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Issues: (i) Whether the assessee was entitled to depreciation at the special rate applicable to motor lorries used in the business of running them on hire under clause E(1A) of Part III of Appendix I to the Income-tax Rules, 1962. (ii) Whether depreciation on the car was liable to be disallowed proportionately under section 38(2) of the Income-tax Act, 1961. (iii) Whether depreciation on dumpers was correctly restricted to 30 per cent.
Issue (i): Whether the assessee was entitled to depreciation at the special rate applicable to motor lorries used in the business of running them on hire under clause E(1A) of Part III of Appendix I to the Income-tax Rules, 1962.
Analysis: The trucks were registered as public carriers and were actually let out to third parties for hire on several occasions. The fact that they were also used for transporting the assessee's own stone did not deprive the assessee of the character of one using the vehicles in the business of running them on hire. The receipts from outsiders, the registration as public carriers, and the use of the trucks to serve customers at the depot were all treated as indicating hire use within the meaning of the relevant depreciation entry.
Conclusion: The assessee was entitled to depreciation at 40 per cent and the revisional order reducing it to 30 per cent on trucks was set aside.
Issue (ii): Whether depreciation on the car was liable to be disallowed proportionately under section 38(2) of the Income-tax Act, 1961.
Analysis: Where one-third of the running expenditure on the car had already been disallowed on the ground of non-exclusive business use, depreciation also had to be adjusted on the same proportionate basis. The order of the Assessing Officer allowing full depreciation was therefore treated as erroneous and prejudicial to the Revenue on this aspect.
Conclusion: The proportionate disallowance of depreciation on the car was upheld against the assessee.
Issue (iii): Whether depreciation on dumpers was correctly restricted to 30 per cent.
Analysis: The assessee had accepted that dumpers were not used for running them on hire and were only used in the mining business. The special higher rate was therefore not available on that asset.
Conclusion: The restriction of depreciation on dumpers to 30 per cent was upheld against the assessee.
Final Conclusion: The revisional order was set aside only in relation to the trucks, while the disallowance of depreciation on the car and the restriction of depreciation on dumpers remained undisturbed.
Ratio Decidendi: For the higher rate of depreciation on motor lorries, actual and not exclusive use for hire is material; where vehicles are registered as public carriers and are in fact let out for hire, they fall within the provision even if also used in the assessee's own business.
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