Higher depreciation for leased motor lorries applies when leasing is treated as hiring out for consideration and user by another.

Higher depreciation under Appendix I, entry 111(2)(ii) is available where motor lorries are leased out for consideration and put to use by another person. A lease transfers possession and user rights for payment, and the fact that the consideration is described as rent or hire charges does not alter the substance. For this depreciation entry, there is no material distinction between short-term hiring and leasing for a specified period. The leased motor lorries were therefore regarded as being used in the business of running them on hire, entitling the assessee to the higher rate of depreciation.

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Issues: Whether higher depreciation under Appendix I, entry 111(2)(ii) of the Income-tax Rules is allowable where motor lorries are leased out for consideration, and whether such leasing amounts to use in the business of running them on hire.

Analysis: The higher rate of depreciation is intended for motor vehicles exposed to faster wear and tear when used by another for consideration. A lease gives the lessee possession and the right to use the vehicle for a period in return for payment, and the terminology used as rent or hire charges does not change the substance. For this entry, there is no material distinction between letting the vehicle on hire for short duration and leasing it for a specified period for consideration.

Conclusion: The assessee's leased motor lorries were being used in the business of running them on hire, and the assessee was entitled to the higher rate of depreciation.

Final Conclusion: The question referred was answered in favour of the assessee and against the Revenue.

Ratio Decidendi: For the purpose of the higher depreciation entry, a lease of motor lorries for consideration is equivalent in substance to hiring them out, provided the vehicles are put to use by another for the hirer's benefit.

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