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TMI Blog2005 (2) TMI 83X X X X Extracts X X X X X X X X Extracts X X X X ..... n has been raised by Mr. Khaitan, appearing on behalf of the assessee, challenging the order of the learned Tribunal in respect of the assessment year 1986-87 on the strength of an agreement executed on September 1, 1986, when the accounting year expired on September 30, viz: whether the subject vehicles so leased under the said agreement were used for the purpose of business in the previous year 1986-87 in order to enable the assessee to obtain the benefit of depreciation under section 32 of the Income-tax Act, 1961. Submission on behalf of the appellant: Mr. Khaitan had supported his submission on the basis of the materials on record relying on certain decisions to which we shall be referring at the appropriate stage. According to him, the assessee having been carrying on the business of leasing out, as soon as the vehicles were leased out, the vehicles are used for the purpose of the assessee's business. He referred to various terms of the agreement and pointed out that the vehicle, which was purchased on August 4, 1986, was intended to be taken delivery of by the lessee at his own risk from the supplier and the registration was also his responsibility. Notwithstanding anyth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the question is to be decided on the basis of the manner in which the expression has been used in section 32. Section 32 prescribes that in respect of depreciation of building, machinery, plant, and furniture being tangible assets owned wholly or partly by the assessee and used for the purpose of the business or profession, the deductions shall be allowed. The expression that has been used with which we are now concerned is expressed as "used for the purpose of business or profession". It does not qualify the word "used" by "actual" nor does it qualify the same by the phrase "put to" as has been used in other provisions of the 1961 Act. Therefore, the expression that has been used is to be interpreted in the ordinary grammatical sense. It has to be used in common parlance, not in the legal or technical sense. The word "use" in Longman Dictionary of Contemporary English, 1982 reprint has been defined as "the act of using or state of being used; the ability or right to use something; the purpose or reason for using something; usefulness or advantage given by something; take advantage of; to employ; to put to use". In the Shorter Oxford English Dictionary, 3rd edition, 1987 re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , it must be used for the purpose of business of the assessee. The property for which the purchase order was placed by the assessee and the ownership supported by its subsequent registration after the purchase and the lease of such property, after purchase but before registration would remain the property of the assessee. The ownership is acquired with the purchase followed by delivery of the asset to the purchaser. The purchaser may authorize anyone to take deliver)' of the property. Taking of delivery by anyone else would be on behalf of the purchaser/owner. The ownership accrues the moment the property is purchased, which is confirmed by delivery with which the title in the property passes on to the owner. The subsequent registration is only a mode of recording of evidence of ownership. The event of registration does not confer title. The title is acquired by purchase. The registration is only a system of recording the ownership. Unlike immovable property, the acquisition of title is not dependent on the registration of movable property, if after such acquisition of ownership, the property is leased out, even though registered at a subsequent date, which is only a piece of evide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ant or machinery has come as stand by to provide against break-down, even a passive use may entitle the assessee to claim depreciation under section 32 because in both these cases the machinery is kept ready for use in the factory. The allowance of depreciation may not depend on the actual working of the machinery. But no depreciation is allowable if the assets are not used at all for the purpose of the business of the assessee in the relevant previous years. In Hindusthan Gas Industries Ltd. [1995] 79 Taxman 151 (Cal), it was held that in several cases passive use of an asset was held to be sufficient for obtaining depreciation allowance. It had found that the assessee had leased out a generating set in the course of his business. It could not get back the same even after the expiry of the period of lease because of the lock-out in the lessee's factories. This was a happening, which was incidental to the assessee's business of leasing out generating sets. The assessee itself was not actually running the generating sets. The assessee's business was leasing out of the generators. The generating set was used by the assessee and was being used by the assessee in its business of le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... every kind of use for the purpose of the business will satisfy for attracting allowance it is not open for the Revenue to read into the section any words of limitation so as to affect the interest of the assessee. It is with a view to the business of the assessee that the assessee used the machinery for the purposes of its business in causing those to go into trial production. If that is not using the machinery for the purposes of the business, then the court would be at a loss as to how else the court could describe the above activity of the assessee in that regard. The claiming of depreciation is inextricably connected with the assessee commencing its business at the first place. It might be that no use made by it of plant or machinery can be said to be used by it for the purpose of its business. Whether the vehicle was used for the purpose of business: Therefore, it is to be ascertained when the vehicle was used for the purpose of the business. Whether entering into the agreement for lease by an assessee carrying on business of leasing amounts to use of the vehicle for the purpose of his leasing business which is required to be examined. From the agreement, it appears that i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he same time, that was not the finding of the learned Tribunal. On the other hand, the learned Tribunal proceeded on a logic that the rent would become due on October 20, 1986 which is falling in the next previous year and, as such, the vehicle could not be said to have been put to use in the previous year 1986-87. This logic seems to be unacceptable. The rent accrues on the commencement of the lease the rent whereof is calculated in the unit of the month comprising the use of the asset for the whole period of the month. Therefore, the profit starts accruing and the taking of advantage starts continuing with the commencement of the lease irrespective of the rent being receivable in the unit of month, which may become due either at the end of the month or in the same month or in advance as may be agreed. It cannot be said if the rent is payable in advance that it would be a use on a particular date but when receivable after the use would commence on the date the rent is due. It is a mode of receipt and payment of the rent or profit between the parties on account of the use of the asset commenced from the date when the lease is agreed to commence. Receipt of the rent at a later date ..... X X X X Extracts X X X X X X X X Extracts X X X X
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