2017 (9) TMI 1856 - AT - Income Tax

Claim of depreciation on buses @ 15% instead of 30% - assessee company engaged in the business of transportation of passengers and is registered under the Motor Vehicle Act - CIT-A allowed the depreciation @ 30% to the assessee - HELD THAT - In over all 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'. 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. Hence, the appeals lack the merits and therefore, the order passed by the Ld. CIT(A) is uphold - Appeal filed by the Revenue Department stands dismissed

Summary

Issues Involved:
1. 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.
2. Whether the assessee was entitled to claim depreciation at 30% or 15% on buses used for its own business.

Detailed Analysis:

Issue 1: Difference between Hiring out a Vehicle and Letting a Passenger Travel
The Revenue Department argued that the Ld. CIT(A) erred in holding that there is no difference between hiring out a vehicle for a specified period and letting a passenger travel in a vehicle on payment of charges. The Revenue contended that a passenger traveling in a bus purchases only a right to travel between fixed points as per terms and conditions of the transporter, whereas in the case of hiring out a vehicle, one person grants to another the enjoyment of things during a certain time for stipulated compensation without interference of the owner.

The Ld. CIT(A) and the Tribunal, however, found that there is an implied contract of hire when passengers use public transport, which entitles the buses to a higher rate of depreciation. The Tribunal referred to the definitions of "contract carriage" and "stage carriage" under the Motor Vehicle Act, 1939, which support the view that buses used for public transport are effectively hired by passengers. The Tribunal cited various judgments, including those from the High Court of Kerala and ITAT Madras Bench, to support this interpretation.

Issue 2: Entitlement to Depreciation Rate
The core issue was whether the assessee was entitled to claim depreciation at 30% on buses used for its own business or if it should be restricted to 15%. The Assessing Officer (AO) had restricted the depreciation claim to 15%, arguing that the buses were used for the assessee's own business and not for hire.

The assessee contended that the buses were used for public transport and thus qualified for a higher depreciation rate of 30%. The Ld. CIT(A) accepted this argument, noting that the buses were registered under the Motor Vehicle Act and used for transporting passengers, which qualifies them for a higher depreciation rate. The Tribunal upheld this view, emphasizing that the nature of the business involved an implied contract of hire between the passengers and the bus owner.

The Tribunal also referred to previous judgments, including those from ITAT Amritsar and ITAT Chandigarh Bench, which supported the higher depreciation rate for buses used in public transport. The Tribunal concluded that the buses used by the assessee for public transport indeed qualify for a higher depreciation rate of 30%, as they are effectively hired by passengers, even if for short durations.

Conclusion:
The appeal by the Revenue Department was dismissed. The Tribunal upheld the Ld. CIT(A)'s decision that the assessee was entitled to claim depreciation at 30% on buses used for public transport, as there is an implied contract of hire between the passengers and the bus owner. The Tribunal found no merit in the Revenue's arguments and concluded that the order passed by the Ld. CIT(A) was based on sound logic, reasons, and relevant judgments.