1. These two appeals filed by the assessee involve common issue, hence, these were heard together and are being disposed off through this consolidated order for the sake of convenience.
2. We have heard both the sides and have also perused the material on record.
3. First we shall take up assessee's appeal in ITA No. 4059/M/04 which is directed against the order of the ld. Commissioner (Appeals), Thane dated 15-3-2004 and it pertains to the assessment year 1999-2000.
4. In this appeal ground Nos. 1 to 3 are in respect of rate of depreciation for the use of car whereas ground No. 4 is regarding the validity of reopening of assessment under Section 147 of the Act. Since no arguments were made in respect of ground No. 1, it is presumed to be not pressed. Hence same is dismissed as not pressed.
5. The facts in brief are that the assessee purchased a motor car between the period from 1-10-1998 to 31-3-1999. This car was used by the assessee for his business of civil construction. The assessee claimed the depreciation on the same at the rate of 40 per cent which was allowed under Section 143(l)(a). The assessing officer sought to rectify the same under Section 154, however the proceedings under that section were dropped and notice under Section 148 was issued and the assessment was reopened. The assessee clarified that the depreciation at the rate of 40 per cent was claimed in view of new entry (iia) inserted under Item III in Appendix-I to Rule 5 of IT Rules, 1962 with effect from 1-4-1999. The assessing officer stated that the depreciation claimed by the assessee at the higher rate of 40 per cent for assessment year 2001 -02 had to be restricted to 20 per cent because Maruti Zen was not a commercial vehicle as confirmed by the RTO Authorities. The assessing officer, accordingly, restricted the depreciation to 20 per cent and made an addition of Rs. 72,959 to the total income of the assessee. Aggrieved by this the assessee carried the matter into appeal before the ld. Commissioner (Appeals) who also confirmed the action of the assessing officer following the appellate order of Commissioner (Appeals) for assessment year 2001-02. Aggrieved by this, the assessee is in appeal before us.
6. The ld. Counsel appearing on behalf of the assessee firstly narrated the factual matrix of the case and thereafter made legal arguments. The first argument raised by the assessee's counsel was that the words "commercial vehicle" was used only in the Income Tax Act, 1961 and Income-tax Rules, 1962, hence, the meaning assigned to the same in the Income Tax Act was relevant and only to be considered. It was also pointed out that the words "commercial vehicle" was not defined in the Motor Vehicles Act 1988, nor in any registration certificate issued by the RTO these words were used, hence the report of the RTO to this effect was not relevant and consequently reliance placed by the revenue authorities thereon was also misplaced. The ld. Counsel also stated that in the report of the RTO no such specific certificate was given though the same was not available with him at that time. The ld.Counsel then referred to the relevant clause of Appendix-I and also note thereto defining the term "commercial vehicle". The ld. Counsel also referred to the Explanation to third proviso of Section 32 of the Act. The ld. Counsel also referred to the definitions of various terms used in Appendix-I and Section 32 and their meanings as assigned to them in the relevant provisions of Motor Vehicles Act, 1988. Based upon these provisions the ld. Counsel contended that the Maruti Zen car was a light motor vehicle hence, the same fell within the meaning of definition of "commercial vehicle" as per provisions of Section 32, Appendix-I to Rule 5 of the Income-tax Rules, 1962. It was also contended by the ld. Counsel that in Item-Ill of Part A of Appendix I, Clause (1A) was on statute with effect from 23-8-1990, Clause (2)(ii) was also on statute however Clause (2)(iia) was brought on statute with effect from 1-4-1999, which provided for depreciation at the rate of 40 per cent on any "commercial vehicle" acquired by the assessee after first day of October, 1998 but before the first day of April, 1999 and which was put to use before the first day of April, 1999 for the purpose of business and profession of the assessee and the assessee complied with all these conditions, hence assessee was entitled for the depreciation thereon at the rate of 40 per cent. It was also contended that this new entry was inserted with the intention to give boost to automobile sector by providing enhanced rate of depreciation on vehicles purchased during particular period of time. It was also contended that once a separate entry was created and a particular asset fell within that entry then the same was to remain under the same entry till it was used for the purpose of business and for that duration the assessee was entitled to depreciation at the rate specified for that entry only.
7. The ld. AR, on the other hand, placed strong reliance on the order of the revenue authority.
We have considered the submissions made by both the sides, material on record, orders of authorities below and applicable legal provisions.
The interesting question which has arisen before us is regarding the rate of depreciation applicable to motor car acquired between 2-10-1998 and 31-3-1999 and if the same has been put to use between the same period for the purpose of business of the assessee. As far as use of the car acquired by the assessee during this period for the purpose of business is concerned, the same is not in dispute. We consider it pertinent to reproduce the relevant statutory provisions as under for better appreciation of legal position.
Provided also that where an asset being commercial vehicle is acquired by the assessee on or after the 1st day of October, 1998 but before the 1st day of April, 1999 and is put to use before the 1st day of April, 1999 for the purposes of business of profession, the deduction in respect of such asset shall be allowed on such percentage on the written down value therefore, as may be prescribed.
(a) the expression 'commercial vehicle' means' 'heavy goods vehicle', 'heavy passenger motor vehicle', 'light motor vehicle', 'medium goods vehicle' and 'medium passenger motor vehicle', but does not include 'maxi-cab', 'motor-cab', 'tractor' and 'road-roller'.
(b) the expression 'heavy goods vehicle', 'heavy passenger motor vehicle'. 'Light motor vehicle', 'medium goods vehicle', 'medium passenger motor vehicle', 'maxi-cab', 'motor-cab', 'tractor' and 'road-roller' shall have the meanings respectively as assigned to them in Section 2 of the Motor Vehicles Act, 1988 (59 of 1988).
(iia Commercial vehicle which is acquired by the assessee on or after the 1st day of October, 1998, but before the 1st day of April, 1999 and is put to use for any period before the 1st day of April, 1999 for the purpose of business or profession in accordance with the third proviso to Clause (ii) of Sub-section (1) of Section 32 (see Note 3A below the Table) 3A. "commercial vehicle" means "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle" and "medium passenger motor vehicle" but does not include "maxi-cab", "Motor-cab", "tractor" and "road-roller". The expressions "heavy goods vehicle", "heavy passenger motor vehicle", "light motor vehicle", "medium goods vehicle", "medium passenger motor vehicle", "maxi-cab", "motor-cab", "tractor" and "road-roller" shall have the meanings respectively as assigned to them in Section 2 of the Motor Vehicles Act, 1988 (59 of 1988)) "heavy goods vehicle" means any goods carriage the gross vehicle weight of which, or a tractor or a road-roller the unladen weight of either of which, exceeds 12,000 kilograms; "heavy passenger motor vehicle" means any public service vehicle or private service vehicle or educational institution bus or omnibus the gross vehicle weight of any of which, or a motor car the unladen weight of "light motor vehicle" means a transport vehicle or omnibus the gross vehicle weight of either of which or a motor car or tractor or road-roller the unladen weight of any of which, does not exceed (7,500) kilograms; "maxi-cab" means any motor vehicle constructed or adapted to carry more than six passengers, but not more than twelve passengers, excluding the driver, for hire or reward; "medium goods vehicle" means any goods carriage other than a light motor vehicle or a heavy goods vehicle; "medium passenger motor vehicle" means any public service vehicle or private service vehicle, or educational institution bus other than a motor cycle, invalid carriage, light motor vehicle or heavy passenger motor vehicle; "motor cab" means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driver for hire or reward; 8. As per the Ilird proviso to Section 32 of the Act, in respect of the asset being commercial vehicle acquired between 2-10-1998 and 31-3-1999, the depreciation has to be allowed on such percentage on the written down value thereof as may be prescribed. As per the provisions of Section 43(6)(c)(ii). W.D.V. means the written down value of that block of asset as increased by the actual cost of any asset falling within that block acquired during the previous year and as reduced by the monies payable together with scrap value if any in respect of the assets falling within that block which are sold or discarded or demolished or destroyed during that previous year. However, for our purpose the material provision is that the actual cost of the asset so acquired would fall within that block in the year of acquisition and thereafter the W.D.V., i.e., the actual cost less depreciation allowed thereon would be material for computing depreciation in subsequent years. Thus the cost of car is to be treated as W.D.V. for computing depreciation thereon at the specified percentage. Further the Explanation to this proviso defines that the expression "commercial vehicle" would mean... "light motor vehicle" and the "light motor vehicle" as defined in the Motor Vehicles Act, 1988, means any transport vehicle or omni bus, the gross physical weight of either of which or a motor car or a Tractor or Road Roller the unladen weight of which does not exceed 75,00 kgs. Thus a motor car not exceeding the specified weight is covered under the definition of "light motor vehicle". It is further provided that commercial vehicle would not include "maxi-cab" and "motor-cab". The maxi-cab as per provisions of Motor Vehicles Act means any motor vehicle constructed or adapted to carry more than six passengers but not more than twelve passengers excluding the driver for hire or reward. Similarly the term "motor c Jo" also excludes any motor vehicle for hire or reward. If the provisions of Explanation to this proviso and the definition of maxi-cab and motor cab as given in Motor Vehicles Act, 1988 are read together then motor vehicles used for hire or reward would not be covered under this proviso to Section 32 of the Act, and such motor vehicles would be covered under entry (2)(ii) of Item-3 of Part-A of Appendix-I to Rule 5 of the Rules. This conclusion further leads to an interference that the Legislature has given benefit of higher depreciation to the assessees not engaged in the business of Motor Buses, Motor Lorries and Motor Taxies on hire and defining such light motor vehicles as commercial vehicles though intentionally excluding vehicles commercially exploited for yielding income from the definition of commercial vehicle further supports the case of the assessee. We also find sufficient force in the contention of the assessee that different entries exist in Appendix-I for different categories of motor vehicles for providing depreciation at a specified rate depending upon the period of acquisition and the purpose for which they are deployed.
Therefore, nomenclature of commercial vehicle should not be so construed to deprive the assessee of higher depreciation when all the conditions specified in the Act and the Rules have been met by the assessee. We also hold that, till such car is used by the assessee for its business purpose the assessee would get the depreciation at the rate of 40 per cent as per the IIIrd proviso to Section 32 of the Act.
Thus, Ground Nos. 1 to 3 of the assessee stand accepted.
9. In the result, the appeal filed by the assessee stand partly allowed.
10. Now we shall take assessee's appeal in ITA No. 7307/M/03 for assessment year 2001-02.
11. The issue raised in all the grounds is identical to issue raised in Ground Nos. 1 to 3 of assessee's appeal for assessment year 1999-2000 except quantum, hence, there is no necessity to reproduce the facts and contentions here again. In view of our decision therein, all grounds of the assessee in this year are liable to be accepted. We order accordingly.
13. To sum up the assessee's appeal in ITA No. 4059/M/04 for the assessment year 1999-2000 is partly allowed and in ITA No. 7307/M/03 is allowed.