1984 (11) TMI 138 - AT - Income Tax

Summary

Issues:
1. Interpretation of depreciation rate for trucks and dumpers.
2. Application of depreciation rate for cars.
3. Disallowance of depreciation on cars and dumpers.
4. Consideration of hire charges in depreciation calculation.
5. Dispute over the use of trucks for hire purposes.
6. Justification for depreciation rate based on hire charges.

Analysis:
1. The appeal before the Appellate Tribunal ITAT Jaipur involved a dispute regarding the depreciation rate applicable to trucks and dumpers used by the assessee firm for quarrying and sale of stone during the assessment year 1981-82. The CIT contended that the hiring of trucks by the assessee was nominal and casual, thus justifying a depreciation rate of 30% instead of the 40% claimed by the assessee.

2. The assessee argued that the trucks were primarily used for carrying stone from the mine site to the sale depot, and the enhanced sale price included transportation costs, implying hire charges. The CIT rejected this argument, emphasizing that the trucks were used for the assessee's business and not exclusively for hire purposes. Consequently, the CIT directed a depreciation rate of 30% for the trucks and also disallowed a portion of depreciation for the car used by the firm.

3. The Tribunal upheld the CIT's decision on the depreciation rate for cars but disagreed on the depreciation rate for trucks. The Tribunal noted that the assessee earned income from hiring out trucks to third parties, supported by evidence of hire charges received. The Tribunal recognized the registration of trucks as public carriers and the intention of the assessee to earn income from hiring, thereby justifying a 40% depreciation rate as per the IT Rules.

4. Additional evidence presented by the assessee, including hire charges received for specific trucks, further supported the contention that the trucks were used for hire purposes. The Tribunal emphasized that the inclusion of transportation charges in the sale price of stones indicated the hiring of trucks by customers for transhipment, justifying the 40% depreciation rate under the relevant IT Rules.

5. The Tribunal concluded that the order of the CIT under section 263 was erroneous in disallowing the 40% depreciation rate for trucks used for hire purposes. However, the disallowance of depreciation on cars and the reduction of depreciation on dumpers to 30% were upheld. The appeal was partly allowed, affirming the depreciation rate of 40% for trucks used for hire and maintaining the CIT's decision on depreciation for cars and dumpers.