V.K.SINGHAL,J. - (1.) THE Tribunal has referred the following question of law arising out of its order dt. 30th Sept., 1985 in respect of the asst. year 1982 83, under S. 256(1) of the IT Act, 1961 : "Whether, on the facts and circumstances of the case, the Tribunal was right in coming to the conclusion that the sale price realised included price of stones as well as hire charges of trucks from the customers and thereby holding that the assessee is entitled to depreciation at 40% and not at 30% as is allowable in case of motor lorries?"
(2.) THE brief facts of the case are that the assessee 'is a trader in stones and owned two trucks which are used for transportation of stones from the site of mines to the depot of the assessee as well as to the customers' premises. The claim of the assessee was that the trucks were occasionally and when not in use by the assessee were hired out to a sister concern. The income from hiring of the trucks in this manner was at a figure of Rs. 33,155. The value of the truck was shown at a figure Rs. 3,82,280, and the expenditure on the running and maintenance of trucks was Rs. 1,90,663. The sale of the stones during the year was to the tune of Rs. 21,25,660. The assessee claimed depreciation @ 40% on the trucks which was allowed by the ITO while assessing under s. 143(3) of the Act. Subsequently the CIT exercising the powers under S. 263 of the Act came to the conclusion that the rate of depreciation @ 40% is allowable only when the assessee was carrying on the business of trucks running on hire. Since the assessee was not carrying on the business of running the trucks on hire, therefore the depreciation was allowable @ 30% only. The order was therefore prejudicial to the Revenue and the assessment order was accordingly set aside with the observation that the trucks were entitled to depreciation @ 30% in accordance with the cl. (iii) D (9) of the Schedule of Depreciation App. I of the IT Rules, 1962. In appeal before the CIT(A) it was contended that the trucks were used in connection with the transportation of sale of stones to the customers. The customers were charged not only for the purchase of stones but also for the transportation, and therefore such charges are hire charges. It was, therefore, contended that the trucks were not required for transportation of the stones of the assessee and were hired to the sister concern and the income received therefrom has separately been shown. The CIT(A) found that in accordance with the language used in (Item)(iii)/E(1A) of the Depreciation Table which uses the words "used in a business of running them on hire" means that the assessee must not only be giving the trucks on hire but also carrying on a business of running the trucks on hire. The fact which was also taken into consideration by the CIT was that this could be at the time only when there must be continuity or regularity on hiring transaction. The casual hiring to sister concern is not sufficient to justify it that the assessee was carrying on the business of hiring as well, and therefore the depreciation @ 30% was directed to be computed. In second appeal before Tribunal, the Tribunal following its earlier decision in the case of Manjeet Stones Co. observed that the assessee was using the trucks for transportation for itself and customers and also hired the trucks whenever the trucks were not required for transportation of the stones. The sale price of the stones was charged from the customers which included truck hiring charges as well. The Tribunal further came to the conclusion that the same value was not bifurcated between the sale price of stones, and transportation charges and for that reason it does not mean that the trucks were not used on hire by the customers. The order in the case of Manjeet Stones Co. came up for consideration before this Hon'ble Court in DB IT Ref. No. 77/85 decided on 22nd Nov., 1990 [reported as Manjeet Stone Co. vs. CIT (1991) 91 CTR (Raj) 239 ]and following observations were made : "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 App. I, appended to the Rules, show 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 the App. I and are entitled for depreciation @ 40% and the motor buses and motor lorries other than those used in a business of running them on hire are entitled for depreciation @ 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 of depreciation @ 40% and 30%. In the case of motor buses and motor lorries other than those used in a business of running them on hire are entitled for a depreciation @ 30% while the motor buses, motor lorries and motor taxis used in a business of running them on hire are entitled for the depreciation @ 40%. If a truck is not used for hiring but for the purpose of one's own business, then it would be entitled for depreciation @ 30% and not 40%. The context of the relevant entry does indicate the same.
(3.) 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 sale depot or to the godown of the assessee. If the trucks are being used for its own business then they are entitled for depreciation @ 30% only, as the assessee was not using the trucks in the business or running them on hire. The registration of the trucks as 'public carriers' will not, in any way, affect the eligibility of the depreciation as the main consideration as per Entry III(ii) E(1 A) 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 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 the business 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 the 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 sale depot, the case of the assessee is, therefore, covered by Entry No. III(ii)D (9) and not by Entry No. III(ii)E(1 A), and as such the assessee is entitled for depreciation @ 30% and not @ 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 @ 40% and not 30% on the trucks and dumpers used by it for its business." The rate of depreciation which is provided in respect of motor lorries other than those in a business of running them on hire is @ 30%. If the motor buses, motor lorries and motor taxis are used in a business running them on hire then the depreciation is allowable @ 40% in accordance with the law. The finding which has been recorded by the Tribunal is that there is no specific mention in respect of hire charges of the truck, in the bills yet the hire charges should be considered to have been realised. The dispute was not with regard to the hire charges, but was with regard to the nature of business.;