Case Law Details
Authorised Representative: Utsav R. Doshi, Chartered Accountant
ITAT Rajkot E-Bench knocks down CIT(A) order. Held that Swift Dzire is a motor-car which is classifiable as “LMV”, and therefore additional depreciation was permissible.
Issue under Appeal
Whether the assessee is entitled to claim depreciation at the rate of 50% on Maruti Shift car purchased by it during the accounting year relevant to the assessment year and used for the purpose of the business.
Brief Facts
Assessee has filed its return of income electronically on 21.9.2011 declaring total income at Rs.6,33,710/-. The assessee has purchased Maruti Shift car on 27.4.2009. It has claimed depreciation at the rate of 50% on the cost of this car. The AO did not allow the claim of the assessee. Against the claim of Rs.1,70,325/-, the ld. AO has allowed depreciation of Rs.5 1,097/-. He disallowed the claim of the assessee at Rs.1,19,228/-.
Held by CIT (A)
Appeal to the CIT(A) did not bring any relief to the Assessee.
Held by ITAT
An identical issue has been considered by the ITAT, Ahmedabad “SMC” Bench in ITA No.2737/Ahd/2013. ITAT has relied upon the order of the ITAT, Mumbai Bench in the case of Daleep S. Chandnan Vs. ACIT, 14 SOT 0233. Order of the ITAT read as under:
“2. Sole issue involved in this appeal is, at what rate depreciation is admissible to the assessee on new induction of motor car in the block of assets.
3. The assessee has filed its return of income on 22.9.2010 declaring total income at Rs.13,19,250/-. It has purchased Mercedes car on 9.2.2009 for Rs.29,72,759/- and Maruti Shift Car of Rs.6, 74,555/- on 30.3 .2009. The total investment made by the assessee was of Rs.36,47,314/- in the previous year. It has claimed depreciation at the rate of 50%/2 i.e. 25%, because vehicles were not used for 365 days in the previous year. The assessee in this way worked out WDV at Rs.27,35,485/-. The AO granted depreciation at the rate of 15%. Appeal to the CIT(A) did not bring any relief to the assessee.
4. With the assistance of the ld.representatives, I have gone through the record carefully. The ld.counsel for the assessee relied upon the order of the ITAT, Mumbai Bench in the case of Daleep S. Chandnani Vs. ACIT, reported in 14 SOT 0233. The Tribunal has considered verbatim same situation in that case. Discussion made by the Tribunal reads as under:
“7….
We have considered the submissions made by both the sides, material on record, orders of authorities below and applicable legal provisions. The interesting question which has arisen before us is regarding the rate of depreciation applicable to motor car acquired between 2-10-1998 and 31-3-1999 and if the same has been put to use between the same period for the purpose of business of the assessee. As far as use of the car acquired by the assessee during this period for the purpose of business is concerned, the same is not in dispute. We consider it pertinent to reproduce the relevant statutory provisions as under for better appreciation of legal position.
1. Third proviso to Section 32, and Explanation thereto.
Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business of profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value therefore, as may be prescribed.
Explanation.’ For the purposes of this proviso’
(a) the expression ‘commercial vehicle’ means’ ‘heavy goods vehicle ç ‘heavy passenger motor vehicle’, ‘light motor vehicle’, ‘medium goods vehicle’ and ‘medium passenger motor vehicle’, but does not include ‘maxi-cab’, ‘motor-cab’, ‘tractor’ and ‘road-roller’.
(b) the expression ‘heavy goods vehicle’, ‘heavy passenger motor vehicle’. ‘Light motor vehicle’, ‘medium goods vehicle’, ‘medium passenger motor vehicle’, ‘maxi-cab’, ‘motor-cab’, ‘tractor’ and ‘road-roller’ shall have the meanings respectively as assigned to them in Section 2 of the Motor Vehicles Act, 1988 (59 of 1988).
2. Relevant provisions of Appendix-I and note thereto.
(iia Commercial vehicle which is acquired by the assessee on or after the 1st day of October, 1998, but before the 1st day of April, 1999 and is put to use for any period before the 1st day of April, 1999 for the purpose of business or profession in accordance with the third proviso to Clause (ii) of Sub-section (1) of Section 32 (see Note 3A below the Table) 3A. “commercial vehicle” means “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but does not include “maxi-cab”, “Motor-cab”, “tractor” and “road-roller”. The expressions “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”, “medium passenger motor vehicle”, “maxi-cab”, “motor-cab”, “tractor” and “road-roller” shall have the meanings respectively as assigned to them in Section 2 of the Motor Vehicles Act, 1988 (59 of 1988))
3. Relevant provisions of the Motor Vehicles Act, 1988.
“heavy goods vehicle” means any goods carriage the gross vehicle weight of which, or a tractor or a road-roller the unladen weight of either of which, exceeds 12,000 kilograms;
“heavy passenger motor vehicle” means any public service vehicle or private service vehicle or educational institution bus or omnibus the gross vehicle weight of any of which, or a motor car the unladen weight of which, exceeds 12,000 kilograms;
“light motor vehicle” means a transport vehicle or omnibus the gross vehicle weight of either of which or a motor car or tractor or road-roller the unladen weight of any of which, does not exceed (7,500) kilograms;
“maxi-cab” means any motor vehicle constructed or adapted to carry more than six passengers, but not more than twelve passengers, excluding the driver, for hire or reward;
“medium goods vehicle” means any goods carriage other than a light motor vehicle or a heavy goods vehicle;
“medium passenger motor vehicle” means any public service vehicle or private service vehicle, or educational institution bus other than a motor cycle, invalid carriage, light motor vehicle or heavy passenger motor vehicle;
“motor cab” means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward;
8. As per the third proviso to Section 32 of the Act, in respect of the asset being commercial vehicle acquired between 2-10-1998 and 31-3- 1999, the depreciation has to be allowed on such percentage on the written down value thereof as may be prescribed. As per the provisions of Section 43(6)(c)(ii). W.D. V. means the written down value of that block of asset as increased by the actual cost of any asset falling within that block acquired during the previous year and as reduced by the monies payable together with scrap value if any in respect of the assets falling within that block which are sold or discarded or demolished or destroyed during that previous year. However, for our purpose the material provision is that the actual cost of the asset so acquired would fall within that block in the year of acquisition and thereafter the W.D.V., i.e., the actual cost less depreciation allowed thereon would be material for computing depreciation in subsequent years. Thus the cost of car is to be treated as W.D.V. for computing depreciation thereon at the specified percentage. Further the Explanation to this proviso defines that the expression “commercial vehicle” would mean… “light motor vehicle” and the “light motor vehicle” as defined in the Motor Vehicles Act, 1988, means any transport vehicle or omni bus, the gross physical weight of either of which or a motor car or a Tractor or Road Roller the unladen weight of which does not exceed 75,00 kgs. Thus a motor car not exceeding the specified weight is covered under the definition of “light motor vehicle”. It is further provided that commercial vehicle would not include “maxi-cab” and “motor-cab”. The maxi-cab as per provisions of Motor Vehicles Act means any motor vehicle constructed or adapted to carry more than six passengers but not more than twelve passengers excluding the driver for hire or reward. Similarly the term “motor c Jo” also excludes any motor vehicle for hire or reward. If the provisions of Explanation to this proviso and the definition of maxi-cab and motor cab as given in Motor Vehicles Act, 1988 are read together then motor vehicles used for hire or reward would not be covered under this proviso to Section 32 of the Act, and such motor vehicles would be covered under entry (2)(ii) of Item-3 of Part-A of Appendix-I to Rule 5 of the Rules. This conclusion further leads to an interference that the Legislature has given benefit of higher depreciation to the assessees not engaged in the business of Motor Buses, Motor Lorries and Motor Taxies on hire and defining such light motor vehicles as commercial vehicles though intentionally excluding vehicles commercially exploited for yielding income from the definition of commercial vehicle further supports the case of the assessee. We also find sufficient force in the contention of the assessee that different entries exist in Appendix-I for different categories of motor vehicles for providing depreciation at a specified rate depending upon the period of acquisition and the purpose for which they are deployed. Therefore, nomenclature of commercial vehicle should not be so construed to deprive the assessee of higher depreciation when all the conditions specified in the Act and the Rules have been met by the assessee. We also hold that, till such car is used by the assessee for its business purpose the assessee would get the depreciation at the rate of 40 per cent as per the third proviso to Section 32 of the Act. Thus, Ground Nos. 1 to 3 of the assessee stand accepted.”
9. In the present case, the ld.AO has granted depreciation at the rate of 15% without examining relevant provisions. It appears that his finding is based upon his experience and past impression. He was of the opinion that once Board has not granted higher rate of depreciation to cars, which are put in the business of hiring, or in public transportation, then how a partner, who used motor car for the purpose of business can be granted at a such rate. In the case he had an impression, higher rate of depreciation at the most could be granted to the car used for the public transportation for the people. On appeal, the ld. CIT(A) has observed that CBDT has amended I. T. Rules by Income Tax (Third Amendment) Rules, 2009 and new Appendix has been introduced. The ld. CIT(A) made reference to Notification no.10/2009 dated 19.1.2009 and also para-6 of the said notification which gives definition of commercial vehicle. I have examined this notification available on page no.1.426 of Income Tax Rules (3rd Edition) of Taxmann i.e. 2016 edition. Paragraph-6 contemplates definition of “commercial vehicle”. This paragraph is available at page no.1.433 of the Taxmann ’s Income Tax Rules. I find it is verbatim same as considered by the ITAT, Mumbai. There is no such condition that vehicle would qualify as “commercial vehicles” when licensed to be used as public transport. For facility of reference, I take note of this as under:
10. “Commercial vehicle” means “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle” and “medium passenger motor vehicle” but does not include “maxi-cab”, “motor-cab”, “tractor” and “road-roller”. The expressions “heavy goods vehicle”, “heavy passenger motor vehicle”, “light motor vehicle”, “medium goods vehicle”, “medium passenger motor vehicle”, “maxi-cab”, “motor-cab”, “tractor” and “roadroller” shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988).”
11. In view of the above, I do not find any disparity on facts. I allow appeal of the assessee and delete disallowance made by the AO.
On due consideration of the above order, we are of the view that there is no disparity on facts and circumstances of the case, therefore, we allow the appeal of the assessee and delete disallowance.
