QUESTIONS & ANSWERS
Higher depreciation for motor cars — whether permissible?
Your answer in The Hindu dated February 23, 2009, states that motor cars purchased and put to use between January 1, 2009 and March 31, 2009, would not qualify for higher rate of depreciation at 50 per cent. Your reference is invited regarding your article in The Hindu dated September 16, 2002, on a similar entry regarding higher depreciation on motor cars in which you have stated that the intention of the said higher depreciation appears to allow higher depreciation even for passenger vehicles, if unladen weights less than 7,500 kg as long as it is used either for business or profession.
While inserting the new entry in Appendix 1 in the Income-tax Rules, it is given at the end “See paragraph 6 of the Notes below this table” wherein meaning of commercial vehicle is given which includes light motor vehicle.
In the case of Daleep S. Chandnani v ACIT, the ITAT Mumbai D Bench has held that “different entries exist in Appendix 1 for different categories of motor vehicle for providing depreciation at specified rate depending on 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 had been met by the assessee. Till such car was used by the assessee for its business purpose, the assessee would get the depreciation at the rate of 40 per cent as per the third proviso to Sec. 32 (Para 8).”
Also enclosed herewith, please find the opinion given on the subject by Dr. Vinod K. Singhania.
Even if it is felt that the rate of higher depreciation is under different entry in Appendix 1, we are unable to understand why higher rate of depreciation at 50 per cent could not be claimed on motor cars which fall under light motor vehicle.
The above letter from K. Ramasamy, Chartered Accountant, Tirunelveli, gives the other view based on the definition of commercial vehicle under Sec. 2 of the Motor Vehicles Act, 1988, which will include light motor vehicle. Similar view favourable to the taxpayer was given in these columns for a similar concession in The Hindu dated September 16, 2002, but such a view is not being accepted by the assessing officer as is evident from the citation given in the query in a case where the assessee had to go to the Tribunal.
This liberal view has no official acceptance. It is for this reason, the other view was indicated. It was also indicated that the more liberal view based on interpretation cited in the reader’s query would be risky, unless accepted by revenue. All the same, the reader’s interpretation is not necessarily wrong. Such ambiguities in law with revenue invariably taking a narrow view are littered in our law.
S. RAJARATNAM
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