Functional classification of motor vehicles can extend higher depreciation to vans and three wheelers used as goods vehicles.

Motor vans and three wheelers may fall within the higher depreciation category for motor vehicles if their character and use fit the functional description in Appendix I, Part I of the Income-tax Rules, 1962. The relevant distinction is between vehicles ordinarily meant for personal or family use and vehicles used for hire, carriage of goods, or other non-personal operations. Even without express enumeration, a vehicle can be classified under the appropriate head where its nature answers that category. On that reasoning, goods vehicles such as vans and three wheelers are treated as within item III-D(9) and eligible for depreciation at the enhanced rate.

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Issues: Whether motor vans and three wheelers owned by the assessee fell under item III-D(9) of Appendix I, Part I of the Income-tax Rules, 1962 and were therefore entitled to depreciation at the enhanced rate of 30 per cent.

Analysis: The schedule in Appendix I contained two relevant classes of motor vehicles. Item III-C(7) covered vehicles ordinarily meant for personal or family use, namely motor cars, motor cycles, scooters and other mopeds. Item III-D(9) covered motor buses, motor lorries, motor taxis and motor tractors, being vehicles normally used for hire or reward, for carrying goods, or for other non-personal operations. The vans and three wheelers in question were not covered by item III-C(7), but they were goods vehicles and their nature and use brought them within the broader class of vehicles covered by item III-D(9). The absence of an express mention of vans and three wheelers in the schedule did not defeat the claim, since the decisive question was whether they could be brought under one of the existing heads in the depreciation schedule.

Conclusion: The question was answered in the affirmative, in favour of the assessee and against the Revenue. The vans and three wheelers were held to fall under item III-D(9) and to qualify for depreciation at 30 per cent.

Final Conclusion: The reference was decided in favour of the assessee, with costs awarded to the assessee.

Ratio Decidendi: Where a depreciation schedule classifies motor vehicles by functional use, a vehicle not expressly named may still be placed in the appropriate category if its character and use clearly answer that description.

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