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Depreciation @50% on maruti Car

CA.Mkhandelwal (Practice) (156 Points)

20 February 2009

Whether depreciation of 50% for commercial vehicles purchased on or between January-March 2009 also includes maruti car used in the business.

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12 Replies

jitendra goswami (accountant) (76 Points)
Replied 20 February 2009

plz clarify that you want dep. as per i.t. or companies act

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jitendra goswami (accountant) (76 Points)
Replied 20 February 2009

1. as i.t.act provide the depreciation on moter buses, motor lorries and motor taxis used in a business of running them on is upto a.y. 2005-06 is 40% and a.y.2006-07 onwards is 30%.

2. As per companies act. 1956 provides the 40% (WDV) and 16.21% (SLM) on the sama.

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 20 February 2009

Are you taking about recent amendment in New Appendix-I vide Notification No.120/2009 dt.19-01-2009, whereby new entry is added namely (via) in heading III- MACHINARY AND PLANT in item (3) stating that “New Commercial vehicle which is acquired after 01-01-2009 but before 01-04-2009 and is put to use before 01-04-2009 for the purposes of business or profession, Rate of Depreciation is 50%.’? The said entry is for Commercial Vehicle means Heavy goods vehicles and not for Motor Car. Motor car is covered in item No. (2) in heading III. Hence, Normal Rate of depreciation on Motor Car is 15% only and if it is put to use for less than 180 days, it is 7.50%

CA.Mkhandelwal (Practice) (156 Points)
Replied 20 February 2009

Originally posted by :CA. ASHOK SHAH

Please go through this which I abstracted from the "taxguru" & it seems that as per this 50% dep. can be taken on car also which I have doubt pls clarify.

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.

Any way for you to get a 50 % depreciation, all you have to do is buy that car and drive it before 1 st April 2009.

This may be a stimulus for the motor vehicle sector.

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Are you taking about recent amendment in New Appendix-I vide Notification No.120/2009 dt.19-01-2009, whereby new entry is added namely (via) in heading III- MACHINARY AND PLANT in item (3) stating that “New Commercial vehicle which is acquired after 01-01-2009 but before 01-04-2009 and is put to use before 01-04-2009 for the purposes of business or profession, Rate of Depreciation is 50%.’? The said entry is for Commercial Vehicle means Heavy goods vehicles and not for Motor Car. Motor car is covered in item No. (2) in heading III. Hence, Normal Rate of depreciation on Motor Car is 15% only and if it is put to use for less than 180 days, it is 7.50%

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 20 February 2009

Sorry, I do not agree that you will get depreciation on Maruti Car @ 50% due to amendment in New Appendix-I vide Notification No.120/2009 dt.19-01-2009, whereby new entry is added namely (via) in heading III- MACHINARY AND PLANT in item (3) stating that “New Commercial vehicle which is acquired after 01-01-2009 but before 01-04-2009 and is put to use before 01-04-2009 for the purposes of business or profession, Rate of Depreciation is 50%.’ The reason is as I have ready stated that the said entry is for Commercial Vehicle which means Heavy goods vehicles and not for Motor Car. Motor car is covered in item No. (2) in heading III. Hence, Normal Rate of depreciation on Motor Car is 15% only and if it is put to use for less than 180 days, it is 7.50%

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Abhinav Agarwal (M.Com C.A SAP Consultant) (814 Points)
Replied 20 February 2009

I think CAR used as taxi should also be called as Commercial vehicle. The basic funda of dep is the wear & tear. For commercial vehicle dep rate is higher as they are to be used extensively than a private vehicle. This is general logic. So if it is put to use before 1.4.2009, it is eligible for 50% dep.

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 20 February 2009

Mr. Abhinav, here we are discussing depreciation on motor car used for the purpose of business other than those used in a business of running them on hire. Please refer Schedule of Rate of Depreciation. Motor car is separately covered in entry no. 2 of heading III . Commercial vehicle is covered in entry no.3 of heading III. Commercial vehicle is defined in the said schedule.

CA.Mkhandelwal (Practice) (156 Points)
Replied 20 February 2009

Thanks for the reply.

I agree with you that we are discussing here only about motor car used in the business. But my point is that when by inserting a seperate entry via by notification then one can claim the depreciation as per that inserted enrty on all the items falling under that inserted entry it is irrelevent that, that item is already having a seperate entry under clause 2 or any other clause i.e. 3(ii). My main doubt is the defination of commercial vehicle which is again reproduce here:-

“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”.

in the aforesaid defination where is the motor car it is neither in inclusion list nor in exclusion list.

As per motor vehicle act "motor car" means any motor vehicle other than a transport vehicle, omnibus, road-roller, tractor, motor cycle or invalid carriage;"

CA. Ashok shah (CHARTERED ACCOUNTANT) (333 Points)
Replied 21 February 2009

The Motor Car used for the purpose of our own business is a private car and not a commercial vehicle. Hence, it is covered in Entry 2 (separate entry) and not in Entry 3 of heading III which is for commercial vehicles only.

CA Sakshi (CA Practice) (309 Points)
Replied 21 February 2009

I agree with Mr. Ashok Shah.

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CA.Mkhandelwal (Practice) (156 Points)
Replied 03 March 2009

I am attaching herewith a case law relating to claim of higher depreciation on motor car and treating the motor car as commercial vehicle, go through the same and share your views now.

Attached File : 58 higher depreciation commercial vehicle tax cases.pdf downloaded: 312 times

CA Tarun Goyal (Article Assistant) (22 Points)
Replied 17 August 2009

Hii CA mkhandelwal, I want your final conclusion which you arrived after this case law which yu hav attached. I also have the same query like you! Watz the solution to this.

Please Revert Back.

Waiting for reply.