2015 (7) TMI 809 - HC - Income Tax

Depreciation allowance at the rate of 30% for the vehicles given on hire denied - Assessing authority limited the depreciation allowance to 15% in respect of the petitioner, only because of the TDS certificate in which the nature of payment was shown as payment to contractor and not as hire charges - Held that - Merely on the basis of the TDS certificate furnished by M/s KSE Ltd. and the hire charges received per metric tonne, the claim of petitioner should not have been rejected. It is pertinent to note that the assessing authority as well as revisional authority, while rejecting the claim of petitioner refers to the contract receipt as one for letting out lorries on hire . When they themselves admit that the petitioner firm was letting out lorries on hire the petitioner firm comes under Clause III(3)(ii) of Appendix I to the Income Tax Rules and is entitled to depreciation allowance @ 30%, It was engaged in the business of hiring trucks and those trucks cannot be treated as motor vehicles other than those used in the business of running them on hire so as to limit the depreciation allowance to 15%. Thus it is declared that the petitioner will get the benefit of depreciation allowance at the rate of 30% . - Decided in favour of assessee.

Summary

Issues:
Challenge to denial of depreciation allowance at 30% for vehicles given on hire.

Analysis:
1. The petitioner, engaged in letting out lorries on hire, challenged the denial of depreciation allowance at 30% for vehicles given on hire as per Exts.P2 and P5 orders.
2. The Assessing Authority, in Ext.P2 order, limited depreciation allowance to 15% stating that the petitioner was a contractor engaged in supplying/transporting goods, not running lorries on hire.
3. The Commissioner of Income Tax, in Ext.P5, upheld the Assessing Officer's findings without considering the petitioner's contentions, leading to the petitioner filing a Writ Petition seeking depreciation allowance per Income Tax Rules.
4. The respondents argued that the petitioner was in the business of transporting goods under a contract with M/S KSE Ltd., not running lorries on hire, hence eligible for 15% depreciation only.
5. The court considered the agreement between the petitioner and KSE Ltd., noting the rates per metric tonne for trucks supplied, and the TDS certificate issued.
6. Appendix 1 specified depreciation rates, with Clause III(3)(ii) allowing 30% depreciation for lorries used in the business of running them on hire.
7. The court found that the Assessing Authority and revisional authority referred to the petitioner as "letting out lorries on hire," making them eligible for 30% depreciation under Clause III(3)(ii) of Appendix I.
8. The court held that the petitioner, engaged in hiring trucks, should receive 30% depreciation, not limited to 15% based on TDS certificate or nature of payment.
9. Consequently, the court quashed Exts.P2 and P5 orders, granting the petitioner the benefit of depreciation allowance at 30%, and disposed of the writ petition in favor of the petitioner.