SRINIVASAN J. - The question that have been referred to us are :
'(1) Whether, on the facts and circumstances of the case, the Tribunal acted rightly in rejecting the assessees claim for development rebate on the new cars and lorries ?
(2) Whether the Tribunals decision allowing depreciation at the rate of 20 per cent. is correct in law ?'
The assessee firm, besides dealing in electrical goods, acts as agents for distribution of Burmah-Shell products. It also maintains a fleet of cars and lorries which it hires out, solely we are informed, for the use of officials of the Burmah-Shell Co. The hire receipts from these vehicles have been 1954-55 onwards. During the calendar years 1956 and 1957, relevant to the assessment year 1957-58 and 1958-59, respectively, the assessee purchased and used for this part of its business new cars and lorries. Development rebate under section 10(2) (vi) of the Act was claimed. In addition thereto, depreciation at the rate of 25 per cent. under the Income-tax Rules was also claimed. The Income-tax Officer denied the development rebate, merely stating, 'Obviously development rebate cannot be granted on this.' In so far as the depreciation was concerned, he granted 20 per cent. instead of 25 per cent. The appeal to the Assistant Commissioner failed, that officer holding that the purchase of new cars and hiring them out to other persons does not amount to installing of plant or machinery. He further held that the depreciation allowance of 25 per cent. was allowed only in respect of motor taxis and not in respect of cars. On further appeal to the Tribunal, apparently, a new contention was put forward by the department. That was that the income from the hiring of cars was not income which fell for computation under section 10 of the Act but under section 12. Section 12 being self-contained in so far as any allowances were permitted in the view of the Tribunal, the claim of the assessee to development rebate, which was not one of the items covered by section 12, could not be granted to it. The Tribunal also rejected the appeal in so far as the quantum of depreciation was claimed.
It is in these circumstances that the matter stands referred for the determination of this court.
It seems to us that the question has been approached by the Tribunal from a point of view that finds no justification on the facts. There is no doubt whatsoever that a part of the business of the assessee consisted in his hiring out cars to the Burmah-Shell Co. It is only in a case where a part of the activity of the assessee yielding income does not come within the scope of any of the other heads set out in section 6 that the tax is payable by the assessee under the head of income from other sources under section 12. There is nothing which prevents the assessee from carrying on as a business the hiring out of vehicles. Merely for the reason that section 12(3) also envisages hiring out machinery and plant as a source of income, it does not follow that in every case where hiring of machinery and plant is concerned it should be taken for assessment under section 12. Section 12(1) itself under any of the preceding heads. It follows from the context of the provision that where an assessee carries on the business of hiring machinery, plant or furniture, the income therefrom is computable only under section 10. It is only in cases where such hiring is not the business or part of the business that it comes within the scope of section 12, as income from other sources.
The view of the Tribunal that since the case came under section 12(3) of the Act, the allowances in that regard were confined only to those provided in clauses (iv), (v), (vi) and (vii) of sub-section (2) of section 10 and that rebate under clauses (iv-b) of sub-section (2) of section 10 was not available would undoubtedly be correct if the question came to be considered only under section 12. The very fact that section 12(3) denies development rebate shows that the provision applies only in cases where the hiring out is otherwise than the provision applies only in case where the hiring out is otherwise than in the course of business.
It has been held by this court that even in cases-Commissioner of Income-tax v. Sri Rama Vilas Service - where replacement of engines of lorries used in the course of business is involved, it amounts to installation of new plant and machinery and that development rebate under clause (iv-b) sub-section (2) of section 10 is available. In so far as the business of hiring vehicle is concerned, the entire replacement of the vehicles themselves can stand on no inferior outing. It allows, therefore, that on the basis of the decision of this court referred to above, the assessee is entitled to development rebate. The first question is accordingly answered in the negative and in favour of the assessee.
It is not denied that in terms rule 8 applies to the present case. The relevant clauses thereof are (q) and (r) which specify the class of the asset and the rate at which the percentage of allowance is to be calculated. The entry (q) is 'motor-cars' and the entry (r) covers 'motor-taxis'. The rate of depreciation for motor-cars is 20 per cent while that or motor-taxis is 25 per cent. The claim of the assessee that the vehicles in question should be regarded as taxis eligible for 25 per cent. depreciation seems to us to be unacceptable. A taxi as ordinarily understood is a vehicle which is available for every hirer. But in a case where vehicles are hired out to a single customer and to no one else, that vehicle cannot be regarded as a taxi. It is also pointed out in the orders of the officers below that these vehicles are not registered as motor-taxis. There is a material distinction between the two items referred to. We are satisfied that the refusal of the larger amount of depreciation allowance is fully justified. The second question is answered against the assessee.
In the circumstances, there will be no order as to costs.
Questions answered accordingly.