Law: Income Tax Act, 1961

Section: 66(2)

Section 32, read with section 253 of the Income-tax Act, 1961 [Corresponding to section 10(2)(vi), read with section 33, of the Indian Income-tax Act, 1922] - Depreciation - Allowance of - Assessment year 1953-54 - Assessee claimed depreciation on entire purchase price of old buses plying on a particular route - Whether buses had little value shorn of their permits to ply on particular routes and therefore, taking judicial notice of fact that on transfer of a bus with permit a fair portion of consideration would represent value attributable to pecuniary gain derived by operating on route, it could not be said that department went wrong in allowing depreciation only on amount as representing value of vehicles after deducting amount representing 'route value' from total consideration - Held, yes FACTS The assessee was a transport operator owning a fleet of buses. During the year ended 31-3-1953, relevant to the assessment year 1953-54, he purchased 10 buses plying on a specified route from certain person for a consideration of Rs. 1,25,000. He claimed depreciation in respect of these buses on the purchase amount which according to him represented his original cost of acquisition of the vehicles. The ITO was of opinion that the buses being all of old models the said sum could not represent the value of the vehicles alone, but that some part of that amount must represent the value of plying the buses on the route in respect of which they had permits. He estimated the 'route value' at Rs. 40,000 and the 'Vehicle value' at Rs. 85,000. Depreciation was accordingly granted on the sum of Rs. 85,000. The AAC dismissed the appeal. On second appeal, the Tribunal initially estimated the route value at Rs. 60,000 but on the assessee's application under section 35, restored the 'route value' at Rs. 40,000 as held by ITO. The Tribunal thus, dismissed assessee's original appeal. On reference : HELD Neither the provisions of the Motor Vehicles Act nor the rules framed thereunder actually prohibit the receipt of consideration for a transfer of permit. It may be that the competent authorities under the Motor Vehicles Act may not allow a permit to be transferred for value lest it…

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