S. Bandyopadhyay, Accountant Member - (1.) THE Department has filed this appeal against the order of the Deputy Commissioner of Income-tax (Appeals), Hubli. THE only issue agitated by the Department relates to allowance of depreciation on motor buses belonging to the assessee. Admittedly, these motor buses are ones running on fixed routes as per the licence given by the Government. THE buses carry passengers between various stages of operation in between full course of their running and the passengers are supposed to pay the bus fares and are issued tickets thereon. THE assessee had claimed depreciation on these buses at the rate of 50 per cent. THE ITO, however, remarked that depreciation at the rate of 50 per cent was available on buses only if such buses were run on hire. He stated that the buses in the instant case were being operated along prescribed routes sanctioned by the transport authorities and that they were not used for hire during the year. On the basis of the said reasoning, he allowed depreciation on the buses at the rate of 33 1/3 per cent only.
(2.) When the matter came up before the DCIT (Appeals), the assessee placed reliance on the provisions of the Karnataka Motor Vehicles Taxation Act, 1957 and particularly on Section 4(2) of the said Act. The DCIT (Appeals) referred to the definition of a "stage carriage" in the said Act, which meant "a motor vehicle constructed or adapted to carry more than six passengers excluding the driver for hire or reward at separate fares paid by or for individual passengers either for the whole journey or for stages of the journey". He also referred to the definition of the word "hire" as occurring in Chamber's 20th Century Dictionary as "the price paid for the use of any thing: an arrangement by which use or service is granted for payment". The DCIT (Appeals) thereafter stated that it was undisputed that the buses being plied by the assessee were actually being paid for by its users. He thus finally concluded that the vehicles were plying on hire. On that basis, he directed for allowance of depreciation at the higher rate of 50 per cent. The learned Counsel for the department argued that the motor buses under consideration were being run on their usual routes and if no passengers would board the buses, no income would be generated from plying of the buses. She argued that the motor buses could not be considered to have been hired out.
(3.) THE learned Counsel for the assessee, on the other hand, referred to the definition of the word "hire" as appearing in Stroud's Judicial Dictionary and also in Black's Law Dictionary. He strongly contended that according to the said definitions, "hire" would mean compensation for the use of a thing or for labour or services. He argued that since in the instant case, the passengers were compensating the owner of the buses for the journey undertaken by them in the buses, the buses must be considered to have been used in a business of hiring out the same. He also took us to the various provisions of the Karnataka Motor Vehicles Taxation Act, 1957. He particularly drew our attention to item No. 4 at Part A of the Schedule attached to the said Act which prescribed various rates for payment of tax under the Motor Vehicles Act (in accordance with the capacity of the vehicle) in respect of motor vehicles plying for hire and used for transport of passengers. He also argued that a liberal construction is necessary about the usage of the word "hire" in the present case as has been prescribed by the Supreme Court in the case of CIT v. UP Cooperative Federation Ltd. [1989] 176 ITR 435.;