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TMI Blog2010 (1) TMI 742X X X X Extracts X X X X X X X X Extracts X X X X ..... aside the orders of the Tribunal and that of the first appellate authority and remand the matter for verification of factual position by assessing officers and to grant depreciation, if found eligible. X X X X Extracts X X X X X X X X Extracts X X X X ..... acts found in that judgment are applied to the respondents herein in these cases, then the respondents are not entitled to depreciation under S.32 of the Income Tax Act, 1961 (for short 'the Act') because they were neither owners of the vehicle nor have they used the vehicle in their business or profession. 2. Counsel for the respondents/assessees have relied on a decision of the Delhi High Court in Commissioner of Income Tax v. Bansal Credits Ltd. (259 ITR 69 where the Delhi High Court held that the assessees, which were engaged in the business of leasing out commercial vehicles, were entitled to depreciation at the higher rate of 40%, as provided in Item III(2)(ii) of Part A of Appendix I to the Income Tax Rules, 1962. We notice that th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature of transactions in vehicle financing. We have noticed that though the transaction is styled as hire purchase agreement, it is nothing, but financing of the vehicle purchase fully or partly and the vehicle is purchased and registered in the name of the borrower, who is entitled to depreciation at the applicable rate depending on whether the vehicle is used in profession or let on hire. Keeping in mind the factual position which is not the same as projected before the lower authorities even including the assessing authority the assesees' counsel submitted before us that "the owner" takes in not only the registered owner, but the person in whose favour hypothecation agreement is entered into. We are unable to accept this contention ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed, the admitted position is that the leasing companies purchased the machinery and retained their ownership during the period of lease and in that context, the Supreme Court declared their eligibility for depreciation because leasing was found to be their business. So far as the decision of the Delhi High Court is concerned, there was no controversy on facts because the vehicles were stated to be given on lease which means that the lessor retained ownership and the vehicles were leased out on collection of lease rents only. In these cases, the respondents/assessees are only financiers engaged in financing of vehicles partly or fully and the amount repaid under the agreement by the registered owner is essentially repayment of loan in instal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessing officer to find the true nature and character of the agreement and the arrangement between the financier and the vehicle owners. If it is found to be a loan transaction, as found by this Court in the judgment above referred, then the respondents/ assessees will not be entitled to depreciation much less higher rate claimed by them and allowed by the Tribunal. On the other hand, if the vehicles are purchased by the respondents/ assessees and retained their ownership with registration in their name and the vehicles were either given on lease or given under hire purchase agreement giving an option to the hirer to purchase it after the payment of lease rental s or hire charges during the agreed period, then the respondents/assessees ..... X X X X Extracts X X X X X X X X Extracts X X X X
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