Section 44AE: Income computation as per ‘Gross Vehicle Weight’ or ‘Unladen Weight’?

CA Sharad Jain

Income Under Section 44AE-Whether To Be Computed As Per “Gross Vehicle Weight” Or “Unladen Weight”

INTRODUCTION : Recently, the provisions of Section 44AE of the Income Tax Act have been amended w.e.f. 01.04.2019 (i.e., from Assessment Year 2019-20) by the Finance Act, 2018. According to the amendment, in respect of heavy goods vehicle, the minimum income per vehicle shall be deemed to be rupees one thousand per ton of “gross vehicle weight or unladen weight, as the case may be”, for every month or part thereof.

The words “as the case may be” indicates that there may be more than one type of cases (at least two types) where at least in one type of cases the “gross vehicle weight” will be applicable and in another type of cases the “unladen weight” will be applicable.

But nowhere, in the section 44AE it has been mentioned that in which type of cases gross vehicle weight will be applicable and in which type of cases unladen weight will be applicable. Further, in the Finance Bill / Memorandum explaining clauses thereof / through any circular etc. (till date), no clarification / guidance is available.

Therefore, in this article an attempt has been made to discuss the issue in view of the provisions of the Motor Vehicles Act, 1988 to the find out the probable cause of the above anomaly and to arrive at a logical view.

AMENDMENTS MADE TO SECTION 44AE : The relevant clause of Finance Bill making the above amendment is reproduced as under :

Amendment of section 44AE.

In section 44AE of the Income-tax Act, with effect from the 1st day of April, 2019,—

(a) for sub-section (2), the following sub-section shall be substituted, namely:—

“(2) For the purposes of sub-section (1), the profits and gains from each goods carriage,—

(i) being a heavy goods vehicle, shall be an amount equal to one thousand rupees per ton of gross vehicle weight or unladen weight, as the case may be, for every month or part of a month during which the heavy goods vehicle is owned by the assessee in the previous year or an amount claimed to have been actually earned from such vehicle, whichever is higher;

(ii) other than heavy goods vehicle, shall be an amount equal to seven thousand five hundred rupees for every month or part of a month during which the goods carriage is owned by the assessee in the previous year or an amount claimed to have been actually earned from such goods carriage, whichever is higher.”;

(b) in the Explanation, for clause (a), the following clauses shall be substituted, namely:—

(a) the expressions “goods carriage”, “gross vehicle weight” and “unladen weight” shall have the respective meanings assigned to them in section 2 of the Motor Vehicles Act, 1988 (59 of 1988);

(aa) the expression “heavy goods vehicle” means any goods carriage, the gross vehicle weight of which exceeds 12000 kilograms;’.

DEFINITIONS UNDER MOTOR VEHICLES ACT AS REFERRED IN THE SECTION 44AE AMENDMENT :

Since the provisions of section 44AE are closely related / substantially based on the definitions / concepts of Motor Vehicles Act, it will be most appropriate to refer to the definitions of various relevant terms as given in the Motor Vehicles Act, 1988 to logically fill up the gap (regarding applicability of “Gross Vehicle Weight” / “unladen weight”) in the above amendment to section 44AE.

The relevant definitions of various terms as given in Motor Vehicles Act are as under :

Goods Carriage :- “goods carriage” means any motor vehicle constructed or adapted for use solely for the carriage of goods, or any motor vehicle not so constructed or adopted when used for the carriage of goods (Section 2(14) of M.V. Act ).

Gross Vehicle Weight :- “gross vehicle weight” means in respect of any vehicle the total weight  of the  vehicle and load certified and registered by the registering authority as permissible for that vehicle (Section 2(15) of M.V. Act ).

Unladen Weight :- “unladen  weight” means  the weight  of a vehicle or trailer including all  equipment ordinarily  used with  the vehicle or trailer when working,  but excluding  the weight of a driver or attendant; and where alternative  parts or  bodies are used the unlade weight of the vehicle means  the weight  of  the  vehicle  with  the  heaviest  such alternative part or body (Section 2(48) of M.V. Act ).

Heavy Goods Vehicle :- “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 (Section 2(16) of M.V. Act ).

DEFINITION OF HEAVY GOODS VEHICLE IN SECTION 44AE :

The definition of “heavy goods vehicle” as given in section 44AE is as under :-

(aa) the expression “heavy goods vehicle” means any goods carriage, the gross vehicle weight of which exceeds 12000 kilograms;’.

DIFFERENCE BETWEEN DEFINITION OF HEAVY GOODS VEHICLE IN SECTION 44AE AND MOTOR VEHICLES ACT :

In Section 44AE, the definitions of “goods carriage”, “gross vehicle weight” and “unladen weight” have been adopted as they are existing in the Motor Vehicles Act.

But the definition of “heavy goods vehicle” as given in Motor Vehicles Act has not been adopted identically (as in the case of other definitions). The same has been adopted only in part. The words “or a tractor or a road-roller the unlad-en weight of either of which” in the definition of “Heavy Goods Vehicle” existing in the definition of have been omitted in Section 44AE.

CONCEPT OF UNLADEN WEIGHT :

In section 44AE, the concept of unladen weight has not been attached with any special type of vehicle.

But in the original definition of “heavy goods vehicle” as given in Motor Vehicles Act the concept of “unladen weight” has been attached with tractor and a road roller and  the concept of “gross vehicle weight” has been attached with goods carriages.

PROBABLE REASON BEHIND THE ANOMALY  :

According to the author, probably the above part adoption of definition of “heavy goods vehicle” in Section 44AE amendment may be the root cause of the anomaly i.e., “non clarity regarding when income under section 44AE is to be computed as per Gross Vehicle Weight and when as per Unladen Weight”.

In the amended definition in Section 44AE, the difference between the “tractor and road roller” and other goods carriages (as existing in the original definition in the Motor Vehicles Act) has been removed but the words “unladen weight” which are exclusively attached in the Motor Vehicles Act, with “tractor and road roller” have been taken in Section 44AE (that too without specifically mentioning any specific purpose behind that).

This situation gives rise to the question that whether the words “unladen weight” have got inserted in Section 44AE amendment as a result of any mistake / error.

In these circumstances, it appears to the author that probably it might had happened that when originally the amendment of Section 44AE was drafted, the definition of “heavy goods vehicle” might had been taken as it is given in the Motor Vehicles Act and accordingly the rates of income might had also been drafted i.e., as per gross vehicle weight in case of goods carriages and as per unladen weight in case of tractor, road roller etc.

But later on, the definition of “heavy goods vehicle” might had been taken differently but the drafted provisions regarding the rates might had remained to be changed accordingly.

CONCLUSION  :

In this situation, the CBDT is required to make appropriate clarification. However, in the meantime, it can be logically concluded (on the basis of the provisions of Motor Vehicles Act), that the words “unladen weight” may not have any relevance in the present scenario and the income under Section 44AE may have to be computed at the rate of rupees one thousand per ton of “gross vehicle weight” only for every month or part thereof in respect of all the heavy goods vehicles without any differentiation between them.

AN ANOTHER LOGICAL TEST :

The above conclusion can also be examined from another approach. The income in respect of goods carriges other than heavy goods vehicle (i.e., having weight of 12 MT or less) is to be computed at the rate of Rs. 7,500/- per month. Here the rate per MT arrives at Rs. 625/- per MT of Gross Vehicle Weight. Looking to that the rate of Rs. 1,000/- per MT in respect of heavy goods vehicles (i.e., having gross vehicle weight over 12 MT) may not appear to be grossly illogical.

Disclaimer: The information contained in the above article are solely for informational purpose after exercising due care. However, it does not constitute professional advice or a formal recommendation. The author do not owns any responsibility for any loss or damage caused to any person, directly or indirectly, for any action taken on the basis of the above article.