Higher depreciation for leased motor buses depends on actual route use, not only on whether the owner runs a hiring business.

Higher depreciation for motor buses depends on the nature of their use, not merely on whether the owner itself carries on a hiring business. Where buses are leased to a road transport corporation and used in route operation, the actual end use exposes them to the same intensive wear and value erosion as vehicles used on hire. On that basis, leased motor buses used in route operation may fall within the higher depreciation category applicable to motor buses used in a business of running them on hire, and the assessee was entitled to depreciation at 40%.

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Issues: Whether motor buses leased by the assessee to a road transport corporation and used in route operation were entitled to depreciation at the higher rate applicable to motor buses used in a business of running them on hire.

Analysis: The higher depreciation rate for motor buses is intended for vehicles that undergo faster deterioration because of intensive use. A vehicle used in route operation is exposed to the same erosion in value as a contract carriage let on hire. The fact that the assessee leased the buses and was not itself operating a hiring business was not decisive, because the depreciation schedule governs the rate applicable to the owner entitled to depreciation, and the relevant consideration is the nature of use of the vehicle. On that basis, the end use of the buses by the lessee brought them within the description of vehicles used on hire.

Conclusion: The assessee was entitled to depreciation at 40% on the leased motor buses.

Ratio Decidendi: For depreciation purposes, the relevant inquiry is the actual use of the vehicle and not merely whether the owner carries on a hiring business; where leased buses are used in route operation, they may be treated as vehicles used on hire for the higher rate of depreciation.

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