1990 (11) TMI 121 - HC - Income Tax

Summary

Issues:
1. Whether the Tribunal was justified in treating the jeeps as the capital asset of the assessee subject to depreciation?
2. Whether the jeeps hired to the Congress party could be considered the capital asset of the assessee subject to depreciation?
3. Whether the assessee was entitled to deduction of expenses claimed in connection with the hiring of the jeeps?
4. Whether the loss claimed by the assessee was allowable as a balancing charge for the assessment year 1968-69?

Analysis:

Issue 1:
The Tribunal's decision to treat the jeeps as the capital asset of the assessee subject to depreciation was questioned. The Income-tax Officer found that the jeeps were purchased on a special order of hire by the City Congress Committee for election purposes. The Tribunal, however, considered the hiring of jeeps as a normal business activity of the assessee. The High Court upheld this finding, stating that the jeeps constituted the capital asset of the company, entitling the assessee to depreciation.

Issue 2:
Regarding whether the jeeps hired to the Congress party could be considered the capital asset of the assessee, the High Court affirmed that the hiring of the jeeps was a normal business activity of the assessee. Therefore, the jeeps were deemed to be the capital asset of the company subject to depreciation.

Issue 3:
The question of whether the assessee was entitled to deduction of expenses claimed in connection with the hiring of the jeeps was also addressed. The High Court ruled in favor of the assessee, stating that once hire charges constitute income, the expenses incurred must be deducted. Therefore, the assessee was entitled to claim the expenses in connection with the hiring of the jeeps.

Issue 4:
The final issue pertained to the allowance of the loss claimed by the assessee as a balancing charge for the assessment year 1968-69. The High Court determined that the claimed loss was a capital loss, not a business loss, since the jeeps were treated as a capital asset. As a result, the capital loss could not be deducted from the revenues of the assessee, and the question was answered in favor of the Revenue.

In conclusion, the High Court answered the referred questions in favor of the assessee regarding the treatment of jeeps as capital assets, deduction of expenses, but in favor of the Revenue regarding the capital loss claimed by the assessee.