The Income Tax Appellate Tribunal (ITAT), Raipur bench, held that depreciation cannot be claimed on hired vehicles used in a Mining Contract. Therefore, the bench upheld the revision order.
The assessee, Technoblast Mining Corporation, is a firm engaged in the business of mining contracts and electronically filed its income tax return. Thereafter, the case was selected for scrutiny, and an Assessment order under Section 143(3) of the Income Tax Act was passed.
Accordingly, the Principal Commissioner of Income Tax (PCIT) examined the assessment order and revealed that the assessee had claimed and was allowed depreciation at 30% on heavy vehicles.
The PCIT observed that since the assessee is engaged in a mining contract and these vehicles are primarily used in the assessee’s own business, and furthermore, no hire income was shown from the heavy vehicles, therefore, only depreciation at 15% should have been allowed to the assessee. Thus, the excess allowance of depreciation was disallowed.
Thereafter, the PCIT issued a notice under section 263 of the Income Tax Act. The assessee responded to the notice under Section 263, but the reply of the assessee was not found convincing, and therefore the PCIT held that the assessment order was erroneous and prejudicial to the interest of revenue.
Aggrieved, the assessee preferred an appeal to the tribunal.
Before the tribunal, Sakshi Gopal Aggarwal, Assessee Representative (AR), submitted that the additional depreciation claimed by the assessee was on heavy vehicles called Hyva and Tipper. The vehicles are absolutely and exclusively used for the transportation of coal or iron ore from production sites to the finished goods stock yard inside the coal/iron ore mines.
It was further argued that the machines, i.e., vehicles used for transportation under the scope of work assigned to the assessee by Godawari Power and Ispat Ltd., were actually for the work of Godawari Power and Ispat Ltd., and thus the said work should be considered as hiring of vehicles.
V. K. Singh, department representative (DR), supported the orders of authorities below.
The tribunal, while considering the appeal, observed that the hiring of vehicles in terms of Section 32 could not be specified. Further, the PCIT had rightly observed to disallow such additional depreciation when the vehicles are used in the assessee’s own business and not on hire.
After reviewing the contentions of both parties, the two-member bench of Arun Khodpia (Accountant Member) and Ravish Sood (Judicial Member) upheld the revision order passed by the PCIT.
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