Higher depreciation on vehicles requires running them on hire, while company use can support depreciation despite registration in a director's name.

Higher depreciation under the motor vehicle entry applies only where motor buses, motor lorries or motor taxis are used in the business of running them on hire; leasing vehicles does not satisfy that requirement, so the claim fails on that point. Depreciation may nevertheless be claimed where a vehicle is purchased from company funds, used for the company's business, and the leasing income is assessed in the company's hands, even if registration stands in a director's name, because factual ownership and business user prevail over the registration record.

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Issues: (i) Whether higher depreciation under item III(2)(ii) of Appendix I to the Income-tax Rules, 1962 was admissible on vehicles given on lease; (ii) Whether depreciation could be claimed on a vehicle registered in the name of a director but purchased and used for the company's business.

Issue (i): Whether higher depreciation under item III(2)(ii) of Appendix I to the Income-tax Rules, 1962 was admissible on vehicles given on lease.

Analysis: The higher rate of depreciation is available only where motor buses, motor lorries and motor taxis are used in a business of running them on hire. The assessee was engaged in leasing vehicles and not in the business of running the vehicles on hire. The applicable entry was therefore not satisfied.

Conclusion: The issue was decided against the assessee and in favour of the Revenue.

Issue (ii): Whether depreciation could be claimed on a vehicle registered in the name of a director but purchased and used for the company's business.

Analysis: The vehicle was purchased from company funds, used for the company's business, and the income from leasing was assessed in the company's hands. Registration in the director's name did not displace the factual finding that the asset belonged to and was used by the company for business purposes.

Conclusion: The issue was decided in favour of the assessee and against the Revenue.

Final Conclusion: The appeal succeeded only on the first depreciation question and failed on the ownership and user question, so the Tribunal's decision was modified accordingly.

Ratio Decidendi: Higher depreciation on vehicles is allowable only when the vehicles are actually used in the business of running them on hire, while depreciation cannot be denied merely because a business asset is registered in another person's name if the factual ownership and business user are established.

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