1986 (1) TMI 188 - AT - Income Tax

Summary

Issues:
The judgment involves the issue of depreciation allowance on buses used for plying transport services and whether the buses were used in a business of running them on hire.

Depreciation Allowance Issue:
The appeal by the revenue pertained to the assessment year 1981-82, where the assessee, a private limited company, claimed depreciation at 40% on buses used for transport services. The Income Tax Officer (ITO) contended that depreciation at 40% could only be allowed on buses let on hire, not for those used in the business of plying buses. The Commissioner (Appeals) allowed depreciation at 40% stating that buses registered and operated as public carriers were considered as being let out on hire. The revenue argued that 40% depreciation is admissible only if the whole bus was hired out, not for individual passengers taking single tickets.

Business of Running Buses on Hire Issue:
The learned counsel argued that as per the Motor Vehicles Act, the assessee was engaged in the business of plying buses on hire and thus entitled to depreciation at 40%. Referring to a previous Tribunal decision, it was contended that no mistake warranted reducing the depreciation rate. The Tribunal analyzed the Income-tax Rules and found that the assessee received income from plying buses on specified routes, indicating a business of running buses on hire. The definition of 'public service vehicle' under the Motor Vehicles Act supported the view that buses carrying passengers for hire or reward constituted a business of running buses on hire. The judgment emphasized that regular plying of buses for hire between fixed points, even if passengers paid separate fares, qualified as running buses on hire. Citing government rules on claiming mileage allowance for public conveyance, the Tribunal concluded that the assessee was entitled to depreciation at 40% on the buses in question.

Conclusion:
The Tribunal dismissed the revenue's appeal, affirming the allowance of depreciation at 40% for the buses used in the business of plying transport services on hire routes.