Per Shri R. L. Sangani, Judicial Member - In the accounting year relevant to the assessment year 1978-79, the assessee, Mr. J. D. Cooper, acquired two cars which had been manufactured outside India. He gave these two cars on hire to Brown & Root International Ltd., and received hire charges of Rs. 54,655.66. He offered this amount for taxation. Brown & root International Ltd. was a foreign company and was not maintaining a regular office in India. The said company had opened a temporary office in India in a hotel and that office was closed after the business activities of the said company were over. The said company was engaged in the business as engineers and constructors and the cars given by the assessee had been used by them for their business.
2. The assessee claimed depreciation of the value of these cars. The ITO disallowed the claim relying on the proviso to section 32(1) (ii) of the Income-tax Act, 1961 (the Act), which is as follows :
'Provided further that no deduction shall be allowed under this clause or clause (iii) in respect of any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975, and is used otherwise than in a business of running it on hire for tourists;'
3. The ITO observed that the assessee had claimed that these cars had been used as tourist taxies by the assessee in the relevant accounting year, but the assessee had not produced any proof to show that they had been used as tourist taxies and not for any other purpose. Consequently, in view of the said proviso, no depreciation was admissible.
4. The Commissioner (Appeals) observed that the learned representative for the learned representative for the assessee had expressly admitted before him that the cars in question had not been registered as tourist cars with the Regional Transport Authority and, as such, there was a strong presumption that the cars in question had not been used in a business of running them on hire for tourists. The assessee, according to him, had not produced any evidence to rebut the said presumption. In fact, the cars had been used by the foreign company for their business purposes. Consequently, it could not be said that they had been used in the business of running them on hire for tourists. He, accordingly, confirmed the order of the ITO on this point.
5. In this further appeal filed by the assessee the contention of Shri S. B. Desai, who appeared for the assessee before us, is that the fact that the cars in question had not been registered with the Regional Transport Authority as tourist taxies, might constitute an offence under the Motor Vehicles Act. However, that was only irrelevant when the cars had in fact been given to foreign company. According to him, the foreign company to whom the cars have been given should be deemed to be tourist.
Shri Anjani Kumar, the departmental representative, on the other hand, relied on the reasons given by the Commissioner (Appeals) and contended that the foreign company in question could not be deemed to be a tourist and, as such, no depreciation was allowable.
6. We have considered the rival submissions and facts on record. We have already extracted the relevant proviso to section 32(1) (ii). The claim for depreciation is liable to be disallowed under the said proviso if the car in question is used otherwise than in a business of running it on hire for tourists. Thus, for claiming depreciation, the assessee has to prove that the car in question had been used in a business of running it on hire for tourists. If the business is of running it on hire to persons other than tourists, the claim for depreciation would not be allowable. In the present case, the cars have been given on hire not to any particular tourists but to a foreign company. The said foreign company had established its office in India for business as tourists. They had come to India to carry on the business. Thus, the cars in question had been given to a foreign company for its business purposes. In the circumstances, it cannot be said that the cars in question had been used in a business of running them on hire for tourists. In fact, if the cars had to be used for giving on hire to tourists, the assessee would not have failed to get them registered with the Regional Transport Authority as tourist cars. The very fact that the cars had not been registered as tourist cars gives rise to the presumption that they had not been used in a business of running them on hire for tourists.
7. It is true that the Act does not require that the car in question should be registered as tourist car before depreciation could be claimed. However, when the question whether the car was in fact used in a business of running it on hire for tourists; is to be determined all the surrounding circumstances are required to be considered and the fact that the car was not registered at tourist car would be an important circumstance to determine the aforesaid question of fact. As already stated, the cars in question in the present case, have been given to a foreign business concern, to be used for business. In the circumstances, the lower authorities were justified in rejecting the claim for depreciation.
8. In the result, the appeal fails and is dismissed.