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Issues: (i) Whether the assessee, carrying on transport business by plying passenger buses, was entitled to depreciation at 50 per cent on the buses. (ii) Whether the Commissioner was justified in exercising revisional jurisdiction under section 263 and setting aside the assessment order.
Issue (i): Whether the assessee, carrying on transport business by plying passenger buses, was entitled to depreciation at 50 per cent on the buses.
Analysis: The relevant depreciation entry applied to motor buses, motor lorries and motor taxies used in a business of running them on hire. The assessee's activity was held to be a transport business in which the vehicles were employed for carrying passengers from one place to another. On that footing, the business fell within the scope of running such vehicles on hire for the purposes of the higher rate of depreciation.
Conclusion: The assessee was entitled to depreciation at 50 per cent.
Issue (ii): Whether the Commissioner was justified in exercising revisional jurisdiction under section 263 and setting aside the assessment order.
Analysis: Since the assessment order granting depreciation at 50 per cent was held to be in accordance with the applicable depreciation entry, it could not be treated as erroneous or prejudicial to the interests of the Revenue. The foundation for revision under section 263 therefore failed.
Conclusion: The Commissioner was not justified in invoking section 263.
Final Conclusion: The reference was answered in favour of the assessee, and the Revenue's challenge to the depreciation allowance and revision order failed.
Ratio Decidendi: Vehicles used as part of a transport business for carrying passengers or goods in the regular course of hiring activity qualify for the higher rate of depreciation applicable to vehicles used in a business of running them on hire.
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