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of <h1>Court allows depreciation for buses kept ready for use, broad interpretation of 'used' for depreciation purposes</h1> <h3>Capital Bus Service Pvt. Limited Versus Commissioner Of Income-Tax, New Delhi</h3> Capital Bus Service Pvt. Limited Versus Commissioner Of Income-Tax, New Delhi - [1980] 123 ITR 404, 17 CTR 155, 4 TAXMANN 309 Issues Involved:1. Entitlement to depreciation for buses not actively used for more than 30 days.2. Interpretation of the term 'used' in the context of depreciation under the Indian I.T. Act, 1922.Issue 1: Entitlement to Depreciation for Buses Not Actively Used for More Than 30 DaysThe assessee, a transport operator, maintained a fleet of twenty buses, with four buses not actively used for more than 30 days due to lack of demand. The ITO declined to grant depreciation, stating these buses had not been 'used' during the previous year for 30 days or more. The AAC allowed the claim, considering the passive user of these buses. However, the Appellate Tribunal upheld the ITO's view, leading to this reference.Issue 2: Interpretation of the Term 'Used' in the Context of Depreciation Under the Indian I.T. Act, 1922The court examined whether the term 'used' in s.10(2)(vi) of the Indian I.T. Act, 1922, should be interpreted strictly to mean active employment or if it could include passive user. The court reviewed various precedents, including:- N. D. Radha Kishen and Sons v. CIT [1928] 3 ITC 73 (Lah): Held that depreciation is granted for machinery employed in earning income, not for lying idle.- Bhikaji Venkatesh v. CIT [1937] 5 ITR 626 (Nag): Asserted that 'used' means 'actually used' and not merely 'capable of being used.'- CIT v. Viswanath Bhaskar Sathe [1937] 5 ITR 621 (Bom): Distinguished by holding that machinery kept ready for use under an express contract could be considered 'used.'- CIT v. Dalmia Cement Ltd. [1945] 13 ITR 415 (Pat): Supported the view that depreciation might be allowed even if machinery was kept idle.- Niranjan Lal Ram Chandra v. CIT [1963] 49 ITR 177 (All): Held that trucks kept ready for hire could be considered 'used' even when stationary.The court concluded that the term 'used' should be interpreted broadly to include both active and passive user. It emphasized that machinery kept ready for use in the business, even if not actively employed, should be considered 'used' for the purposes of depreciation. The court noted that the buses in question were kept ready for operation and were not used actively due to lack of contracts, not because they were unfit for use.Conclusion:The court held that the assessee was entitled to depreciation for the four buses kept ready for use throughout the previous year, even though they were not actively used for more than 30 days. The question was answered in the affirmative and in favor of the assessee. No order as to costs was made.
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