Depreciation @ 30% on hire basis applicability

[Kush Lodha]

Sir,

We have bought a poclain or excavator (no wheels but chain mounted) and give them to a factory owner on hourly rate basis although driver and repair & maintenance expenses to be borne by us but diesel to be provided by them. We do not have any other control on the machine. I would like to know whether it will tantamount to provide them on hire although driver and helper is on our own accord. (TDS deducted u/s. 194(I)(a) @ 2% by the factory owner).(Also SAC Code - 9973 is used for invoicing).

Secondly, if say it is on hire, can i take depreciation @ 30% every year under section 32 of Income Tax Act. In Sec. 32 it says about motor cars, motor lorries or motor taxis used in the business of running them on hire @ 30%, does excavator or poclain will be covered in the above?

Or Sec. 32 talks about additional depreciation @ 30% in the first year of purchase. Am i entitled to take 30% depreciation in the first year only and then @ 15% normal rates from the next year.

Thanks & Regards.

AI Summary

Depreciation eligibility for excavator on hire depends on asset classification and hiring arrangements affecting applicable rates. Whether the chain mounted excavator supplied hourly constitutes hire depends on control, allocation of driver, repair and fuel responsibilities and contractual terms; TDS and service coding follow that characterization. If classified as an asset run on hire, it may attract higher or additional first year depreciation where prescribed, with normal written down rates thereafter, subject to statutory definitions of plant and machinery and the factual use pattern.