Income-tax---

----Depreciation---Rate of depreciation---Motor buses ---Assessee having income from plying of passenger buses on hire---Entitled to depreciation at 50 percent.---Indian Income Tax Rules, 1962.

Held, that the relevant entry in the Income-tax Rules, 1962, which existed at that point of time read as under: "motor buses, motor lorries and motor taxies used in a business of running; them on hire". Therefore, if the assessee was doing the business of plying motor buses/motor lorries/motor taxies, then he would be entitled to 50 per cent of depreciation. The paramount consideration was that he must be doing the business of running them on hire. The business of the assessee was transport business and as all the vehicles were employed in that business, he was entitled to depreciation to the extent of 50 percent.

Abhay Sapre for the Commissioner.

G.N. Purohit for the Assessee.

JUDGMENT

A. K. MATHUR, C.J.---This is an income-tax reference under section 256(1) of the Income Tax Act, 1961, at the instance of the Revenue and the following two questions have been referred by the Tribunal for answer by this Court:

"(1) Whether, on the facts and in the circumstances of the case, the Tribunal was right in law in holding that the assessee was entitled to claim depreciation at 50 per centinstead of 33-1/3 percent. as provided by the law?

(2)Whether, on the facts and in the circumstances of the case, the Tribunal was justified in cancelling the order of the Commissioner of Income-tax under section 26:5 and restoring the order of the Assessing Officer?"

The assessee is deriving income from plying of buses. The Assessing Officer, while completing the assessment, granted depreciation at 50 per cent on the passenger buses plied by the assessee. The Commissioner of Income-tax held that the order of the Assessing Officer was erroneous and prejudicial to the interests of the Revenue. Therefore, he invoked power under section 263 of the Income-tax Act and set aside the order of the Assessing Officer and remanded the case to the Assessing Officer. On appeal by the assessee, the Tribunal, by order, dated December 2, 1993, set aside the order of the Commissioner of Income-tax and affirmed the order of the Assessing Officer granting 50 per cent depreciation. Therefore, the Revenue approached the Tribunal to refer the case to this Court and, accordingly, the aforesaid two questions have been referred by the Tribunal.

We have gone through the record and after considering the matter, we are of the opinion that the view taken by the Assessing Officer appears to be justified. The question for consideration in this case is as to what is the business of the assessee? The assessee is doing transport business of transporting passengers from one place to another. Therefore, the business of the assessee is a transport business and as all the vehicles are employed in that business, he is entitled to depreciation to the extent of 50 percent. The relevant entry, which existed at that point of time reads as under:

"Motor buses, motor lorries and motor taxis used in a business of running them onhire."

Therefore, if the assessee is doing the business of plying motor buses/motor lorries/motor taxies, then he is entitled to 50 per cent depreciation. The paramount consideration is that he must be doing the business of running them on hire. An owner who holds a transport fleet of buses on permits for hiring them, then he will be doing a transport business and will be entitled to depreciation: Likewise, if the owner uses motor lorries for goods carriage as a regular business, then also he is entitled to depreciation. Similarly, if the owner is doing the business of giving his motor cars on hire as taxies, then also he will be entitled to get the depreciation to the extent of 50 percent. Therefore, the view taken by the Tribunal appears to be well justified.

We, therefore, answer both the questions in favour of the assessee and against the Revenue.

M.B.A./4056/FCReference answered.