B.R. Arora, J. - (1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, at the instance of the Revenue, has referred the following question of law for the opinion of this court : "Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the assessee is entitled to depreciation at 40% and not 30% on the trucks used by it in its business ?"
(2.) THE assessee, M/s. Manjeet Stone Company, Kota, is carrying on the work of quarrying and sale of stones excavated from mines and derives its income from this business. THE assessee owns trucks which are used mainly for carrying the stones from the quarry to the sales depot or to the godown of the assessee. THE trucks are registered as "public carriers". For the assessment year 1981-82, the assessee claimed depreciation on these trucks at the rate of 40%. THE Income-tax Officer allowed depreciation at the rate of 40% as claimed by the assessee. THE Commissioner of Income-tax initiated proceedings under Section 263 of the Income-tax Act against the assessee and, after giving notice to the assessee under Section 263, set aside the order passed by the Income-tax Officer as, according to the Commissioner of Income-tax, the order passed by the Income-tax Officer allowing depreciation at 40% was prejudicial to the interests of the Revenue and directed the Income-tax Officer to modify the assessment order so as to restrict the depreciation on the trucks to the extent of 30% only. Dissatisfied with the order passed by the Commissioner of Income-tax, the assessee preferred an appeal before the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, and the Tribunal, by its order dated November 19, 1984, allowed the appeal filed by the assessee and held that depreciation at 40% on the trucks is to be allowed on the same basis as if the assessee was using it for hiring. Aggrieved by the order passed by the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, the Revenue moved an application under Section 256(1) of the Income-tax Act to refer the question of law mentioned in the application for the opinion of the High Court and the Tribunal, by its order dated June 27, 1985, referred the question of law mentioned in para No. 1 above. It has been contended by learned counsel for the Revenue that the business of the assessee in the present case was of quarrying and not of hiring of trucks and if, in one or two transactions, the business of hiring has been carried on, then that cannot be said to be the business of the assessee. Learned counsel for the Revenue has further submitted that, for the purpose of treating it as a business, it should be a continuous activity. He has further submitted that no specific finding has been given by the Tribunal on the point that the assessee was engaged in the business of hiring. The finding of the Commissioner on that point that the assessee was not carrying on the business of hiring the trucks has not been set aside by the Tribunal and, therefore, the assessee is entitled to depreciation only at 30% and not at the rate of 40%. Learned counsel for the assessee, on the other hand, has submitted that the trucks in question were registered as "public carriers" and as such they can be used for hiring purposes also. In fact, the trucks are being used for personal use as well as for hiring purposes in taking the goods of the various purchasers from the sales office or from the mines to the business premises of the purchasers. He has further submitted that the Tribunal has given a specific finding that the trucks in question were used for hiring purposes for the assessment year 1981-82 and these are the findings of fact which have not been challenged by the Department. He has further submitted that it is a beneficial legislation and a beneficial legislation should be liberally construed and if two views are possible, then the view in favour of the assessee should be taken into account. So far as the point whether the hiring activity of the assessee can be treated as a business or not is concerned, counsel for the assessee submitted that even two or more transactions can be treated as a business. Counsel for the assessee has also submitted that the intention of the Legislature in inserting the entry is to give benefit to the assessee. His further submission is that, in the entry, the words like "only" or "wholly" or "exclusively" have not been used which means that, apart from the use of the trucks for hiring, the trucks can be employed for personal work also. He has taken us through the various provisions of the Income-tax Act, wherein the intention of the Legislature was to limit the applicability of the provisions where the words "wholly", "exclusively" or "only" have been used. We have considered the rival submissions made by the parties and carefully gone through the record. In view of the question referred by the Tribunal for the opinion of the High Court, many of the arguments advanced by counsel for the parties need not to be considered because the question which has been referred is limited to the question, where the truck is used in its business by the assessee, at which rate depreciation is admissible. The question which, therefore, requires consideration is : whether the assessee is entitled to depreciation at 40% or 30% on the trucks used by it in its business ? Rates at which depreciation is admissible have been provided in the "Depreciation Table" given in Appendix-I, Part-I, of the Income-tax Rules, 1962. In the Table of Rates of Depreciation, there are two entries relating to motor buses and motor lorries which provide the "Rate of depreciation" allowable on these items and which read as under : "III(ii)D(9) Motor buses and motor lorries other than those used in a business of running them on hire (N. E. S. A) ... 30%" "III(ii) E (1A) Motor buses, motor lorries and motor taxis used in a business of running them on hire (N. E. S. A) ... 40%" The Central Board of Direct Taxes issued an instruction in the year 1973 declaring that dumper and fork-lift trucks would be classified under item No. III(ii)-D (9) of Appendix-I to the Income-tax Rules, 1962, and would be entitled to depreciation at the rate of 30%.
(3.) A plain reading of both these entries, i.e., Entry No. III(ii)D(9) and III(ii)E(1A) 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 No. III(ii)E (1A) of Appendix-I and are entitled to depreciation at 40% and the motor buses and motor lorries other than those used in the business of running them on hire are entitled to depreciation at 30%. It is true that the relevant clause does not lay down the requirement of hiring wholly or exclusively, but the entry has maintained the distinction about the entitlement to depreciation at 40% and 30%. In the case of motor buses and motor lorries other than those used in a business of running them on hire they are entitled to depreciation at 30% while the motor buses, motor lorries and motor taxis used in a business of running them on hire are entitled to depreciation at 40%. If a truck is not used for hiring but for the purpose of one's own business, then it would be entitled to depreciation at 30% and not 40%. The context of the relevant entry does indicate the same. In the present case, the business of the assessee is that of mining and sale of stones excavated from the mines and the trucks are used mainly for its business of mining. They are used mainly for carrying the stones from the mine-site to the sales depot or to the godown of the assessee. If the trucks are used for its own business, then they are entitled to depreciation at 30% only, as the assessee was not using the trucks in the business of running them on hire. The registration of the trucks as "public carriers" will not, in any way, affect the eligibility to depreciation as the main consideration as per entry No. III(ii)E(1A) is that the assessee is using the vehicle in the business of running them on hire. The business of the assessee is quarrying and selling the stones after excavation and not of hiring. If a small portion of its income is received from the business of hiring from two or three transactions of hiring, then it will not make the business of the assessee as one of hiring the trucks. Even otherwise, when we look into the finding arrived at by the Tribunal regarding the business of the assessee, then we find that the findings are to the effect that the business of the assessee is of quarrying and selling stones and the trucks are mainly used for carrying the stones from the mines to the sales depot. As the trucks were mainly used by the assessee in its own business for carrying the stones from the mine-site to the sales depot, the case of the assessee is covered by entry No. III(ii)D(9) and not by entry No. III(ii)E(1A), and as such the assessee is entitled to depreciation at 30% and not at 40%. In this view of the matter, we are of the opinion that the Tribunal was not right in holding that the assessee is entitled to depreciation at 40% and not at 30% on the trucks and dumpers used by it for its business. We, therefore, answer the question in the negative, i.e., in favour of the Revenue and against the assessee, by holding that the assessee is entitled to depreciation at 30% and not at 40%, as the case of the assessee is covered by Entry No. III(ii)D(9) and not by Entry No. III(ii)E(1A). No order as to costs. ;