1995 (2) TMI 48 - HC - Income Tax

Summary

Issues involved:
The judgment addresses the issue of depreciation rate applicable to trucks used for transportation of stones, specifically focusing on whether the trucks were used in a business of running them on hire.

Details of the Judgment:

Assessment of Depreciation Rate:
The case involved a trader in stones who owned trucks used for transporting stones and occasionally hired them out. Initially, the Income-tax Officer allowed depreciation at 40%, but the Commissioner of Income-tax concluded that since the assessee was not in the business of running trucks on hire, depreciation should be at 30%. The Commissioner of Income-tax (Appeals) upheld this decision, emphasizing the requirement of continuity or regularity in hiring transactions for the higher depreciation rate.

Tribunal's Decision:
In the second appeal, the Income-tax Appellate Tribunal noted that the trucks were used for transportation by the assessee and customers, with hire charges included in the sale price of stones. The Tribunal referred to a previous case and highlighted the distinction in depreciation rates based on whether the vehicles were used in a business of running them on hire. It emphasized that if trucks were used for the assessee's own business, depreciation at 30% applied.

Interpretation of Law:
The Tribunal found that even if hire charges were not explicitly mentioned in bills, they could be considered realized. It differentiated between using trucks for transportation as part of the main business and running them on hire as a separate business activity. The Tribunal's decision aligned with a previous court ruling that trucks mainly used for the assessee's business were entitled to 30% depreciation, not 40%.

Conclusion:
The court upheld the Tribunal's decision, stating that the assessee was not engaged in the business of running vehicles on hire, justifying the 30% depreciation rate. It emphasized that the main activity and intention behind hiring should determine if the business of running vehicles on hire was conducted. Consequently, the reference was answered in favor of the Revenue, affirming the 30% depreciation rate for the assessee's trucks.