1982 (9) TMI 28 - HC - Income Tax

Summary

Issues Involved:
1. Ownership and Depreciation of New Vehicles.
2. Nature of Amounts Received from Sub-letting Buses.

Summary:

1. Ownership and Depreciation of New Vehicles:
The primary issue was whether the assessee-firm was the owner of five new buses acquired at the cost of Rs. 1,88,464 and thus entitled to depreciation u/s 32 of the I.T. Act, 1961. The Tribunal held that the assessee-firm was indeed the owner of the new buses as per clause 10 of the agency agreement dated March 29, 1963, which stated, "The vehicles so replaced will be the property of the agents." The Tribunal rejected the contention that the lack of registration under the Motor Vehicles Act negated ownership, emphasizing that ownership for depreciation purposes under the I.T. Act does not require registration under the Motor Vehicles Act. The High Court upheld this view, stating, "The requirement of s. 32 of the I.T. Act is that the vehicles must be 'owned by the assessee'. This section does not require that the assessee must be a registered owner of the vehicles in order to claim depreciation allowance in respect of them."

2. Nature of Amounts Received from Sub-letting Buses:
The second issue was whether the amounts received by the assessee from sub-letting buses were capital receipts or revenue receipts. The Tribunal accepted the assessee's contention that these amounts were premiums for parting with a capital asset and not revenue receipts. The Tribunal noted, "The Department has not brought on record any evidence to show that these lump sum payments represented advance payment of part of hire charges but not premiums for parting with the capital assets, namely, buses." The High Court affirmed this, reasoning that since the lump sum payments made by the assessee for hiring the buses were treated as capital expenditure, the amounts received from sub-letting should similarly be treated as capital receipts.

Conclusion:
Both questions were answered in the affirmative and in favor of the assessee. The High Court concluded that the assessee was entitled to depreciation on the new buses and that the amounts received from sub-letting were capital receipts.