Higher depreciation on vehicles leased out denied because leasing is not the same as running vehicles on hire.

Higher depreciation under Entry No. III(2)(ii) of Appendix I to the Income-tax Rules applies only to motor buses, motor lorries and motor taxis used in a business of running them on hire. A vehicle-leasing activity does not satisfy that statutory requirement because leasing is distinct from operating vehicles on hire. Following the earlier Division Bench view, the court held that the assessee was not entitled to the higher depreciation rate on leased vehicles and upheld the Revenue's position.

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Issues: Whether depreciation at the higher rate under Entry No. III(2)(ii) of Appendix I to the Income-tax Rules, 1962 was allowable on vehicles given on lease.

Analysis: The higher rate of depreciation applies only to motor buses, motor lorries and motor taxis 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 earlier Division Bench view, followed here, held that mere leasing of vehicles does not satisfy the statutory requirement for the higher depreciation rate.

Conclusion: The assessee was not entitled to depreciation at the higher rate, and the issue was decided in favour of the Revenue.

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