Court allows private hospital to claim higher depreciation rate for ambulance van used in business.

The Court upheld the Tribunal's decision, allowing the assessee, a private hospital, to claim a 40% depreciation rate for an ambulance van used in their business, despite the Department's challenge. The Court agreed that the van's use for hire constituted a business activity integral to the hospital's operations, justifying the higher depreciation rate. The Court dismissed the Department's petition, affirming the assessee's entitlement to the 40% depreciation rate under the Income-tax Act.

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Issues Involved:
The correct rate of depreciation for an ambulance van used in a private hospital business.

Judgment Details:

The assessee, running a private hospital, filed a return of income for the assessment year 1984-85, including income from hiring an ambulance van and claimed depreciation at 40%. The Commissioner of Income-tax invoked section 263, reducing the depreciation rate to 30%. The Tribunal later ruled in favor of the assessee, allowing the higher 40% depreciation rate.

The Department sought reference under section 256(1) of the Income-tax Act, questioning the entitlement to the higher depreciation rate and the interpretation of the condition of 'used in business of running them on hire'. The Tribunal dismissed the reference application, leading to a petition under section 256(2) of the Income-tax Act.

Regarding the interpretation of sub-clause (1A) of clause E in the Income-tax Rules, the Tribunal held that the ambulance van, though incidental to the hospital business, was used for hire and constituted a business activity. The hire charges were assessed under the head "Business," justifying the 40% depreciation rate.

The Court concurred with the Tribunal's reasoning, emphasizing that combining different business activities is permissible. As the hire of the ambulance van was integral to the overall business, the assessee was entitled to the 40% depreciation rate. Consequently, the petition was dismissed.

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