JUDGMENT
N. Kumar, J.
1. Sri S. Parthasarathi, learned Counsel takes notices for the respondent.
2. Heard the learned Counsel for the parties. As the matter could be disposed of on a short point, by consent of the parties, this appeal is taken up for final hearing and disposed of by this judgment.
3. In this appeal the revenue has challenged the Order of the Income Tax Appellate Tribunal, Bangalore Bench, made in ITA No. 1284/Bang/2002 dated 7th April 2005 upholding the order of the appellate authority and holding that the respondent is entitled to 40 per cent depreciation for the motor vehicles which are used in business of running them on hire.
4. Few facts leading to this appeal are as under: The respondent-assessee had leased to ferry BPL employees from city to factory and back to the residence, the motor vehicles for its sister concern. The assessee. claimed deprecation at. 40 per cent. The assessing officer restricted the depreciation to 20 per cent on the ground that the assessee is entitled to 40 per cent depreciation only when the motor vehicles are hired to public and not to its sister concern. Aggrieved by the said order, the assessee preferred an appeal to the Commissioner. The Commissioner allowed deprecation at 40 per cent on the ground that once the vehicle is vised for the business of hire, the assessee is entitled to 40 per cent depreciation, which order has been affirmed by the Tribunal, Challenging these orders, the revenue is before this court
5. We have heard the learned Counsel appearing for the parties.
6. Item III of Appendix-I to the Income Tax Rules, 1962, deals with depreciation allowance in respect of machinery and plant. The same reads as under:
III. MACHINERY AND PLANT:
III(2) Motor cars, other than those used in a
business of running them on hire, acquired
or put to use on or after the 1st day of
April 1990. 20
3 (i) xxx xxx xxx
3(ii) Motor buses, motor lorries and motor taxis
used in a business of running them on hire. 40
7. The reading of the aforesaid provisions make it clear that 20 per cent is the depreciation allowable in respect of the motor cars other than those used in the business of running them on hire. Whereas, 40 per cent is the depreciation allowed in respect of motor buses, lorries and taxis used in a business of running them on hire. The stress is on “running them on hire”. Here the use may be for its business, but not “business of hiring vehicles”. In other words, if the assessee uses the vehicles for its “own use” or for its business other than the “business of running the vehicles on hire” then 20 per cent is the depreciation allowable, whereas if the assessee uses them in its “business of running them on hire” the depreciation allowable is 40 per cent. It is immaterial whether the vehicles are hired to sister concern or to a third party or to a total stranger.
8. Therefore, when once on facts it was found that the assessee was carrying on the business of hiring its vehicles, and were not used for its own other business, the assessee is entitled to 40 per cent depreciation as provided in Appendix and not for 20 per cent, as wrongly held by the assessing officer.
9. In that view of the matter the impugned orders passed by the appellate authorities do not suffer from infirmity. Accordingly this appeal is rejected.