1998 (8) TMI 58 - HC - Income Tax

Summary

Issues Involved:
The issues involved in the judgment are:
1. Whether the Income-tax Appellate Tribunal erred in allowing higher rate of depreciation on tippersRs.
2. Whether the tipper should be treated as a lorryRs.
3. Whether the Income-tax Appellate Tribunal was justified in allowing 40% rate of depreciation on tippersRs.

Judgment Details:
The Revenue filed a petition under section 256(2) of the Income-tax Act, 1961, seeking reference of certain questions regarding the depreciation on tippers. The assessee, a firm engaged in civil contracts, claimed depreciation at 40%, but the Assessing Officer restricted it to 25%. The Tribunal held that tippers are motor lorries with an extra hydraulic system for unloading, used for both business and hire, justifying 40% depreciation.

The Income-tax Act, 1961, provides for depreciation on assets used for business. Rule 5 of the Income-tax Rules, 1962, specifies depreciation rates for different assets. The Appendix under the Rules prescribes 20% for motor cars, 40% for motor lorries, and 25% for machinery and plant. The Tribunal found that the assessee's substantial income was from hiring tippers, justifying 40% depreciation.

The main argument was that tippers, falling under motor lorries, should not be eligible for 40% depreciation as per the Rules. However, the Tribunal's finding was that substantial hire income entitled the assessee to 40% depreciation, regardless of other uses. The Rules do not require exclusive business use for depreciation eligibility.

The Court upheld the Tribunal's decision, stating that the assessee's hire income justified 40% depreciation on tippers, dismissing the petition with no costs.

Therefore, the Tribunal's decision to allow 40% depreciation on tippers was deemed justified, and the petition was dismissed.