My client is assessed under s.44AE on his own trucks, but he also hired trucks from the market. The officer has disallowed all the running expenses. Is that right?
No. Section 44AE applies to an assessee who owns not more than ten goods carriages and deems the income from all the goods carriages owned by him; receipts relating to owned goods carriages are subject to the section, but vehicles taken on hire are outside it. The Delhi Bench directed the Assessing Officer to allow the deduction of expenditure relating to goods carriages not owned by the assessee but taken on hire from the open market for carrying out the transportation activities.
Decided by the ITAT (Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, Delhi 'SMC' Bench, New Delhi)) on 2022-10-12, reported as ITA No. 1715/Del/2015, Assessment Year 2008-09. It bears on section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b) of the Income Tax Act 1961, in Presumptive Taxation & Audit, Deductions & Disallowances and Assessment & Scrutiny matters.
The presumptive bar in s.44AE(3) — no further deduction under ss.30 to 38 — operates only on the income computed under sub-section (1), and sub-section (1) is confined to owned vehicles. A transporter who runs a mixed fleet therefore has two computations, not one: the deemed figure on the owned vehicles, and ordinary computation on the hired-in operations, with the expenditure on those operations deductible. The officer's instinct to treat the whole business as absorbed by s.44AE is what this order corrects, and the CIT(A) had gone further and questioned whether the section could be applied for part of a year at all. Two limits are worth stating with the point. Ownership for s.44AE includes possession under hire purchase or on instalments where amounts remain due, by Explanation (b), so a financed truck is an owned truck; and the ten-vehicle ceiling is tested 'at any time during the previous year', so hiring in does not itself breach the ceiling but acquiring an eleventh owned vehicle does. Note also that s.44AE, unlike s.44AD, has kept the proviso allowing a firm to deduct partners' salary and interest within the s.40(b) limits.
Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere.
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The assessee carried on a goods transport business, operating both goods carriages he owned and goods carriages taken on hire from the open market, for part of the year in issue (the period from 1 May to 15 November 2007 features in the disallowances). Disallowances of about Rs 5,23,960 were made covering truck maintenance expenses, driver and conductor salaries, labour charges and truck hire costs. The CIT(A) took the view that the assessee could not compute income under s.44AE for part of the year only, and confirmed the disallowances. The assessee raised six grounds; grounds 2 to 5 concerned the disallowances, ground 1 was general and ground 6 concerned interest.
The appeal was partly allowed. There was no dispute that the assessee satisfied the two conditions in s.44AE(1) — he owned not more than ten goods carriages at any time during the previous year and was engaged in the business of plying, hiring or leasing such goods carriages — so the receipts relating to the goods carriages owned by him were subject to s.44AE. But the assessee had also taken goods carriages on hire which he did not own, and the expenses relating to those were disallowed by the lower authorities without the CIT(A) appreciating the distinction. The Assessing Officer was directed to give the deduction of expenditure relating to the goods carriages not owned by the assessee but taken on hire from the open market for carrying out the transportation activities, and grounds 2 to 5 were allowed; grounds 1 and 6 were dismissed as general and consequential (paragraphs 11 to 13).
The Bench set out s.44AE in full at paragraph 9 and then, at paragraph 10, distilled the section into the two conditions on which it operates: an assessee who owns not more than ten goods carriages at any time during the previous year, and who is engaged in the business of plying, hiring or leasing such goods carriages. At paragraph 11 it applied those conditions, holding that the assessee satisfied both, so that the receipts related to the goods carriages he owned would be subject to s.44AE; and that because the assessee had in addition taken certain goods carriages on hire which were not owned by him, and had claimed expenses related to those carriages which the lower authorities had disallowed, the CIT(A) had failed to appreciate that aspect. It therefore directed the Assessing Officer to allow the expenditure relating to the hired-in vehicles.
Therefore, the AO is directed to give deduction of expenditure which related to the goods carriages which were not owned by the assessee but taken on hire from the open market for carrying out the transportation activities.
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Handle my notice → Ask a CA on WhatsAppNo. Section 44AE applies to an assessee who owns not more than ten goods carriages and deems the income from all the goods carriages owned by him; receipts relating to owned goods carriages are subject to the section, but vehicles taken on hire are outside it. The Delhi Bench directed the Assessing Officer to allow the deduction of expenditure relating to goods carriages not owned by the assessee but taken on hire from the open market for carrying out the transportation activities. This was decided by the ITAT (Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, Delhi 'SMC' Bench, New Delhi)) and bears on section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b) of the Income Tax Act 1961. It is reported as ITA No. 1715/Del/2015, Assessment Year 2008-09. The presumptive bar in s.44AE(3) — no further deduction under ss.30 to 38 — operates only on the income computed under sub-section (1), and sub-section (1) is confined to owned vehicles. A transporter who runs a mixed fleet therefore has two computations, not one: the deemed figure on the owned vehicles, and ordinary computation on the hired-in operations, with the expenditure on those operations deductible. The officer's instinct to treat the whole business as absorbed by s.44AE is what this order corrects, and the CIT(A) had gone further and questioned whether the section could be applied for part of a year at all. Two limits are worth stating with the point. Ownership for s.44AE includes possession under hire purchase or on instalments where amounts remain due, by Explanation (b), so a financed truck is an owned truck; and the ten-vehicle ceiling is tested 'at any time during the previous year', so hiring in does not itself breach the ceiling but acquiring an eleventh owned vehicle does. Note also that s.44AE, unlike s.44AD, has kept the proviso allowing a firm to deduct partners' salary and interest within the s.40(b) limits. If it applies to you, the first step is this: Separate the fleet in the computation: owned goods carriages into the s.44AE deeming, hired-in vehicles into an ordinary profit-and-loss computation with their own receipts and their own expenditure.
The assessee carried on a goods transport business, operating both goods carriages he owned and goods carriages taken on hire from the open market, for part of the year in issue (the period from 1 May to 15 November 2007 features in the disallowances). Disallowances of about Rs 5,23,960 were made covering truck maintenance expenses, driver and conductor salaries, labour charges and truck hire costs. The CIT(A) took the view that the assessee could not compute income under s.44AE for part of the year only, and confirmed the disallowances. The assessee raised six grounds; grounds 2 to 5 concerned the disallowances, ground 1 was general and ground 6 concerned interest. The matter was decided on 2022-10-12 by the ITAT (Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, Delhi 'SMC' Bench, New Delhi)). On those facts the ITAT held as follows. The appeal was partly allowed. There was no dispute that the assessee satisfied the two conditions in s.44AE(1) — he owned not more than ten goods carriages at any time during the previous year and was engaged in the business of plying, hiring or leasing such goods carriages — so the receipts relating to the goods carriages owned by him were subject to s.44AE. But the assessee had also taken goods carriages on hire which he did not own, and the expenses relating to those were disallowed by the lower authorities without the CIT(A) appreciating the distinction. The Assessing Officer was directed to give the deduction of expenditure relating to the goods carriages not owned by the assessee but taken on hire from the open market for carrying out the transportation activities, and grounds 2 to 5 were allowed; grounds 1 and 6 were dismissed as general and consequential (paragraphs 11 to 13).
The Bench set out s.44AE in full at paragraph 9 and then, at paragraph 10, distilled the section into the two conditions on which it operates: an assessee who owns not more than ten goods carriages at any time during the previous year, and who is engaged in the business of plying, hiring or leasing such goods carriages. At paragraph 11 it applied those conditions, holding that the assessee satisfied both, so that the receipts related to the goods carriages he owned would be subject to s.44AE; and that because the assessee had in addition taken certain goods carriages on hire which were not owned by him, and had claimed expenses related to those carriages which the lower authorities had disallowed, the CIT(A) had failed to appreciate that aspect. It therefore directed the Assessing Officer to allow the expenditure relating to the hired-in vehicles. In the words reproduced by the source cited on this page: "Therefore, the AO is directed to give deduction of expenditure which related to the goods carriages which were not owned by the assessee but taken on hire from the open market for carrying out the transportation activities."
It was decided by the ITAT on 2022-10-12 and is reported as ITA No. 1715/Del/2015, Assessment Year 2008-09. Binding on the AO and CIT(A) within the Tribunal's jurisdiction. Persuasive elsewhere. A Tribunal decision binds the assessing officer and the Commissioner (Appeals) within that Tribunal's jurisdiction, and is persuasive before other benches. It is not binding on a High Court, and a contrary co-ordinate bench decision will be argued against you, so check whether the point has been taken the other way before you build a reply around it. On section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b), the practical question is whether the facts of your own notice match the facts of this case closely enough for the same rule to apply.
It helps the taxpayer. The appeal was partly allowed. There was no dispute that the assessee satisfied the two conditions in s.44AE(1) — he owned not more than ten goods carriages at any time during the previous year and was engaged in the business of plying, hiring or leasing such goods carriages — so the receipts relating to the goods carriages owned by him were subject to s.44AE. But the assessee had also taken goods carriages on hire which he did not own, and the expenses relating to those were disallowed by the lower authorities without the CIT(A) appreciating the distinction. The Assessing Officer was directed to give the deduction of expenditure relating to the goods carriages not owned by the assessee but taken on hire from the open market for carrying out the transportation activities, and grounds 2 to 5 were allowed; grounds 1 and 6 were dismissed as general and consequential (paragraphs 11 to 13). It arises in Presumptive Taxation & Audit, Deductions & Disallowances and Assessment & Scrutiny matters, on section 44AE, section 44AA, section 44AA(2), section 44AB, section 40(b) of the Income Tax Act 1961, and was decided by Shri Kul Bharat, Judicial Member (Income Tax Appellate Tribunal, Delhi 'SMC' Bench, New Delhi). Before relying on it, read the source linked on this page and check whether it has since been distinguished, overruled or overtaken by an amendment to the Income Tax Act. In practice the steps that follow from it are these. Document the hiring — market hire bills, payments, and the linkage between hired vehicles and the trips they ran — because the deduction directed here was for expenditure 'related to the goods carriages which were not owned by the assessee'. Count owned vehicles at every point in the year against the ten-vehicle ceiling, treating hire-purchase and instalment vehicles as owned under Explanation (b). Where the officer disallows all vehicle expenditure on the footing that s.44AE covers everything, put the two limbs of sub-section (1) — 'who owns not more than ten goods carriages' and 'from all the goods carriages owned by him' — at the front of the reply. Check which version of s.44AE governs the year in issue before computing: the differentiated per-tonne rate for heavy goods vehicles applies only from AY 2019-20.
Searched for later treatment; none was found. That is not the same as a source affirming it. No later Bench has applied the holding that the presumptive scheme in s.44AE covers only the goods carriages the assessee owns, so that expenditure on hired-in vehicles remains separately deductible, and no Allahabad High Court appeal from this order has been traced. One near miss should be recorded because it will otherwise look like later treatment. Shakil Ahamad, Saharanpur v ITO (ITAT Delhi, 10 August 2026) comes up against a similar name; it is a different assessee and it concerns a remand to the Commissioner (Appeals). The only other record under this appeal number is the Tribunal's earlier 2016 order in the same appeal. Three limits on the order itself. It is a single-member order of the Delhi Bench, so it binds nobody outside the case. The direction it gives is to allow the expenditure relating to the hired-in vehicles; it does not quantify that expenditure, and it says nothing about the receipts from the hired-in operations, which must be brought to tax in the ordinary way. And it reproduces the wrong version of the section for the year decided, as the editor's note on this page explains, so the rates in it are not the rates for assessment year 2008-09. The reasoning does not depend on later approval. Section 44AE(1) applies to an assessee 'who owns not more than ten goods carriages' and deems the income 'from all the goods carriages owned by him', and the bar in s.44AE(3) on further deduction under ss.30 to 38 operates only on the income so computed. A Bench taking the contrary view would have to read the word 'owned' out of both limbs. For a year governed by the Income-tax Act 2025 the successor of s.44AE should be identified before the computation is put in; that correspondence has not been established here. No source could be cited for that finding. Checking whether an authority still stands matters as much as knowing what it held: a decision may be overruled on one point and survive on another, or the provision it interprets may have been amended since. Read the source and the editor's note on this page before relying on it in a reply to an Assessing Officer or in an appeal.
A MATERIAL MISMATCH IN THE ORDER, and it must be flagged. The assessment year is 2008-09, but the version of s.44AE reproduced by the Bench at paragraph 9 is the version in force at the date of the order in October 2022 - it carries the per-tonne rate for heavy goods vehicles and the seven thousand five hundred rupee rate, neither of which applied to assessment year 2008-09, when the rates were lower and undifferentiated. The Bench's holding turns on the ownership limb of sub-section (1), which has not changed, so the mismatch does not affect the ratio. But the rates reproduced in this order must not be used for assessment year 2008-09 or for any year before assessment year 2019-20. The reproduction does, incidentally, corroborate the current text of s.44AE used in the companion statutory entry in this library. ON STRUCTURE. The earlier portion of the order carries numbering that restarts within the grounds of appeal and again within the recital of the authorities' findings. The Bench's own reasoning is at paragraphs 10 to 13, ending with the disposal. Paragraph 9 is the reproduction of the statute and is not the Bench speaking, so a citation to paragraph 9 of this order is a citation to the section. ON THE QUANTUM. The order does not state the quantum of relief. It directs the Assessing Officer to give the deduction, so the figure of about Rs 5,23,960 that appears in the recital of the grounds is the amount originally disallowed and not the amount allowed. That amount covered truck maintenance expenses, driver and conductor salaries, labour charges and truck hire costs. TWO LIMITS THAT TRAVEL WITH THE POINT. Ownership for s.44AE includes possession under hire purchase or on instalments where amounts remain due, by force of Explanation (b), so a financed truck is an owned truck and counts towards the ceiling. And the ten-vehicle ceiling is tested 'at any time during the previous year', so hiring in does not itself breach it but acquiring an eleventh owned vehicle at any point in the year does. ON WHAT THE COMMISSIONER (APPEALS) HAD HELD, because it is the objection to expect. He took the view that the assessee could not compute income under s.44AE for part of the year only, and confirmed the disallowances on that footing. The Bench did not answer that proposition directly; it decided the appeal on the distinction between owned and hired-in vehicles. So this order is not authority on whether the section can be applied for part of a year, and an officer who runs that argument is not answered by it. This library shows the verification state of every entry openly. This entry has not yet been read in full by a chartered accountant. The summary reflects the sources listed on this page. Read the source before you rely on it in a reply to an Assessing Officer or in an appeal before the Commissioner (Appeals) or the Income Tax Appellate Tribunal.
The appeal was partly allowed. There was no dispute that the assessee satisfied the two conditions in s.44AE(1) — he owned not more than ten goods carriages at any time during the previous year and was engaged in the business of plying, hiring or leasing such goods carriages — so the receipts relating to the goods carriages owned by him were subject to s.44AE. But the assessee had also taken goods carriages on hire which he did not own, and the expenses relating to those were disallowed by the lower authorities without the CIT(A) appreciating the distinction. The Assessing Officer was directed to give the deduction of expenditure relating to the goods carriages not owned by the assessee but taken on hire from the open market for carrying out the transportation activities, and grounds 2 to 5 were allowed; grounds 1 and 6 were dismissed as general and consequential (paragraphs 11 to 13).
TaxSphere, “Shakir Ahmad v ITO — s.44AE covers only the goods carriages the assessee owns, so expenditure on hired vehicles remains deductible”, https://taxnotice.vittsphere.com/caselaw/case/shakir-ahmad-v-ito-44ae-covers-only-the-goods-carriages-the-assessee-owns/ (validity last checked 2026-09-08)
The judgment itself is a government work and may be quoted freely. The summary, the validity note and the reasoning on this page are this library's own writing: quote them with attribution, and please do not present either as the words of the court — this page keeps the two apart and so should a quotation of it.
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