Applicability of higher depreciation on Construction vehicle: ITAT Remands back matter for factual evidence

In the case of DCIT V/s. Jaihind Projects Ltd., the Income Tax Appellate Tribunal (ITAT) remand back the case to the CIT(A) re-examine the matter after giving opportunity of being heard to assessee as well as assessing officer.

In this matter, the assessee was engaged in construction business and claimed depreciation on Construction Vehicle @ 40% on WDV Basis. The claim of excess depreciation of Rs. 22,42,228/- was disallowed by Ld. Assessing Officer by holding that ‘construction vehicles’ do not carry any higher rate of depreciation but were eligible for normal rate of depreciation @15% only.

In an appeal against the assessing officer, the assessee the assessee submitted that the assessee is eligible for a higher rate of depreciation since the vehicles were give on hire and assessee has shown rental income from those vehicles. The Ld. CIT(A) allowed the claim of excess depreciation by holding as under:

“On a careful consideration of the entire facts of the case, it is noted that though the vehicles were construction vehicles the appellant had given these vehicles on hire and the rental or higher receipts have been offered for income. It is also further observed that the vehicles have been used for the purpose of higher and letting out regularly during the course of year as a regular income from these vehicles are being shown. It is not a case where the principal use of the vehicles was for the purpose of business but only a small and casual letting out was made by the appellant. The appellant has demonstrated that the vehicles were let out almost during the entire part of the year. The appellant has also shown the income earned from letting out of these vehicles in the profit and loss account for the year. The issue regarding existence of vehicle is not in dispute. The vehicles are registered with the RTO as motor vehicles, which is clearly evident from the copies of registration book submitted during the course of appellate proceedings. The AO has also examined these certificates and booklets. And in the remand report no factual observation regarding this aspect has been given by her. The observation of the AO that no evidence regarding name and addresses of the parties to whom the vehicles have been given on rent appear to be factually incorrect as the appellant has given before me all those details. In of these facts I am of the considered opinion that the claim of the appellant regarding higher rate of depreciation as the vehicles were let out on hire during the year, is acceptable. The disallowance made by the AO is therefore, directed to be deleted”.

The Assessing Officer argued before the tribunal that the the assessee was engaged in construction activity and is not engaged in the business of letting vehicles for hire on a commercial basis and the vehicles were not used for plying commercially. The Ld. DR submitted that additional details were filed before Ld. CIT(A) in respect of claim of higher rate of depreciation, who admitted the same by way of additional evidence, whereas the assessee did not file these details during assessment proceedings, despite being provided ample opportunity during assessment proceedings. ITAT was of the view that the vehicle let on hire are eligible for higher depreciation but in this case the assessee has not been able to irrefutably establish whether vehicles were let out on hire on regular basis, with details of parties to whom vehicle were given on hire, duration for which vehicles were let out for hire i.e. whether vehicles were being let out on hire on a regular basis throughout the year, the purpose for which the vehicles were being used when let out on hire, the details of rental income earned from such vehicle etc. Therefore, appeal of the Revenue is allowed for statistical purposes.

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