2012 (8) TMI 773 - HC - Income Tax

Depreciation on Motor cars - ITAT entitled the assessee to depreciation at the rate of 50% as against 20% fixed by AO - Held that - As it is agreed that the vehicles in the present case are light motor vehicles (LMV) Rule 5(1) of the Income Tax Rules, 1962 defines that Depreciation on it subject to the provisions of sub-rule(2), the allowance under clause (ii) of sub-section (1) of section 32 in respect of depreciation of any block of assets shall be calculated at the percentages specified in the second column of the Table in Appendix-I. As per APPENDIX-I PART-A (TANGIBLE ASSETS), III MACHINERY AND PLANT (3) (vi)Note 6 of the table Commercial vehicle means ............. light motor vehicle , thus vehicles in respect whereof depreciation has been claimed by the respondent at 50% per annum are light motor vehicles and that the above provisions of the Act and the Rules apply in the present case - in favour of assessee.

Summary

Issues Involved:
1. Interpretation of depreciation rates for motor cars under the Income Tax Act, 1961.

Analysis:
The judgment by the Bombay High Court involved an appeal under section 260-A of the Income Tax Act, 1961, regarding the depreciation rates applicable to motor cars for the assessment year 2003-2004. The primary issue raised was whether motor cars should be categorized as commercial vehicles for the purpose of claiming depreciation at a rate of 50%. The respondent, engaged in asset-based finance and trade finance, claimed depreciation at 50% on motor cars, while the Assessing Officer (A.O.) allowed depreciation at only 20%, contending that the vehicles were not used for commercial purposes as required for the higher rate of depreciation.

The Commissioner of Income Tax (Appeals) and the Tribunal ruled in favor of the respondent, upholding that the vehicles were indeed commercial vehicles and thus eligible for depreciation at 50%. The Tribunal emphasized that the vehicles were used in the respondent's business activities, justifying the higher depreciation rate. The Court analyzed the provisions of Section 32(1)(i) of the Income Tax Act, 1961, which allows for depreciation on tangible assets like machinery and plant, including commercial vehicles, used for business purposes.

Regarding the specific provisions under Rule 5(1) of the Income Tax Rules, 1962, and Appendix-I Part-A, it was noted that the term "commercial vehicle" included "light motor vehicles" as per the Motor Vehicles Act, 1988. The Court acknowledged that the vehicles in question were light motor vehicles, falling under the relevant provisions for claiming depreciation at 50%. The judgment concluded that the issues raised did not present a substantial question of law, leading to the dismissal of the appeal.

In summary, the judgment clarified the criteria for categorizing motor cars as commercial vehicles for depreciation purposes under the Income Tax Act, emphasizing the usage of vehicles in business activities to qualify for higher depreciation rates. The Court's analysis of relevant provisions and previous decisions supported the respondent's claim for depreciation at 50% on the motor cars, ultimately dismissing the appeal based on the established legal framework and factual circumstances.