Will a new motor car acquired and put to use between 1st April, 2001 and 31st March, 2002 be entitled to depreciation at the rate of 50 per cent as compared to 20 per cent which is otherwise available in respect of motor cars.
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