Passenger bus operations count as use on hire, supporting higher depreciation under income tax rules.

Buses operated in passenger transport for separate fares were treated as used on hire for depreciation purposes. Applying Rule 5 of the Income Tax Rules and the Motor Vehicles Act definitions, the Tribunal reasoned that public carriage of passengers involves an implied hire arrangement because consideration is paid for the right to travel. It held that there was no material distinction, for depreciation purposes, between hiring a vehicle as a whole and operating buses as contract or stage carriages. The assessee was therefore entitled to higher depreciation, and the Revenue's objection was rejected.

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Issues: Whether buses operated by the assessee in public transport business were used for hire so as to entitle the assessee to higher depreciation instead of normal depreciation.

Analysis: The depreciation schedule under Rule 5 of the Income Tax Rules, 1962 allowed a higher rate where buses were used on hire. The Tribunal treated the passenger transport activity as involving an implied contract of hire, noting that passengers obtain the right to travel for consideration and that buses registered as contract carriage or stage carriage under the Motor Vehicles Act fall within the concept of hire for this purpose. Relying on the definitions in Section 2(3) and Section 2(29) of the Motor Vehicles Act, 1939 and prior tribunal and High Court decisions, the Tribunal held that there was no material distinction, for depreciation purposes, between hiring the vehicle as a whole and carrying passengers for separate fares in public transport operations.

Conclusion: The assessee was held entitled to higher depreciation, and the Revenue's objection was rejected.

Final Conclusion: The Tribunal affirmed the allowance of depreciation at the higher rate and dismissed the Revenue's appeals.

Ratio Decidendi: Where buses are operated in the business of carrying passengers for separate fares, the use amounts to use on hire for depreciation purposes, supporting entitlement to the higher prescribed depreciation rate.

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