652 : Circular No. 652, dated 14-06-1993

243. Whether, for deriving benefit of higher depreciation, motor lorries must be hired out to some other person or whether user of same in assessee’s business of transportation of goods on hire would suffice

1. Under sub-item 2(ii ) of Item-III of Appendix I to the Income-tax Rules, 1962, higher rate of depreciation is admissible on motor buses, motor lorries and motor taxis used in a business of running them on hire.  A question has been raised as to whether, for deriving the benefit of higher depreciation, motor lorries must be hired out to some other person or whether the user of the same in the assessee’s business of transportation of goods on hire would suffice.

2. In Board’s Circular No. 609, dated 29-7-1991 (Sl. No. 244 ) it was clarified that where a tour operator or travel agent uses motor buses or motor taxis owned by him in providing transportation services to tourists, higher rate of depreciation would be allowed on such vehicles.  It is further clarified that higher depreciation will also be admissible on motor lorries used in the assessee’s business of transportation of goods on hire.  The higher rate of depreciation, however, will not apply if the motor buses, motor lorries, etc., are used in some other non-hiring business of the assessee.

Circular : No. 652, dated 14-6-1993.