2004 (10) TMI 61 - HC - Income Tax

Depreciation on the oil tankers under section 32 - oil tankers were actually put to use in the relevant accounting year by the assessee for its business purposes - Failure of the assessee to produce the hire contract with the parties is in respect of the two oil tankers is of little significance in view of exposition of law that the word used under section 32 of the Act has to be given wider meaning and it will include assets ready for use - . order of the Tribunal refusing to grant depreciation on the two oil tankers is not legally Justified. The appeal is allowed. The order of the Tribunal is set aside and it is held that the assessee-appellant is entitled to depreciation on the two oil tankers

Summary

Issues Involved:
1. Presumption under Section 114 of the Indian Evidence Act, 1872 regarding regular performance of judicial and official acts.
2. Binding nature of facts determined in the judicial order of the Chief Metropolitan Magistrate (C.M.M.), Kanpur, on income-tax authorities.

Issue-wise Detailed Analysis:

1. Presumption under Section 114 of the Indian Evidence Act, 1872:
The court considered whether the learned Tribunal was duty-bound to presume the regular performance of judicial and official acts under Section 114 of the Indian Evidence Act, 1872. The assessee argued that the presumption of correctness of official acts should have been drawn, particularly regarding the challan issued by the transport authority on March 31, 1997. The court noted that there is a presumption under Section 114(e) that judicial and official acts have been regularly performed. This presumption, although rebuttable, requires cogent and relevant material to be overturned. The authorities below failed to draw this presumption, thereby committing an illegality. The Tribunal's approach, which dismissed the judicial order as a "stage show," was found to be based on speculation and surmises without any contrary material evidence.

2. Binding Nature of Judicial Orders on Income-tax Authorities:
The court examined whether the facts determined in the judicial order of the C.M.M., Kanpur, regarding the use of tankers without permits on March 31, 1997, were binding on the income-tax authorities. The assessee contended that the order of the C.M.M., imposing a fine for the breach of the Motor Vehicles Act, evidenced the actual use of the tankers on the relevant date. The court held that the judicial order could not be ignored based on conjectures and surmises. The Tribunal's finding that the vehicles could not have been used on March 31, 1997, due to the registration being granted on April 1, 1997, was incorrect. The court emphasized that for income-tax purposes, the relevant question was whether the assets were used during the previous assessment year, irrespective of compliance with the Motor Vehicles Act.

Depreciation Claim under Section 32 of the Income-tax Act:
The court analyzed the requirements for claiming depreciation under Section 32, which include ownership of the asset and its use for business purposes. The court cited various judgments, including Mysore Minerals Ltd. v. CIT, which advocated a liberal interpretation of the term "used." The court noted that even passive use or readiness for use qualifies for depreciation. The court referenced multiple cases, such as CIT v. Salkia Transport Associates and CIT v. Nidish Transport Corporation, to support the view that registration under the Motor Vehicles Act is not a prerequisite for claiming depreciation under the Income-tax Act.

Conclusion:
The court concluded that the assessee was entitled to depreciation on the two oil tankers as they were used for business purposes during the relevant accounting year. The Tribunal's refusal to grant depreciation was not legally justified. The appeal was allowed, and the Tribunal's order was set aside, affirming the assessee's entitlement to depreciation on the tankers. There was no order as to costs.