Depreciation on passenger buses at higher rate applies where fares are collected on regular routes.

Depreciation at 40 per cent was allowable for motor buses used in a transport business where the vehicles were operated on regular routes and receipts were earned from passengers. The applicable tax schedule distinguished between buses not used in a business of running them on hire and buses so used; the tribunal applied the broader meaning of hiring under the Motor Vehicles Act, 1939, holding that passenger transport for fare or reward falls within that concept. The fact that individual tickets were issued to passengers did not take the buses outside a business of running them on hire, so the higher depreciation rate applied.

---

---

Issues: Whether the assessee was entitled to depreciation at 40 per cent on buses used in its transport business on the footing that they were used in a business of running them on hire.

Analysis: The applicable depreciation entries in Appendix I, Part I of the Income-tax Rules, 1962 allowed 30 per cent for motor buses not used in a business of running them on hire and 40 per cent for motor buses used in such a business. The buses were found to be operated on regular routes and to earn receipts by collection from passengers. The definitions of public service vehicle, contract carriage, and stage carriage under the Motor Vehicles Act, 1939 showed that buses carrying passengers for hire or reward, including where separate fares are paid by individual passengers, fall within the concept of hiring for transport. The fact that passengers purchased individual tickets did not take the case outside a business of running buses on hire.

Conclusion: The assessee was entitled to depreciation at 40 per cent on the buses.

---