TMI Blog2011 (4) TMI 40X X X X Extracts X X X X X X X X Extracts X X X X ..... he question is answered in the affirmative, that is, in favour of the revenue and against the appellant-assessee - The Income-tax Appellate Tribunal was right in law, in holding that the appellant was not entitled to depreciation allowance under Entry No. III(2)(ii) of Appendix-I of the Income-tax Rules, 1962, in respect of vehicles given on lease - The appeals are accordingly dismissed with no order as to costs. - 100 OF 2000, 103 AND 105 OF 2002 - - - Dated:- 1-4-2011 - MS. HARSHA DEVANI, MS. BELA TRIVEDI, JJ. S.N. Divatia for the Appellant. K.M. Parikh for the Respondent. JUDGMENT Ms. Harsha Devani, J. In these appeals under section 260A of the Income-tax Act, 1961 (the Act), common question of law is involved and the parties are also common, hence the appeals were heard together and are decided by this common judgment. 2. In Tax Appeal No. 100 of 2000 the appellant assessee challenged the order dated 28-1-2000 made by the Income-tax Appellate Tribunal, Ahmedabad Bench C in ITA No. 498/Ahd./1994 for assessment year 1989-90. In Tax Appeal No. 103 of 2000 the appellant has challenged order dated 7-11-2001 made in ITA No. 5400/Ahd./1994 for assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... igher depreciation is available. In support of his submissions, the learned advocate placed reliance on the decision of the Karnataka High Court in the case of CIT v. BPL Sanyo Finance (P.) Ltd. [2006] 287 ITR 691 as well as the decision of the Kerala High Court in the case of CIT v. Balakrishna Transports [1998] 233 ITR 133, wherein the Court has held that the real question was that whether the assessee engaged in the business of plying vehicles as an activity used the concerned vehicles for hire or not. It was submitted that in the present case, the petitioner had leased the vehicle in question, which is a lorry being insulated vehicle on to Dharmendra Marketing Company and the vehicle is run by the contractor of that company on contract basis for transportation of ice-cream and other products of the said company. According to the learned advocate, there is no difference between lease and hire so far as motor vehicles are concerned and as such, the appellant is entitled to depreciation on the said motor vehicle at the rate of 50 per cent instead of 33.33 per cent allowed by the authorities below and as such the appeals deserve to be allowed. 6. On the other hand, Mr. K.M. P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc. to its clients. Before the Tribunal, it was the case of the appellant-assessee that the Commissioner (Appeals) was not correct in observing that the vehicles were not running on hire because the assessee company was not carrying on any such business. According to the assessee, there was no difference between lease and hire so far as motor vehicles were concerned. The Tribunal, after considering the rival submissions and going through the provisions of Entry No. III(2)(ii) and Entry No. III(2)(i) of Appendix-I of the Rules, was of the view that if the assessee is doing the business of plying motor buses, motor lorries, motor taxis, then it is entitled to 50 per cent depreciation. In other words, if the said vehicles are used in a business of running them on hire, then those motor vehicles are covered under Entry No. III(2)(ii) of Appendix-I and are entitled to depreciation at the rate of 50 per cent. According to the Tribunal, the paramount consideration is that the assessee must be doing the business of running the vehicles on hire. To put it differently, if the owner is doing business of giving his motor-cars on hire as taxis then he is entitled to depreciation at the rat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the test. The Court, however, held that what is relevant for consideration under item (2)(ii) of heading III of Appendix-I to the Rules is whether the assessee was in the business of hiring out his trucks in addition to his business of trading in timber. The Court observed in the facts of the said case that the order of assessment clearly indicates that the assessee was only in the business of trading in timber and there was no evidence to indicate that the assessee was in the business of hiring out motor lorries for running them to earn business income. 10. The Rajasthan High Court in the case of CIT v. Sardar Stones [1995] 215 ITR 350, has, while construing the provisions of aforesaid entry, held that a plain reading of both the entries, that is, entry No. III(ii)D(9) and III(ii)E(1-A), given in Part I of Appendix I, appended to the Rules, shows that if the motor buses, motor lorries and motor taxis are used in a business of running them on hire then those motor vehicles are covered under entry III(ii)E(1A) of Appendix I and are entitled to depreciation at 40 per cent and the motor buses and motor lorries other than those used in the business of running them on hire are ent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it could not be stated that the assessee was using the said vehicles in the business of running them on hire. 12. This Court is in agreement with the view taken by the Rajasthan High Court as well as the Bombay High Court in the decisions referred to hereinabove. The decisions of the Karnataka High Court as well as of the Kerala High Court on which reliance has been placed on behalf of the appellants are also along the same lines and do not in any manner support the case of the appellant. Moreover, the controversy involved in the present case stands more or less concluded by the decision of the Supreme Court in the case of Gupta Global Exim (P.) Ltd. (supra), wherein the Court has held that under item (2)(ii) of heading III of the depreciation table given in Appendix I to the Income-tax Rules, 1962, the higher rate of depreciation is admissible on motor trucks used in a business of running them on hire. Therefore, the user of the same in the business of the assessee of transportation is the test. 13. In the facts of the present case, as noticed hereinabove, all the authorities below have recorded that the assessee company is a leasing company which is engaged in leasing of pl ..... X X X X Extracts X X X X X X X X Extracts X X X X
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