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Issues involved: Determination of depreciation rate for a partnership firm engaged in plying transport buses, specifically whether the firm is eligible for depreciation at 40% or 30% u/s Income-tax Rules, 1962.
Judgment Details: The court deliberated on whether the assessee, a partnership firm operating transport buses, should be granted depreciation at 40% or 30% for the assessment years 1983-84 and 1984-85. The Assessing Officer contended that the higher rate of 40% was only applicable to vehicles on hire, such as tourist buses and taxies, not regular buses like those operated by the firm. The first appellate authority supported this view, emphasizing that individual passengers or even a group traveling together cannot be considered as having hired the bus. The Income-tax Appellate Tribunal, however, considered the buses as stage carriages under the Motor Vehicles Act, stating that passengers pay fares for the seats they occupy, indicating a hire situation as per the Income-tax Rules. The court analyzed the relevant provisions of the Income-tax Rules, specifically items D9 and E(1A), which delineate depreciation rates for motor buses, motor lorries, and motor taxies used in businesses of running them on hire. It emphasized that the critical factor is whether the assessee is engaged in the business of plying vehicles for hire, irrespective of individual or group payments. The court clarified that the mode of payment is irrelevant; what matters is whether the vehicles are operated for hire. As the assessee is involved in transport activities, with passengers traveling on hire on different routes, the buses in question are deemed to be running on hire, warranting the higher depreciation rate of 40%. In conclusion, the court ruled in favor of the assessee, affirming their entitlement to depreciation at 40% for the relevant assessment years. The judgment will be communicated to the Income-tax Appellate Tribunal, Cochin Bench, as per legal requirements.
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