It would seem so.
Under section 32 of the Act, depreciation is available in respect of a motor car owned by the assessee and used for the purpose of a business or profession at such percentage as may beprescribed.
Under the second proviso to section 31(1)(ii), where an asset is put to use for less than 180 days in a previous year, then the depreciation in respect of that asset is restricted to 50 per cent of the amount calculated at the percentage prescribed for the asset.
Under the third proviso to section 32(1)(ii), depreciation is allowed in respect of commercial vehicles (defined in the explanation to the proviso - this includes motor cars as will be seen later) acquired between October 1, 1998 and March 31, 1999 at the prescribed percentage without restricting the depreciation to 50 per cent thereof as required by the second proviso referred to earlier.
The rates of depreciation are prescribed by rule 5 of the Income-tax Rules, 1962 (the Rules) read with Appendix - I thereto.
What is pertinent to note is that item III of Appendix-I deals with rates of depreciation for machinery and plant. Under sub- item (1A) of item III, motor cars, other than those used in a business of running them on hire, acquired or put to use on or after April 1, 1990 are eligible for depreciation at the rate of 20 per cent. It is pertinent to note that under sub-item (2), there are several clauses and two such clauses are (iib) and (iic).
Under clause (iib) a higher rate of 40 per cent depreciation is available for a new commercial vehicle acquired between October 1, 1998 and March 31, 1999, in replacement of a condemned vehicle over 15 years of age, and put to use before April 1, 1999 for the purpose of business or profession in accordance with the third proviso to section 32(1)(ii). Thus merely because the vehicle was used for less than 180 days would not restrict the depreciation to 50 per cent thereon, as that is what the concerned third proviso speaks of.
Similarly sub-item (iic) provides for an accelerated rate of depreciation of 60 per cent for a new commercial vehicle which is acquired between April 1, 1999 and March 31, 2000, in replacement of a condemned vehicle of over 15 years of age, which is put to use before April 1, 2000 for the purpose of business or profession in accordance with the second proviso to section 32(1)(ii).
In such cases, the depreciation will be reduced by 50 per cent of the amount if it is used for less than 180 days as that is what the concerned second proviso speaks of. In both these clauses, ie, clauses (iib) and (iic), attention is invited to note 3A below the table. Therefore note 3A, which I will advert to later, forms an integral part of the Rules.
Now, by the Income-tax (Sixth Amendment) Rules, 2001, a new clause (iid) has been inserted in sub-item (2) to item II in Appendix-1 to the Rules. As per this new clause, a new commercial vehicle which is acquired on or after April 1, 2001 and before April 1, 2002 and is put to use before April 1, 2002 for the purposes of the business or profession would be eligible for depreciation at the rate of 50 per cent.
As in the case of clauses (iib) and (iic), here too, in clause (iid) as notified, there is a pointer to note 3A below the table. However, unlike clauses (iib) and (iic), the new commercial vehicle acquired between April 1, 2001 and March 31, 2002 need not be in replacement of a condemned vehicle of over 15 years of age. In that sense, all new commercial vehicles acquired within these two dates would be eligible for the higher rate of depreciation.
Now, let us see what is the meaning of the term "commercial vehicle". Note 3A, which defines the term, reads as under:
"Commercial vehicle, means heavy goods vehicle, heavy passenger motor vehicle, light motor vehicle, medium goods vehicle and medium passenger motor vehicle but does not include maxi-cab, motor-cab, tractor and road-roller. The expression heavy goods vehicle, heavy passenger motor vehicle, light motor vehicle, medium goods vehicle, medium passenger motor vehicle, maxi-cab, motor-cab, tractor and road-roller shall have the meanings respectively as assigned to them in section 2 of the Motor Vehicles Act, 1988."
Since no further limitation has been placed on the term commercial vehicle all the vehicles mentioned would fall within the term if they are used for the purpose of the business or profession.
Under clause (21) of section 2 of the Motor Vehicles Act, 1988, the term light motor vehicle means a transport vehicle or omnibus the gross vehicle weight of either of which, or a motor car or tractor or road-roller the unladen weight of any of which, does not exceed 7500 kilograms.
Usually motor cars have a weight of less than 1000 kilograms and certainly far less than the statutory limit of 7500 kilograms as per the Motor Vehicles Act. It would, therefore, seem that new cars which are acquired and put to use between April 1, 2001 and March 31, 2002 would be entitled to the accelerated rate of 50 per cent depreciation. And once this rate of 50 per cent is fixed, it would remain so for all the years that the vehicle is used by the first owner as it would fall in a separate block of assets comprising plant where the rate of depreciation is 50 per cent. Therefore this rate is not restricted to one year only.
Courts have consistently held that a special provision in a statute or in rules would override a general provision. Here there is a specific provision which has been brought in for new commercial vehicles acquired between certain dates. These clauses (iib), (iic) and (iid) of sub-item (2) are specific provisions and would override the general provision of sub-item (1A) which provides for a general rate of depreciation in respect of motor cars.
But there is an anomaly in the rules. Under clause (ii) of sub-item (2) of the rules, motor buses, motor lorries and motor taxies used in a business of running them on hire are entitled to depreciation at a rate of only 40 per cent. Though this rate is applicable even to old vehicles which are used for running on hire, it would seem strange that specified new motor cars which are not used for running on hire would be entitled to the higher rate of 50 per cent. Perhaps the intention of the rule makers is to promote the sale of new vehicles and, hence, the accelerated depreciation to all new vehicles acquired and put to use between April 1, 2001 and March 31, 2002.
The rule making authority should step in and clarify the issue in case they are of the opinion that not all new vehicles purchsed between April 1, 2001 and March 31, 2002 will be entitled to the benefit of the accelerated rate of 50 per cent prescribed by clause (iid) of sub-item (2) of item III of Appendix I to the Rules.