, motorized pedestrian led, side-clamp, tractor, and side-loading trucks."
It will, thus, be clear that motor vehicles like fire trucks, fork lift trucks and crane trucks which are designed for special services fall within the category of 'motor trucks' (also called 'motor lorries').
The word 'crane' when used for an inanimate object means a machine for moving heavy objects usually by suspending them from a projecting arm or beam. Crane is any of a diverse group of machines that not only lift heavy objects but also shift them horizontally. Movable cranes are mounted on railway cars, motor trucks or chassis equipped with caterpillar treads and the hoisting machinery is mounted so as to counterpoise Page 11 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined part of the load on the boom and thereby, preventing the entire crane from overturning while carrying the load. The fork lift truck, widely used for moving goods between warehouse storages and shipping vehicles, "is a highly manoeuvrable crane adaptable to handling drums, crates, or loaded skids or pallets." (See Encyclopedia Britannica under the heading `crane').
Thus, a 'fork-lift truck' is also a type of crane. The expression 'truck crane' is well known in the truck industry. "The truck crane is a unit consisting of a crane house and boom mounted on a truck chassis, ....... Originally assembled by contractors from crawler cranes and truck parts, the truck crane for years been manufactured and sold as a unit. Although the truck crane is difficult to move on soft or slippery ground, it is highly mobile on a firm footing and is easily moved over roads and highways. (See "Crane Hoist" - McGraw Hill - 'Encyclopedia of Science and Technology').
A crane is usually typed according to its undercarriage. Some of the cranes which undercarriage is not a truck are, 'crawler cranes' mounted on continuous tracks, the 'rail or locomotive crane' on special chasis with flanged wheels for use on railway tracks and 'floating crane' on a barge or scow. Therefore, search for the item 'cranes' in the Entries in Appendix 1 without keeping in mind the nature of equipment, was based on an erroneous premise. A crane mounted on a truck is a truck crane which is a well known machinery which can easily move over roads and highways and is not a stationary equipment.
Truck crane is described under the heading 'crane' in Encyclopaedia Britannica, as under :
"A commonly used type of small movable crane is the truck crane, which is a crane mounted on a heavy, modified truck. Such cranes frequently use Page 12 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined unsupported telescoping booms; these are made up of collapsible sections that can be extended outward like the sections of an old nautical telescope or spyglass. The extension of the boom is usually managed hydraulically. Truck cranes make up in mobility and ease of transport what they lack in hoisting capacity."
Thus, a mobile crane mounted on a truck constitutes a single unit known as a 'truck crane' which is adapted for use upon roads for special services. The truck on which the crane is mounted is constructed and adapted specially to carry the crane.
'Goods carriage' as defined in section 2(14) of the Motor Vehicles Act, 1988 means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adapted when used for the carriage of goods. This definition is not confined only to carriage of freight which is narrower than the expression 'carriage of goods'. In the instant case, truck is adapted for use solely for carriage of the crane mounted on it. The mounted crane is attached to the truck which carries it. The test of carrying goods such as potatoes and tomatoes that require loading and unloading in context of carriage of freight when transported, as was suggested on behalf of the Revenue, will not be decisive. Unloading, in the context of truck crane where the crane remains mounted and attached to the truck when carried and even at the destination where it is put to use is not a relevant factor at all. Though not required to be loaded or unloaded like other goods transported in carriage of freight, the crane remains fixed, mounted on the truck which has been adapted for use solely for its carriage and such truck crane is used for special service of lifting and moving heavy objects. This is why such mobile crane is registered as a heavy motor vehicle which is a heavy goods vehicle as defined in section 2(16) of the Motor Vehicles Act.
Page 13 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined The approach of the Tribunal and the authorities below it that cranes are not mentioned specifically as an independent item falling in the categories for which higher depreciation allowance at the rate of 40% when used for hire and at 30% when not so used has been provided as against 10% of machinery in general, and therefore, they should be treated as falling in the general category of machinery, is an over-simplification of the matter. The approach of the Tribunal that the plea taken by the assessee that crane was an integral part of the motor vehicle on which it is mounted required ascertainment of facts and fresh investigation, amounts to imposing a burden on a person to prove something of which Court or Tribunal can take judicial notice. For example, if a witness deposes that he had seen a horse, the Court need not insist upon him for a proof of the anatomy of a horse and can take a judicial notice of horse as an animal. The Courts and Tribunals are not required to act dumb or ignorant of the facts of which judicial notice can be taken. Thus, just as a court can presume what a horse is, it can as well know what a crane is, and also that crane is an integral part of a truck-crane which is registered as a heavy motor vehicle. Lack of effort and knowledge sufficient for taking such judicial notice should not be a burden on the citizens in judicial proceedings. As provided by section 56 of the Evidence Act, no fact of which the Court will take judicial notice, need be proved. This equally applies to the Tribunals which are not in fact strictly bound by the rules of evidence.
The mobile crane of the assessee which admittedly was registered as a heavy motor vehicle, would, for the above reasons, clearly fall within the expression 'motor lorries' (which means motor trucks) in Entry III E(1A) of the Table in Appendix 1 under Rule 5 of the said Rules, since it was used by the assessee in its business of running the crane on hire."
Page 14 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined
37. We are not impressed by the vociferous submissions canvassed on behalf of the Revenue that the RTO registration under the provisions of the Motor Vehicles Act is a sine qua non for claiming depreciation. To put it in other words, the contention of the Revenue is that, unless the vehicle is registered in the name of the assessee under the Motor Vehicles Act, the assessee cannot be said to be its owner, and as such, he would not be entitled to depreciation allowance in respect thereof. The Revenue authorities have also proceeded on the same footing while declining depreciation at the rate of 30%.
38. In the aforesaid context, we may refer to and rely upon a decision of the Bombay High Court in the case of Commissioner of Income-Tax v. Dilip Singh Sardarsingh Bagga, reported in (1993) 201 ITR 995, wherein the following view has been taken :
"4. The word "owner", as observed by the Supreme Court in R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (at page 578) has different meanings in different contexts and in certain circumstances even a lessee may be considered as the owner of the property leased to him. It was also held to be so by the Bombay High Court in CIT v. Alpana Talkies [1983] 139 ITR 1055. It was a case of a lease of a theatre for exhibiting films. Under the lease agreement, the lessee was to keep the theatre in good condition and make all repairs and the premises were to be surrendered with the fittings and fixtures and additions and alterations on the expiry of the lease period. The assessee demolished the theatre and constructed a new one during the period January- July 1962. In respect of the assessment years 1964-65 to 1969-70, the assessee claimed depreciation in respect of the theatre building, furniture and fixtures, plant, etc. The claim was rejected by the Income-tax Officer on the ground that the lessor had not divested himself of the ownership of the land and the building.Page 15 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024
NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined The Appellate Assistant Commissioner and the Tribunal decided in favour of the assessee and held that the assessee was entitled to depreciation. On a reference, this Court (at page 1058) held:
"What is relevant for the purposes of the present case is that during the period of the lease, the assessee was held to be the owner of the building. The Tribunal, in our view, was justified in holding that the assessee was the owner of the building, fixtures and fittings of Alpana Talkies within the meaning of section 32 of the Income-tax Act. Consequently, the assessee would be entitled to depreciation under section 32 of the Incometax Act, 1961, on the above items."
5. The expression "owned by the assessee" also came up for interpretation before the Allahabad High Court in Addl CIT v. U.P. State Agro Industrial Corpn. Ltd. [1981] 127 ITR 97. In this case, depreciation was claimed by the U.P. State Agro Industrial Corporation Ltd., in respect of a building which stood in the name of the State of U.P. The claim was sought to be rejected on the ground that no sale deed had been executed by the State Government in favour of the assessee. The contention of the assessee was that even though the U.P. Government had not transferred the immovable property by a registered deed, the property for all practical purposes belonged to it. It was the beneficial and equitable owner of the property and was entitled to claim depreciation on it. It was held:
" ......the expression 'building owned by the assessee' in section 32 of the Income-tax Act, 1961, has not been used in the sense of the property, complete title in which vests in the assessee. The assessee will be considered to be an owner of the building under section 32 if he is in a position to exercise the rights of the owner not on behalf of the person in whom the title vests but in his own rights."Page 16 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024
NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined
6. Dealing with the contention of the revenue regarding non-execution of a registered sale deed by the State Government as contemplated by section 54 of the Transfer of Property Act, 1882, and the effect thereof on the ownership of the purchaser for the purpose of claiming depreciation, it was observed that "even though in the absence of execution of a registered sale deed the ultimate title in the property had not vested in the assessee, it became the owner thereof in the sense in which the expression has been used in section 32 of the Income-tax Act".
7. In this connection, reference may be made to the decision of the Calcutta High Court in CIT v. Steelcrete (P.) Ltd [1983] 142 ITR 45. This too was a case of rejection of a claim to depreciation and development rebate under sections 32 and 33 of the Act. The controversy was whether the assets in question were "owned by the assessee and used for the purpose of business". There was no real dispute in regard to the user of the assets for the purpose of the business. The sole question for determination was whether the machinery in question could be considered to be owned by the assessee for the purpose of section 32 of the Act. Relying upon the observations of the Supreme Court in R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, the High Court observed that though the machinery in respect of which the depreciation was claimed stood in the name of the Government of India, to all real intents and purposes and also for purposes of section 32 of the Income-tax Act, 1961, it was intended that the property and the goods should pass to the assessee at the relevant time. Read in this context, it was held that the assessee owned the machinery in question and was entitled to depreciation.
8. Reference may also be made to another decision of Page 17 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined the Calcutta High Court in CIT v. Salkia Transport Associates [1983] 143 ITR 39. The dispute in this case was somewhat similar to the dispute in the case before us. Here also depreciation was claimed by the assessee in respect of motor vehicles claimed to be owned by it though not registered under the Motor Vehicles Act in its name. The Calcutta High Court held that the provisions of the Motor Vehicles Act, 1939, do not prevent a person from becoming the owner of the motor vehicles without registration. Registration is not an essential prerequisite for the acquisition of ownership of the motor vehicle but is an obligation cast upon an owner of the vehicle for the purpose of running the vehicles in any public place. Hence, it was immaterial whether the buses were registered in the assessee's name or the original owner's name. On the facts of the case, it was held that the assessee was the owner of the vehicles though the same were not registered in its name under the Motor Vehicles Act and that it was entitled to depreciation in respect thereof.
9. To the same effect is the decision of the Kerala High Court in the case of CIT v. Nidish Transport Corporation [1990] 185 ITR 669. In this case also the sole question for determination was whether the assessees were entitled to depreciation on certain vehicles used by them in their business though the vehicles purchased by the assessees had not been transferred in their names in the certificate of registration. The contention of the revenue in this case also was that till the transfer of ownership is effected in the certificate of registration, the assessees could not be considered to be owners. Repelling this contention of the revenue, it was held that the motor vehicle being a movable property, the transfer of ownership thereof is governed by the Sale of Goods Act and not by the Motor Vehicles Act. As between the transferor and the transferee, the sale is complete even before the transfer is effected in the registration certificate. The failure to Page 18 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined report the same to the Registering Authority may entail levy of the penalty but it does not affect the passing of the title in the vehicle. It was, therefore, held that the assessees who purchased the vehicles were owners of the vehicles and were entitled to depreciation under section 32 of the Act if the same has been used for the purpose of the business.
10. The various decisions including the decisions of the Calcutta High Court and the Kerala High Court which relate to the transfer of motor vehicles referred to above leave no scope for doubt that the transfer of ownership of a vehicle is not dependent upon the transfer of ownership being recorded under the Motor Vehicles Act. Section 31 of the Motor Vehicles Act, 1939 (corresponding to section 50 of the Motor Vehicles Act, 1988), so far as relevant, reads:
"31. (1) Where the ownership of any motor vehicle registered under this Chapter is transferred,--
(a )the transferor shall -
(i)within fourteen days of the transfer, report the fact of transfer to the registering authority within whose jurisdiction the transfer is to be effected and shall simultaneously send a copy of the said report to the transferee;
(ii)within forty-five days of the transfer forward to the registering authority referred to in sub-clause (i)--
(A)a no objection certificate obtained under section 29A; or (B)in a case where no such certificate has been obtained, --
(I)a receipt obtained under sub-section (2) of section 29A; or (II)a postal acknowledgement received by the Page 19 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined transferor if he has sent an application in this behalf by registered post acknowledgement due to the registering authority referred to in section 29A, together with a declaration that he has not received any communication from such authority refusing to grant such certificate or requiring him to comply with any direction subject to which such certificate may be granted;
(b) the transferee shall, within thirty days of the transfer, report the transfer to the registering authority within whose jurisdiction he resides, and shall forward the certificate of registration to that registering authority together with the prescribed fee and a copy of the report received by him from the transferor in order that particulars of the transfer of ownership may be entered in the certificate of registration."
11. From a plain reading of this section, it is clear that this section does not deal with transfer of the ownership of any motor vehicle nor does it impose any restriction on transfer of such ownership. It simply obligates the transferor and the transferee to report within the specified time from the date of transfer the fact of transfer to the registering authority. This section, in fact, presupposes transfer of ownership of a motor vehicle. It is only after the actual transfer is effected that the obligation contemplated by this section comes into operation. Moreover, non- compliance with the requirement of this section does not in any way affect or invalidate the transfer of ownership of the vehicle - it only makes the transferor or the transferee liable to prosecution or penalty. Under the circumstances, reliance on section 32 of the Motor Vehicles Act, 1939, for determining the ownership of a vehicle is completely misplaced. This section has no bearing on the validity of the transfer of a motor vehicle which has to be decided in each case having Page 20 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined regard to the facts and circumstances thereof."
39. A Division Bench of the Calcutta High Court, in the case of Commissioner of Income Tax v. Salkia Transport Associates, reported in (1983) 143 ITR 39, speaking through Sabyasachi Mukharji, J. (as His Lordship then was), observed as under :
"14. The argument that the assessee was not the registered owner of the vehicles under the Motor Vehicles Act is also of no consequence. It is well settled that an assessee will not be entitled to depreciation allowance if he is not the owner of the buildings, machinery, plant or furniture unless he is the owner of the same (sic). Subsection (1A) of section 32, which came into effect from 1.4.1971 provides an exception to this rule but this subsection is confined to buildings only and does not extend to plant, machinery or furniture. But there is no provisions under the Motor Vehicles Act which requires registration of a motor vehicle in the name of a person for the purpose of acquisition of ownership of the vehicle. Section 22(1) of the Motor Vehicles Act which requires registration of motor vehicles is in the following terms :
"(1) No person shall drive any motor vehicle and no owner of a motor vehicle shall cause or permit the vehicle to be driven in any public place or in any other place for the purpose of carrying passengers or goods unless the vehicle is registered in accordance with this chapter and the certificate of registration of the vehicles has not been suspended or cancelled and the vehicle carries a registration mark displayed in the prescribed manner."
15. The provision of this section does not prevent a person from becoming an owner of a motor vehicle without registration. On the contrary, the section makes it obligatory for an owner of a motor vehicle to Page 21 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined get the vehicle registered and to display the certificate of registration before the vehicle is driven in any public place. Registration is not an essential pre-requisite for acquisition of owner ship of a motor vehicle but is an obligation cast upon the owner of a vehicle for the purpose of running of the vehicle in any public place. Therefore, in our opinion, whether the buses were registered in the assessee's name or not is not very material for the purpose of this case. This may be a factor that has to be taken into consideration. But when under the agreement the new buses that were acquired by the assessee in replacement of the old buses became the property of the assessee- firm, there is no reason to hold that the asses see was not the owner of the buses because the buses were not registered in the name of the assessee.
16. Section 22(1) of the Motor Vehicles Act does not lay down that a person cannot be the owner of a motor vehicle unless the motor vehicle is registered in his name.
17. The Supreme Court had also occasion to consider this question in the case of K.L. Johar & Co. v. Deputy Commercial Tax Officer [1965] 16 STC 213 and observed as follows :
"So far as the dealer is concerned the whole pi ice is paid by the appellant. Agreement also shows that the appellant is the owner of the vehicle and the intending purchaser is merely a hirer thereunder. The vehicle has to be registered in the name of the appellant, though the fact of registration by itself in one name or another may not be determinative of the owner of the vehicle."
18. The question of ownership is essentially a question of fact. In this case, the agreement clearly provides that the new vehicles acquired in replacement of the old and worn out vehicle will be the property of the Page 22 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined assessee. That the assessee has purchased five new buses is not disputed. The only argument is that the vehicles were not registered in the name of the assessee under the Motor Vehicles Act. But that is one of the factors that has to be taken into consideration for deciding the question of ownership of the buses. It cannot be said as a matter of law that unless the buses are registered in the name of the asses see, the assessee cannot be regarded as the owner of the buses. On the contrary, the essential pre-requisite for registration under section 22(1) of the Motor Vehicles Act, is ownership of a motor vehicle. Unless a per son is owner of a motor vehicle he is not entitled to get it registered in his name under section 22(1) of the Motor Vehicles Act. The Tribunal in this case has come to the con clusion on a review of the facts and also of the agreement that the assessee was the owner of the five new buses and as such was entitled to claim depreciation allowance on these buses. The Tribunal has not committed any error of law in coming to this conclusion. The requirement of section 34 of the Act, is that the vehicles must be 'owned by the assessee'. This section does not require that the assessee must be a registered owner of the vehicles in order to claim depreciation allow ance in respect of them. We are of the view that on the facts of this case the new buses were owned by the assessee within the meaning of section 32 and the assessee was entitled to claim depreciation allowance on these vehicles."
40. At this stage, we may also look into the decision of this Court in the case of Deputy Commissioner of Income-Tax v. Pradip N.Desai (HUF), reported in (2012) 341 ITR 277 (Gujarat), 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 Page 23 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024 NEUTRAL CITATION C/TAXAP/454/2024 ORDER DATED: 09/07/2024 undefined 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."
[9] In view of the above settled legal position, we answer the questions in favour of the respondent - assessee and against the appellant - Revenue as the appeal would not give rise to any questions of law much less any substantial questions of law. This appeal being devoid of any merits is, accordingly, dismissed.
(BHARGAV D. KARIA, J) (NIRAL R. MEHTA,J) CHANDRESH Page 24 of 24 Downloaded on : Fri Jul 26 21:00:27 IST 2024