Strict construction of goods-carriage presumptive taxation excludes JCBs, but functional use supports higher depreciation as motor lorries.

Section 44AE applies only to an assessee owning not more than ten goods carriages and is a deeming provision requiring strict construction; a JCB, being an earth-moving machine whose main function is excavation and lifting, is not a goods carriage merely because it may incidentally move excavated material, so presumptive taxation was not available. For depreciation, however, the higher rate for motor lorries used in the business of running them on hire was applied on a functional basis; a JCB could be treated as a motor lorry for that purpose because it also performs transport-related work. The assessee therefore failed on section 44AE but qualified for depreciation at 40% on JCBs.

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Issues: (i) Whether JCBs used in the assessee's hiring business could be treated as goods carriages so as to attract section 44AE of the Income-tax Act, 1961; (ii) whether JCBs were eligible for depreciation at 40% as motor lorries used in the business of running them on hire.

Issue (i): Whether JCBs used in the assessee's hiring business could be treated as goods carriages so as to attract section 44AE of the Income-tax Act, 1961.

Analysis: Section 44AE is a presumptive provision applicable to an assessee owning not more than ten goods carriages and engaged in plying, hiring or leasing such goods carriages. Its explanation adopts the meaning of "goods carriage" from section 2 of the Motor Vehicles Act, 1988. The provision being a deeming one requires strict construction. The expression "goods carriage" contemplates a vehicle constructed or adapted for the carriage of goods, whereas a JCB is an earth-moving machine whose principal function is excavation and lifting of earth. The CBDT circular on the introduction of section 44AE also indicates that the scheme was meant for trucks, whose principal function is carriage of goods. A JCB does not fall within that class merely because it may transport excavated earth incidentally.

Conclusion: JCBs are not goods carriages and section 44AE does not apply; the assessee's claim failed on this issue.

Issue (ii): Whether JCBs were eligible for depreciation at 40% as motor lorries used in the business of running them on hire.

Analysis: The higher rate of depreciation available under the relevant schedule covered motor buses, motor lorries and motor taxis used in the business of running them on hire. The expression "motor lorries" was understood broadly to include motor trucks and similar vehicles designed for special services. On the facts, a JCB, though primarily an excavator, also performs the function of carrying or transporting removed earth to another site. Applying that functional approach, the vehicle could be treated as a motor lorry for depreciation purposes.

Conclusion: JCBs were entitled to depreciation at 40%, and the assessee succeeded on this issue.

Final Conclusion: The appeals were allowed in part: the assessee was denied presumptive taxation under section 44AE but was granted higher depreciation at 40% on JCBs.

Ratio Decidendi: A deeming provision for goods carriages must be strictly construed, and an earth-moving machine is not a goods carriage for presumptive taxation merely because it may incidentally transport material, though it may be treated as a motor lorry for depreciation if its functional use brings it within that class.

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