Kerala High Court
Commissioner Of Income-Tax vs Dr. K.R. Jayachandran on 26 October, 1994
Author: Chief Justice
Bench: Chief Justice
JUDGMENT Sujata V. Manohar, C.J.
1. The assessee is running a private hospital at Cochin. For the assessment year 1984-85, the assessee filed a return of income which included income arising from the hire of an ambulance van. The assessee claimed depreciation at the rate of 40 per cent. on the ambulance van. This was allowed in the original assessment. The Commissioner of Income-tax, however, invoked the provisions of Section 263 and held that the correct rate of depreciation to be applied to the ambulance van was only 30 per cent. and accordingly set aside the order of the Assessing Officer and directed him to modify the depreciation allowance.
2. Being aggrieved by the order of the Commissioner of Income-tax, the assessee went in appeal before the Tribunal. The Tribunal held that the assessee is entitled to a higher rate of depreciation, namely, 40 per cent., and set aside the order of the Commissioner of Income-tax.
3. Being aggrieved by the order of the Tribunal, the Department filed a petition under Section 256(1) of the Income-tax Act, seeking reference of the following questions of law :
" 1. Whether, on the facts and in the circumstances of the case and on an interpretation of Sub-clause (1A) of Clause E of Part I to Appendix I to the Income-tax Rules, the assessee is entitled to higher rate of depreciation at the rate of 40 per cent. ?
2. Whether, on the facts and in the circumstances of the case, the Tribunal is right in law and fact in holding that 'in the case of the assessee' the 'condition' of 'used in business of running them on hire' is satisfied when the ambulance van is kept for the use on hire and so plied and is not the above findings, wrong, unreasonable since the plying of ambulance van on hire was incidental to the running of the hospital ?"
4. The Tribunal has dismissed the reference application. Hence, the present petition has been filed under Section 256(2) of the Income-tax Act.
5. Sub-clause (1A) of Clause E in item III in Part I of Appendix I to the Income-tax Rules, 1962, as in force at the relevant time, is as follows :
"Motor buses, motor lorries and motor taxis used in a business running them on hire"
depreciation at the rate of 40 per cent. should be allowed. It is the contention of the Department that since the business of the assessee was running a private hospital, the assessee should not be allowed depreciation at the rate of 40 per cent. on the ambulance van which was given out on hire by the assessee. The Tribunal has rejected the contention. It has held that the ambulance van is kept by the assessee for the purpose of being used on hire and it is so plied. The plying of the ambulance van on hire itself constitutes the business of the assessee though it may be incidental to the running of the hospital. It has also observed that one business can be advantageously combined with another business. In the case of the assessee, the hire charges received by the assessee from the hire of the ambulance van are also assessed under the head "Business". Hence, the assessee is entitled to depreciation at the rate of 40 per cent.
6. We do not see any reason to take a different view as we agree with the reasoning and conclusion of the Tribunal in this regard. Hence, the present petition is dismissed.