2003 (9) TMI 297 - AT - Income Tax

Summary

Issues:
- Disallowance of depreciation at a higher rate of 40% for the assessment year 1999-2000 in the matter of hire purchase and lease financing.

Analysis:
1. The Revenue filed appeals against the disallowance of depreciation at a higher rate of 40% for the assessment year 1999-2000 in the business of hire purchase and lease financing. The Assessing Officer (AO) questioned the justification of claiming depreciation at 40% on motor lorries and trucks leased out by the assessees. The AO contended that the assessees were not running the vehicles on hire themselves, leading to a disagreement on the rate of depreciation.

2. The CIT(A) allowed the assessee's claim based on a Supreme Court judgment in CIT vs. Maharashtra Apex Corpn. Ltd., which held that even if the lessee used the machinery, the lessor could still claim benefits. The Departmental Representative cited a jurisdictional High Court case to support the claim that the assessees were only entitled to a general rate of depreciation.

3. The Tribunal analyzed the provisions of Section 32 and relevant rules, emphasizing that higher depreciation is permissible if the assets are used in the business of running them on hire. The Tribunal noted that the assessees were engaged in hire purchase and leasing, and the vehicles were indeed used for hire by the lessees. Despite the AO's objection, the Tribunal concluded that the assessees fulfilled the conditions for claiming higher depreciation.

4. Referring to the plain language of the statute, the Tribunal rejected the AO's argument that the assessees must use the vehicles themselves for hire to claim higher depreciation. Citing precedents and Supreme Court decisions, the Tribunal emphasized that the end-user of the assets is crucial, not necessarily the lessor's direct use. The Tribunal highlighted the distinction between sub-sections (2)(a) and (2)(b) of Section 32A to support its interpretation.

5. Relying on various High Court decisions, the Tribunal concluded that the AO erred in disregarding the use of the vehicles by the lessees for hire purposes. By aligning with the Supreme Court's stance on similar cases, the Tribunal upheld the CIT(A)'s order and dismissed the Revenue's appeals, finding no fault in allowing the higher rate of depreciation claimed by the assessees for the assessment year 1999-2000.