2013 (7) TMI 360 - HC - Income Tax

Depreciation on truck - claim of depreciation on chassis and tanker mounting on chaises separately - claim of depreciation @ 100% on such tanker - depreciation at a rate of 40% on leased vehicles instead of normal rate of 30% - ITAT allowed the claim of the assessee following the decision in CIT Vs. Bansal Credits Ltd. 2002 (11) TMI 76 - DELHI High Court - Held that - Recently, the Supreme Court in I.C.D.S. Ltd. Vs. Commissioner of Income-tax and Another 2013 (1) TMI 344 - SUPREME COURT affirmed the said view. The lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out. - Decided in favor of assessee.

Summary

Issues involved:
1. Depreciation on a tanker mounted on a truck chassis.
2. Segregation of parts of a truck for claiming depreciation.
3. Eligibility for higher depreciation rate on leased vehicles.
4. Interpretation of the actual use of vehicles for determining depreciation rate.

Analysis:
1. The first issue pertains to the depreciation claim on a tanker mounted on a truck chassis. The court referenced a previous decision where it was held that a tanker or gas cylinder attached to a truck remains a gas cylinder and is entitled to depreciation as per the rules. This means that even in such cases, gas cylinders are eligible for 100% depreciation.

2. The second issue involves the segregation of truck parts for claiming depreciation at different rates. The court noted that the assessee, engaged in leasing and financing, claimed depreciation at 40% which was reduced to 30% by the Assessing Officer. The dispute arose as the vehicles were not being used for hiring as required for the higher rate of depreciation. The tribunal reversed the decision, emphasizing that actual use of the vehicles determines the depreciation rate, not the nature of the assessee's business.

3. Moving on to the third issue, the court discussed the eligibility for a higher depreciation rate on leased vehicles. The tribunal's decision was based on the actual use of the vehicles by lessees for hiring, aligning with previous judgments. The court emphasized that the lessor is considered the owner of the asset in a lease agreement, entitling them to claim depreciation at the higher applicable rate.

4. Lastly, the interpretation of actual vehicle use for determining the depreciation rate was crucial. The court referenced the Supreme Court's affirmation that the lessor is the owner of the asset in a lease agreement, emphasizing the importance of the actual use of vehicles. The court declined to remit the matter to the Assessing Officer, as previous judgments supported the assessee's claim based on the factual matrix.

In conclusion, the court answered the first, second, and third issues in favor of the assessee, affirming their entitlement to depreciation at the claimed rates based on the actual use of the vehicles. The fourth issue was left unanswered, and no costs were awarded in this matter.