2017 (8) TMI 1586 - AT - Income Tax

Depreciation on buses - as assessee company engaged in the business of transportation of passengers and is registered under the Motor Vehicle Act, which clarifies the buses used for the transporting and carrying passengers, therefore eligible for depreciation at 30% instead of 15 % and even otherwise definition of (contract carriage) and (stage carriage) as per section 2(3) 2(29) of the Motor Vehicle Act, 1963 was extracted to infer that the buses used in the transportation business were hired by the passengers, thus, entitling the buses for a higher rate of deprecation - HELD THAT - Stage Carriage is defined in Sec.2(29) of The M.V. Act - Stage carriage means a motor vehicle carrying or adapted to carry more than six persons excluding the driver which carries passengers for hire or reward at separate fares paid by or for individual passengers, either for the whole journey or for stage of the journey. As in the instant cases, the buses are registered under the Motor Vehicle Act, 1939 as stage carriage or contract carriage and even other wise the judgment of High Court of Kerala in the case of Balkrishna Transports 1996 (9) TMI 13 - KERALA HIGH COURT Consideration of the definition of the Motor Vehicles Act, 1939 as well as perusal of the judgment and submissions of the parties, we do not have any hesitation to hold that Public Transport carries the passenger may be for one stop or more than that may be for smaller which can be limited or even otherwise certainly there is implied contract between passenger and the buses owner for hire and in our considered opinion, it cannot be said that the passenger individually or passengers jointly do not have any contract with the bus owner while carrying on journey, hence, the submissions of the Revenue Department does not sound good to the extent that the Ld. CIT(A) erred in holding that there is no difference between hiring out the vehicle for a specified period for a consideration and letting the passenger travel in a vehicle on payment of charges ignoring that a passenger traveling in a bus purchases only right to travel between fixed points as per terms and conditions of the transporter. - Decided against revenue.

Summary

Issues Involved:
1. Whether the assessee is entitled to claim depreciation at 30% on buses used for its transport business.
2. Whether there is a difference between hiring out a vehicle for a specified period and letting a passenger travel in a vehicle on payment of charges.

Detailed Analysis:

Issue 1: Entitlement to Claim Depreciation at 30%
The core issue revolves around the rate of depreciation that the assessee company can claim on its buses. The assessee company, engaged in the business of running buses across various routes, claimed higher depreciation at 30%. The Assessing Officer (AO) restricted this claim to 15%, arguing that the buses were used for the company’s own transport business and not for hire. This decision led to the disallowance of the excess depreciation claimed and subsequent addition to the return incomes for the relevant assessment years.

Upon appeal, the Commissioner of Income Tax (Appeals) [CIT(A)] allowed the higher depreciation rate of 30%, concluding that the buses were indeed used for transporting passengers, thus qualifying for the higher depreciation rate. The CIT(A) relied on various case laws and definitions from the Motor Vehicle Act, 1963, which distinguish between "contract carriage" and "stage carriage." The CIT(A) found that the buses used by the assessee were eligible for the higher depreciation rate as they were effectively hired by passengers.

Issue 2: Difference Between Hiring Out a Vehicle and Letting a Passenger Travel
The Revenue Department contended that the CIT(A) erred in equating hiring out a vehicle for a specified period with letting a passenger travel on payment of charges. The Department argued that a passenger traveling in a bus only purchases the right to travel between fixed points, unlike hiring a vehicle where the hirer enjoys the use of the vehicle for a stipulated time without interference from the owner.

The Tribunal reviewed definitions of "hire" from various dictionaries and the Motor Vehicle Act, 1939. It was emphasized that the term "hire" includes any temporary use of something for an agreed payment. The Tribunal also considered previous judgments, such as those from the ITAT Madras Bench in ITO vs. Sarojini Transports (P) Ltd. and the High Court of Kerala in CIT vs. Balakrishna Transports, which supported the view that buses used for public transport are effectively hired by passengers.

The Tribunal concluded that the AO’s interpretation was flawed. It held that there is an implied contract of hire between the passenger and the bus owner, even if the bus stops at fixed points and operates on a predetermined schedule. The Tribunal noted that public transport buses, registered under the Motor Vehicle Act as "stage carriage" or "contract carriage," qualify for higher depreciation rates due to the wear and tear associated with their use.

Conclusion:
The Tribunal upheld the CIT(A)’s order, affirming that the assessee is entitled to claim depreciation at 30% on its buses. It dismissed the Revenue Department’s appeals, stating that the CIT(A) correctly interpreted the law and previous judgments. The Tribunal found no merit in the Revenue Department’s arguments and confirmed that the buses used for public transport are indeed hired by passengers, thus qualifying for the higher depreciation rate.

Result:
The appeals filed by the Revenue Department were dismissed. The order pronounced in open Court on 23.08.2017.