Higher depreciation on Lorry not eligible if party used for own

GVV Construction Pvt. Ltd. Vs. DCIT (ITAT Cuttack)

If the assessee uses motor lorries partly for own use and for hire charges he is not entitled to claim excess depreciation @ 30% as per the provisions of Section 32 of the Income Tax Act.

Case Summary: –

Facts of the case:

• The assessee filed return of income on 24.09.2013 declaring total income of Rs.3,29,07,929/-. The assessee is deriving income from civil contract business. The case of the assessee was selected for scrutiny and statutory notices were issued to the assessee.
• During the course of assessment proceedings, the AO noticed that the assessee has claimed depreciation at the rate of 30% on various items (14 nos.) under the head plant and machinery referring them as motor lorries used in a business of running them on hire. But on perusal of the profit and loss account, the assessee has not shown any income from hiring in respect of 14 items of plant and machinery in which the assessee claimed depreciation @30%.
• The AO also noted that the above items are not under the category of motor lorries as defined in the Income Tax Act regarding charging of depreciation as per Section 32 of the Act. In this regard the AO issued show cause notice dated 04.01.2016 requesting the assessee to show cause as to why the following 14 items should not be treated as plant and machinery, on which admissible rate of depreciation as per I.T.Act, 1961 is 15%.
• Only, motor buses, motor lorries and motor taxies used in a business of running of them hire is eligible for depreciation @30%. It was also mentioned by the AO that none of the following 14 items are coming under motor buses, motor lorries and motor taxies. It was further mentioned by the AO that no income from hiring the 14 items are shown in the profit and loss account for the F.Y.2012-2013.
• Against the show cause notice issued by the AO the assessee filed written submissions along with picture of the said impugned assets/machineries, which has been incorporated by the AO in the assessment order.
• On going through the above submissions of the assessee, the AO noticed that there was no any grievance made by the assessee for giving the vehicles on hire and no any bills and details of the hire charges payments were produced before the AO to substantiate the claim of the assessee.
• The AO also observed that the assessee claimed that instead of showing hire charges as income it had been credited to the accounting head ‘hire charges’ and furnished ledger copy of the same, but nowhere in the details it was mentioned that, only ‘motor lorries’ were given on hire. There is possibility that item forming part of the plant and machinery other than ‘motor vehicles/buses/lorries would have been given on hire.
• The AO further noticed that for claiming higher rate of depreciation the assets must be fallen under the category of motor vehicles/buses/lorries as prescribed in the Income Tax Act. But here there is no such case.
• Accordingly, the AO recalculated the depreciation @15% as prescribed by the Income Tax Act under the plant and machinery on the 14 items totaling excess depreciation calculated Rs.33,42,185/- and added back to the total income of the assessee.
• Feeling aggrieved from the order of the Assessing Officer, the assessee filed appeal before the CIT(A) and the CIT(A) after considering the submissions of the assessee and findings recorded by the AO, dismissed the appeal of the assessee.
• Aggrieved from the order of CIT(A), the assessee is in appeal before the Income Tax Appellate Tribunal.

Issue: