Functional character test governs depreciation for specialised hire vehicles; road-use adaptable equipment qualifies for the higher rate.

Crawler cranes, trailers, forklifts and dozers used in a hire business were treated as motor vehicles rather than plant and machinery for depreciation purposes. The Tribunal applied the functional character test and relied on the Motor Vehicles Act definition because "motor vehicle" is not defined in the Income-tax Act. It held that these specialised assets, being mechanically propelled and adapted for road use or transport functions, qualified for the higher depreciation rate under the schedule. Permanent registration under the Motor Vehicles Act was held not to be a for the higher claim, and the contrary classification as plant and machinery was rejected.

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Issues: Whether crawler cranes, trailers, forklifts and dozers used in the assessee's hire business were to be treated as motor vehicles eligible for depreciation at 30%, or as plant and machinery eligible only for depreciation at 15%.

Analysis: The Tribunal followed its earlier coordinate bench decisions in the assessee's own case and held that the decisive test is the functional character of the asset and its capability of being used as a motor vehicle. It noted that the term "motor vehicle" is not defined in the Income-tax Act, 1961 and therefore relied on the definition in Section 2(28) of the Motor Vehicles Act, 1988. On that basis, crawler cranes and dozers were treated as mechanically propelled vehicles adapted for use on roads or otherwise functioning as transport vehicles in the assessee's business. The Tribunal also held that permanent registration under the Motor Vehicles Act, 1988 is not a for claiming higher depreciation under Section 32 of the Income-tax Act, 1961 and that the depreciation schedule recognises such hire vehicles for the higher rate. The repeated reliance on plant and machinery classification was therefore rejected.

Conclusion: The assets were held to qualify as motor vehicles for the purpose of higher depreciation, and the Revenue's challenge to the allowance of depreciation at 30% failed.

Ratio Decidendi: For depreciation under Section 32 of the Income-tax Act, 1961, the classification of specialised hire vehicles depends on their functional character and adaptability for road use, and not on permanent registration under the Motor Vehicles Act, 1988.

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