Depreciation for contract carriages requires lawful readiness for business use, including the necessary operating permit.

Depreciation under section 32 is available only for assets owned by the assessee and used for business, including assets kept ready for use. For a vehicle intended to operate as a contract carriage, mere delivery and temporary registration were insufficient where the required contract carriage permit was obtained only later. Because the vehicle could not lawfully be treated as ready for passenger-carrying business before that permit, the assessee's claim to depreciation for the relevant assessment year failed on the stated facts.

---

---

Issues: Whether the assessee was entitled to depreciation under section 32 of the Income-tax Act, 1961, for assessment year 1992-93 on the footing that the vehicle had been used or kept ready for use before the end of the previous year, when the contract carriage permit was obtained only on 5 May 1992.

Analysis: Depreciation under section 32 is available only in respect of assets owned by the assessee and used for the purposes of business, which includes an asset kept ready for use. On the facts, the vehicle was delivered on 30 March 1992 and had temporary and non-transport registration, but the statutory permission to operate it as a contract carriage for carrying passengers for hire was obtained only on 5 May 1992. In the light of the Motor Vehicles Act, 1988, the vehicle could not legally be treated as kept ready for use as a contract carriage before obtaining the required contract carriage permit.

Conclusion: The assessee was not entitled to depreciation for assessment year 1992-93, and the questions were answered against the assessee and in favour of the Revenue.

Ratio Decidendi: For depreciation on a vehicle intended for passenger carriage, the asset is not 'used' or 'kept ready for use' for business purposes unless it has the legally required permit enabling such use.

---