1984 (8) TMI 108 - AT - Income Tax

Summary

Issues:
1. Claim of depreciation on cars used for hire charges.
2. Interpretation of proviso to section 32(1)(ii) of the Income-tax Act, 1961.
3. Determination of whether the cars were used for tourists or business purposes.
4. Consideration of registration as tourist cars for claiming depreciation.

Detailed Analysis:
1. The judgment pertains to the assessment year 1978-79 where the assessee acquired two cars manufactured outside India and gave them on hire to a foreign company, receiving hire charges. The issue arose when the assessee claimed depreciation on the cars, which was disallowed by the Income Tax Officer (ITO) based on the proviso to section 32(1)(ii) of the Income-tax Act, 1961.

2. The proviso stated that no deduction shall be allowed for any motor car manufactured outside India if acquired after a specific date and used other than in a business of running it on hire for tourists. The ITO disallowed depreciation as the assessee failed to prove that the cars were used as tourist taxies, as claimed.

3. The Commissioner (Appeals) upheld the ITO's decision, noting that the cars were not registered as tourist cars with the Regional Transport Authority. The foreign company using the cars was engaged in business activities, indicating that the cars were not used for tourism purposes. The contention in the further appeal was whether the foreign company could be deemed as tourists for the purpose of claiming depreciation.

4. The Appellate Tribunal analyzed the facts and submissions, emphasizing that for depreciation claim, the cars must be used in a business of running them on hire for tourists specifically. Since the cars were given to a foreign company for business purposes, and not to tourists, the claim for depreciation was not allowable. The absence of registration as tourist cars was a crucial factor in determining the usage of the cars for tourism.

5. The Tribunal highlighted that the Act does not mandate registration as a tourist car for claiming depreciation. However, all surrounding circumstances must be considered to determine if the cars were used for tourists or business. In this case, the foreign company using the cars for business indicated that they were not used for tourism purposes, justifying the rejection of the depreciation claim.

6. Ultimately, the appeal was dismissed as the cars were not used in a business of running them on hire for tourists, as required by the proviso. The judgment underscores the importance of proving the specific usage of assets to claim depreciation and considering all relevant circumstances in such determinations.