Rate of dep earth cutting equipments like jcb, loader.

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gopalagarwal78 (Querist)
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23 September 2011 What is the rate of depreciation on the plant and machinery such as JCB,Pocklin,Loader,HYDRA.Wether it is 30% or 15%. As as per the recent amendement/circular/Judgement it comes to my knowledge that it 30%.

Please give your expert opinion along with the extract of Judgement/Circular/amendment.

Thanks
CA. Gopal Agarwal

Bhaskaran Chackrapani Warrier

Bhaskaran Chackrapani Warrier (Expert)
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23 September 2011 Though JCB has been categorized as an excavator and its main function is removing soil or earth, yet at the same time, JCB’s another function is to carry or transport removed soil and dump it at another site to discharge function like transshipment and loading into another vehicle and therefore, for the purpose of depreciation, JCB can be treated as a motor lorry and it would be eligible for higher rate of depreciation (30 % w.e.f asst yr.2006-07 and onwards).

CITATION:- Gaylord Constructions vs. ITO (2008) 175 Taxman (Magz.) 99 (Cochin)

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C A S.S.Agarwal, M.Com.,LL.B,

C A S.S.Agarwal, M.Com.,LL.B, (Expert)
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24 September 2011 I agree with the expert Mr. Chackrapani. I am giving you the full judgement of the case as referred by him

IN THE HIGH COURT OF KERALA AT ERNAKULAM

ITA.No. 1255 of 2009()

1. THE COMMISSIONER OF INCOME TAX,
... Petitioner

Vs

1. GAYLORD CONSTRUCTIONS,
... Respondent

For Petitioner :SRI.P.K.R.MENON,SR.COUNSEL, GOI(TAXES)

For Respondent : No Appearance

Judgement

O R D E R
C .N. RAMACHANDRAN NAIR &
C. K. ABDUL REHIM, JJ.
--------------------------------------------
I.T.A. No. 1255 OF 2009
--------------------------------------------
Dated this the 19th day of August, 2009
C.R.
JUDGMENT

Ramachandran Nair, J.

The question raised in the appeal filed by the Department is

whether the Tribunal was justified in upholding the assessee's claim for

depreciation of earth moving equipment, namely, JCB at the rate of

40% which rate is provided for "Motor Buses, Motor Lorries, Motor

Taxis" used in the business of running them on hire. The assessing

officer took the view that earth moving equipment, popularly known as

JCB, is not Motor Buses, or Motor Lorries or Motor Taxis, eligible for

depreciation at the higher rate of 40%. Therefore he granted

depreciation to the assessee at 25%.

2. Senior standing counsel appearing for the appellant supported

the case of the assessing officer and contended that the items covered

by the above entry are only motor vehicles used for carriage of goods

or passengers and since JCB is only an excavator-cum-earth moving

equipment, it does not answer the description of any of the motor

2

vehicles referred to in the above entry. We notice from the Tribunal's

order that the Tribunal allowed the claim relying on the decision of the

Supreme Court in BOSE ABRAHAM V. STATE OF KERALA,

(2001) 9 KTR 366 (SC) and that of the Gujarat High Court in GUJCO

CARRIAGES V. CIT, 122 Taxman 206 (Guj.) wherein the Gujarat

High Court held that mobile crane which is registered as a heavy motor

vehicle falls within the expression "motor lorries" and is eligible for

depreciation at higher rate of 40% under the above entry.

3. Admittedly JCB which is used on road is registered as a

motor vehicle. Though it is not used as a transport vehicle, JCB is a

four wheeled excavator-cum-transport vehicle used for excavation of

earth and movement of the same, though for limited distances. Even

though the purpose of Motor Lorry which is a heavy motor vehicle

used for transport of goods from place to place, cannot be served by a

JCB, we are of the view that the expression "motor lorry" covered by

the above entry of the Income Tax Rules providing for higher rate of

depreciation, has a wide meaning. JCB though basically is used for

excavation of soil, it is a heavy vehicle also used for transport of excavated soil, sand or other goods, for a limited distance and the machine is also used to level and shape the land. Therefore it serves as a transport equipment as well and so long as it is registered under the Motor Vehicles Act, it is a motor vehicle within the meaning of the said term as held by the Supreme Court in the decision above referred. We therefore feel that in a larger sense JCB answers the description of

Motor Lorry within the meaning of the entry referred above contained in the IT Rules. There is no dispute that the item is not let on hire by the assessee which is one of the items of business carried on by them.

The argument of Senior Standing Counsel that the case decided by the

Gujarat High Court is on different facts, appears to be true because

their the crane in that case is mounted on the truck and the truck is

admittedly entitled to depreciation at 40%. When the crane mounted

on the truck, the crane becomes mobile and when both are let out on

hire as a mobile crane, the value of the crane also becomes part of the

motor lorry entitling for depreciation on the combined value. Even

though the facts in the Gujarat decision are different, we still feel the

principle applied by the Gujarat High Court is applicable in this case also, because in this case JCB itself is functionally and operationally used as motor vehicle for transport of goods within limited distances.

We therefore uphold the view of the Tribunal that JCB is entitled to

higher rate of depreciation claimed by the assessee. In the

circumstances, the appeal is dismissed.

(C.N.RAMACHANDRAN NAIR)
Judge.

(C. K. ABDUL REHIM)
Judge.

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