Motor Vehicles qualify as Self-Propelled Vehicles: ITAT confirms Deletion of Disallowance of Excess Claim of Depreciation [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal (ITAT), confirmed the deletion of disallowance of excess claim of depreciation and noted that motor vehicles qualify as self-propelled vehicles.

The Assessing Officer observed that on verification of Tax Audit Report, it was found that, the assessee, Apraava Energy Pvt. Ltd, has claimed depreciation on “self-propelled vehicles” at 33.40% for an amount of Rupees 1 crores. The AO was of the view that as assessee’s claim for depreciation falls under category of “any other assets not covered above” of the Appendix IA to Rule 5(1A) of the Income-tax Rules, 1962.

The depreciation thereon is allowable at the rate of 7.69%, while the assessee has claimed depreciation under category (k)-of the Income-tax Rules, 1962“self-propelled vehicle” and has claimed depreciation at the rate of 33.40% on motor vehicles.

The assessee submitted before the Assessing Officer that the assessee claimed depreciation under the Straight-Line Method (SLM) on the block of assets. The assessee pointed out that Appendix-IA for rate of depreciation under SLM method does not provide for depreciation @15% on vehicles. Further, the assessee’s case is squarely covered under category (k)-of the Income-tax Rules, 1962“self-propelled vehicles” and is eligible for depreciation at the rate of 33.40%.

The Assessing Officer rejected the arguments of the assessee and made disallowance of Rs 91 lakhs and in appeal, the CIT(Appeals) allowed the appeal of the assessee.

In the case of Gotan Lime Stone Khanij Udyog, the Rajasthan High Court observed that “mechanically propelled vehicle adapted for use on roads is a motor vehicle but does not include a vehicle running upon fixed rails or a vehicle of a special type adapted for use only in a factory or in any other enclosed premises or a vehicle having less than four wheels fitted with engine capacity of not exceeding twenty-five cubic centimetres.”

The Tribunal of Waseem Ahmed, Accountant Member and Siddhartha Nautiyal, Judicial Member observed that “we are of the considered view that motor vehicles qualify as self-propelled vehicles and accordingly, we find no infirmity in the order of the CIT(Appeals), who has allowed relief to the assessee with respect to this issue.

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