2002 (9) TMI 22 - HC - Income Tax

Court rules on depreciation claim timing based on vehicle usage and registration dates for contract carriage

The High Court ruled against the assessee in a case concerning the entitlement to depreciation for the assessment year 1992-93 based on vehicle usage date ... '1. Whether, in the light of the admission of the assessee that the vehicle was run only on April 1, 1992, the assessee is entitled to depreciation for the assessment year 1992-93? - 2. Whether, in view of the fact that registration for operating as a contract carriage was obtained on May 5, 1992, is not depreciation admissible only from the assessment year 1993-94?' - Since the contract carriage permit was obtained for the vehicle only on May 5, 1992, it cannot be said legally that the vehicle was kept ready for use on or before March 31, 1992 - We accordingly answer the two questions against the assessee and in favour of the Revenue. In the above circumstances, we are of the view that the Tribunal has committed a serious error in holding that the assessee had kept the vehicle ready for use during the previous year relevant to the assessment year 1992-93. Issues:1. Entitlement to depreciation for the assessment year 1992-93 based on vehicle usage date.2. Admissibility of depreciation from the assessment year 1993-94 due to registration date for operating as a contract carriage.Analysis:1. The primary issue in this case is whether the assessee is entitled to depreciation for the assessment year 1992-93 based on the date of vehicle usage. The assessee purchased a vehicle and took delivery on March 30, 1992, with temporary registration valid until April 24, 1992. The registration as a non-transport vehicle was granted on April 3, 1992, with retrospective effect from March 30, 1992. The assessee claimed depreciation of Rs. 1,50,560 for the vehicle, which was disallowed by the Assessing Officer on the grounds of non-usage or readiness for use before March 31, 1992. The Tribunal allowed the claim, but the High Court ruled that the vehicle was not legally ready for use before March 31, 1992, as the contract carriage permit was obtained only on May 5, 1992.2. The second issue pertains to the admissibility of depreciation from the assessment year 1993-94 due to the registration date for operating as a contract carriage. The High Court analyzed the provisions of the Motor Vehicles Act, 1988, and concluded that to consider a vehicle ready for use for carrying persons for hire, it must be registered as a contract carriage. Since the contract carriage permit was acquired on May 5, 1992, the Court held that legally, the vehicle was not ready for use before March 31, 1992. Consequently, the Court ruled in favor of the Revenue, setting aside the Tribunal's decision on the depreciation claim for the DCM Toyota Carrier acquired on March 30, 1992.In conclusion, the High Court decided against the assessee, emphasizing the legal requirement of obtaining a contract carriage permit to consider a vehicle ready for use for carrying passengers for hire. The judgment highlights the significance of adherence to legal procedures and permits in determining the eligibility for depreciation claims under the Income-tax Act.