Commercial Vehicle Acquired b/w 01.01.2009 to 31.03.

2009 will be eligible to depreciation @ 50%

January 21, 2009 in Income Tax by admin INCOME-TAX (THIRD AMENDMENT) RULES, 2009 AMENDMENT IN NEW APPENDIX 1 NOTIFICATION NO. 10/2009, DATED 19-1-2009 In exercise of the powers conferred by section 295 of the Income-tax Act, 1961 (43 of 1961), the Central Board of Direct Taxes hereby makes the following rules further to amend the Income-tax Rules, 1962, namely: 1. (1) These rules may be called the Income-tax (Third Amendment) Rules, 2009 (2) They shall come into force on the 1st day of April, 2009. 2. In the Income-tax Rules, 1962, in the Table to New Appendix 1, in Part-A relating to TANGIBLE ASSETS, under the heading III. MACHINERY AND PLANT, in item (3), after sub-item (vi) and entries relating thereto, the following shall be inserted, namely: (via) New commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of April, 2009 and is put to use before the 1st day of April, 2009 for the purposes of business or profession [See paragraph 6 of the Notes below this Table] 50. Income Tax 50% Depreciation for New Motor Vehicles
The

CBDT has amended the Table to the New Appendix-I prescribing the Rates at which depreciation is admissible. Now new commercial vehicle which is acquired on or after the 1st day of January, 2009 but before the 1st day of April, 2009 and is put to use before the 1st day of April, 2009 for the purposes of business or profession , will get 50% depreciation.

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 expressions 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 assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988). And the Motor Vehicles Act defines these as,

heavy goods vehicle means any goods carriage the gross vehicle weight of which, or a tractor or a road roller the unladen weight of either of which, exceeds 12,000 kilograms; heavy passenger motor vehicle means any public service vehicle or private service vehicle or educational institution bus or omnibus the gross vehicle weight of any of which, or a motor car the unladen weight of which, exceeds 12,000 kilograms; 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 6,000 kilograms; medium goods vehicle means any goods carriage other than a light motor vehicle or a heavy goods vehicle; medium passenger motor vehicle means any public service vehicle or private service vehicle, or educational institution bus other than a motor cycle, invalid carriage, light motor vehicle or heavy passenger motor vehicle; maxicab means any motor vehicle constructed or adapted to carry more than six passengers, but not more than twelve passengers, excluding the driver, for hire or reward; motorcab means any motor vehicle constructed or adapted to carry not more than six passengers excluding the driving for hire or reward;

tractor means a motor vehicle which is not itself constructed to carry any load (other than equipment used for the purpose of propulsion); but excludes a road roller; And the Act does not define Road-roller.

FURTHER CLARIFICATION ON ABOVE There has been an increase in depreciation for commercial vehicles from 40 per cent to 50 per cent. Such depreciation is available both for business and profession. Would it mean that the assessees engaged in professions such as law, medicine and audit would be eligible for 50 per cent deduction for depreciation for cars used for profession? Commercial vehicle should ordinarily mean any vehicle used for the purpose of commerce which will include profession. But commercial vehicle is understood in the Notes to the Depreciation Schedule as under: 6. 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 expressions 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 assigned to them in Sec. 2 of the Motor Vehicles Act, 1988 (59 of 1988). The above definition would include light vehicles as well. In fact, passenger cars used by the tourism industry should qualify as commercial vehicles, when they are licensed as public transport. Notwithstanding such persuasive arguments, one has to bear in mind the classification in the Appendix prescribed under Rule 5 in pursuance of Sec. 32(1) for purposes of understanding the entry. Entries under Item III of Part A of the Appendix are relevant in this context. Entry 2 for which the prescribed rate is 15 per cent reads as under: (2) 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. Entry 3(ii) for which the prescribed rate of depreciation is 30 per cent reads as under: (ii) Motor buses, motor lorries and motor taxis used in a business of running them on hire. It may, therefore, be seen that motor cars qualify for depreciation at 20 per cent unless run on hire to merit depreciation at 30 per cent. Entry 3(via) as now inserted by the Income-tax (Third Amendment) Rules, 2009, reads: (via)New commercial vehicle which is acquired on or after January 1, 2009, but before April 1, 2009, and is put to use before April 1, 2009, for purposes of business or profession, [See paragraph 6 of the Notes below this Table].

In the light of the definition of commercial vehicles reproduced earlier and reading the entries harmoniously, it would mean that commercial vehicles referred are other than cars falling under Entry 2 and 3(ii). The amendment to the rule is obviously intended to cover only trucks and other heavy vehicles, besides other commercial vehicles hitherto entitled to depreciation at 30 per cent. So Depreciation Rate will be as Follows for Commercial Vehicles Product Depreciation rate Depreciation rate Depreciation rate(if purchased on or after 1st Jan 09 to 31st March 09)

(if purchased on (if purchased or before 30th after 30th September 2008) September up to 31st December 2008)

Commercial Vehicle

30%

50% of 30%

50%

Note : the above date been further extended to 30Th September 2009. please check our article on the same at the link given below:Date of Purchase for higher rate of depreciation on Purchase of Commercial Vehicle extended to 30th September 2009

Tags: clarification, Deduction, Depreciation, Depreciation on Commercial Vehicle, income tax act 1961, income tax rules, light motor vehicle, medium passenger, passenger motor vehicle, profession, tax 56 Comments

56 Responses to Commercial Vehicle Acquired b/w 01.01.2009 to 31.03.2009 will be eligible to depreciation @ 50%
Older Comments 1. Aditya says: December 10, 2009 at 4:39 pm I am a Consultant to an MNC and planning to buy a Honda City for my work use. what kind of depreciation could I be eligible to if I buy the car between 01-012010 to 31-03-2010 and what would be the depreciation after that.. Pls help

2.

admin says: December 11, 2009 at 12:11 am Normal rate of 15%

3.

Samyak Modi says: March 19, 2010 at 7:30 am If I purchase a car today i.e. 19th March 2010, for my professional use and register it under the commercial vehicle segment, am I still eligible to claim the 50% depreciation on the car for this financial year??

4.

D.A PILLAI says: April 16, 2010 at 12:10 pm I would like to know the rate of depriciation on road roller

5.

gaurav says: August 11, 2010 at 6:37 pm I would like to know if the car is registered on personal name of Director, IT allows depreciation to be claimed by company. Will interest on Loan be allowed as deduction to company if the loan is in name of company?

6.

Hitesh Alwani says: September 24, 2010 at 3:53 pm To Mr.Pillai It will be considered as commercial vehicle so it will be charged as per issued rate by I.T dept. for the block of commercial vehicle as well as benefit of 50% is not eligible as per given clarification above. To Mr.Gaurav Yes for both and please read further I.T act for confirmation.