High Court Of Rajasthan
CIT vs. Bhola Ram
Sections : Rule Appendix I, Part I, Entry No. III(ii)D(9)
Asst. Year 1986-87
N.N. Mathur & D.N. Joshi, JJ.
IT Ref. No. 118 of 1995
11th May, 2002
Counsel Appeared
Sandeep Bhandawat, for the Petitioner
JUDGMENT
N.N. MATHUR, J. :
The Tribunal, Jaipur Bench, has made the instant reference under s. 256(1) of the IT Act, seeking opinion of the following question :
“Whether, on the facts and in the circumstances of the case, the Tribunal was legally justified in confirming the order of the learned CIT(A) and thereby directing grant of depreciation @ 30 per cent on rig machines not used for exploration of mineral oil as per item III-D(7) of depreciation schedule.”
2. The facts giving rise to the instant reference are that the respondent-assessee is engaged to the drilling work. He filed return for the asst. yr. 1986-87 on 1st Feb., 1988, declaring income of Rs. 40,980. The case was selected for scrutiny and, therefore, notice under s. 143(2) was issued. A questionnaire was issued to the assessee. A notice was also given to produce regular books of account, if maintained by the assessee. The assessee was asked to furnish information on the following points : “1. In drilling work, total number of holes done and charges per hole with names and complete addressees of the persons for whom job work was done. Any record showing day-today consumption of diesel. Record showing the spare parts replaced and the scrap value of the parts replaced. Documentary evidence regarding sale of compressor.”
3. None of the above information were furnished by the assessee but he claimed depreciation @ 30 per cent on the cost of rig i.e., Rs. 5 lac. ITO rejected, the claim observing that 30 per cent rate is allowable only in the case of mineral oil concerns. He allowed depreciation only @ 15 per cent. The CIT(A) relying on the decision CIT vs. Super Drillers (1988) 73 CTR (AP) 97 : TC 27R.433 and ITO vs. Popular Borewell Service (1986) 15 ITD 420 (Mad) etc. by the order dt. 14th Feb., 1990, partly allowed the appeal and granted the relief to the assessee directing the AO to allow the depreciation on rig machine @ 30 per cent. The Tribunal simply referred the aforesaid judgment of the Andhra Pradesh High Court and confirmed the finding of the CIT(A). The Tribunal has made a instant reference at the instance of Revenue seeking opinion on the question extracted above.
4. In order to appreciate the controversy involved, it would be convenient to refer the relevant entry being item III(ii)D(9) of Part I of Appendix I of the IT Rules, which reads as follows : III. Machinery and plant (not being a ship) (ii) Special rates : D. (1) to (8) (omitted) (9) Motor buses and motor lorries, motor taxis, motor 30% tractors (N.E.S.A.) The “rig machinery” does not fall in the category of motor buses and motor lorries. It is of course true that rig and compressor are mounted on a lorry used for drilling borewells, It consists of three distinct items viz., rig, compressor and lorry. The rig and compressor do not form an integral part of the motor lorry. Merely, because the rig and compressor are mounted on a lorry to facilitate their easy and convenient transport from one place to another, it cannot be said that the rig and compressor either constitute integral parts of a lorry by themselves or can be appropriately called or known as a “lorry”. Therefore, the rig and compressor used for drilling borewells though mounted on a lorry, cannot held to fall under the category “motor lorry” occurring in entry No. III (ii)D(9) of Part I of Appendix I to the IT Rules, 1962. Thus, in our opinion the assessee is not entitled to depreciation at the special rate of 30 per cent in respect of such rigs and compressors. The view finds support from the decision of the Madras High Court in CIT vs. Popular Borewell Service & Ors. (1991) 94 CTR (Mad) 240 : (1991) 194 ITR 12 (Mad) : TC 27R.434. As far as the decision of Andhra Pradesh High Court is concerned, it was the case of rig used for drilling borewells to extract mineral oil. Thus, the said case has no application to the facts of the instant case. In view of the aforesaid, question referred by Tribunal is answered in favour of the Revenue and against the assessee.
[Citation : 260 ITR 381]