$~R-9
*IN THE HIGH COURT OF DELHI AT NEW DELHI
Date of decision: 4th July, 2013
+ Income Tax Appeal 6/2000
COMMISSIONER OF INCOME TAX, DELHI ..... Petitioner
Through Mr. Sanjeev Sabharwal, Sr. Standing
Counsel.
versus
H.B. LEASING & FINANCE LTD. ..... Respondent
Through Mr. Santosh K. Aggarwal, Advocate.
CORAM:
HON'BLE MR. JUSTICE SANJIV KHANNA
HON'BLE MR. JUSTICE SANJEEV SACHDEVA
SANJIV KHANNA, J. (Oral)
The present appeal by the Revenue under Section 260A of the
Income Tax Act, 1961 (Act, for short) relates to the assessment year
1986-87.
2. The following substantial questions of law were framed while
admitting the present appeal vide order dated 6th September, 2000:-
"A) Whether a tanker mounted on the chasis of the
truck can be separated for the purposes of depreciation,
qua the truck and can it be equated with LPG cylinders
for having a claim of depreciation @ 100% on such
tanker?
B) Whether in law there can be a segregation of the
parts of the truck for the purpose of claiming
depreciation at the different rates on different parts?
ITA 6/2000 Page 1 of 6
C) Whether tribunal was correct in holding that the
assessee was eligible for depreciation at a rate of 40%
on leased vehicles instead of normal rate of 30% even
though the assessee was not carrying on the business of
running them on hire?
D) Whether the order passed by ITAT is perverse in
not appreciating
(i) the real nature and character of the business of the
assessee;
(ii) that the assessee was carrying on the business of
leasing of vehicles and not engaged in running them on
hire;
(iii) that there is a distinction between ,,lease rental
and ,,hire charges."
3. It is stated by the counsel for the parties that the first two
questions i.e. questions A and B are covered by the decision of this
Court in CIT Vs. Goyal MG Gases Ltd., (2008) 296 ITR 72 (Delhi)
wherein a similar controversy had arisen and it was held that a tanker
or a gas cylinder attached to the body of a truck continues to be a gas
cylinder and is accordingly entitled to depreciation as applicable to gas
cylinder in Appendix I to the Income-tax Rules. In other words, the
gas cylinders even in such cases are entitled to 100% depreciation.
4. As far as question C is concerned, we note that the assessee is
engaged in the business of leasing and financing and had entered into
lease agreements with third parties. The assessee claimed depreciation
@ 40% which was restricted to 30% by the Assessing Officer
observing that higher rate of depreciation was applicable if the vehicle
in question was being used for running them on hire and there was no
ITA 6/2000 Page 2 of 6
evidence to show that the vehicles were being actually used for hire.
He recorded that the assessee was not in the business of hiring and had
not shown that the vehicles were in fact hired. The lessee had taken the
vehicles and were using them in their normal business. The said
disallowance was upheld by the first appellate authority observing that
the assessee himself was not in the business of hiring. These trucks
were leased out to Indian Oil Corporation for their business purpose.
5. Income Tax Appellate Tribunal reversed the said finding relying
upon their earlier decisions in the case of Oriental Leasing Co. and
N.G.T. Leasing and Finance Ltd. The question of law is covered by
the decision of this Court in CIT Vs. Bansal Credits Ltd. (2003) 259
ITR 69 (Delhi). In the said case the assesses had given the vehicles on
lease to several persons who used them for actually running them on
hire. It was held that the assessees were entitled to higher rate of
depreciation. The Court rejected the contention that it was the business
of the assesses which determined the rate of depreciation and observed
that it was the actual use of the vehicles, which would determine the
rate of depreciation. It was held:-
"In our opinion, on a plain reading of the section
and the relevant entry in the Appendix, it is clear that
it is the end user of the specified asset which is
relevant for determining the percentage of
depreciation. The section requires that the asset
should be used for the purposes of the assessees
business and the entry in the Appendix refers to the
ITA 6/2000 Page 3 of 6
user it should be put to. Apart from the fact that the
leasing out of the vehicles is by itself tantamount to
hire of vehicles, we are unable to read into any of the
aforenoted provisions the requirement that the assets
are to be used by the assessee for the purposes of
"his" business or profession. Once it is accepted that
the leasing out of the vehicles is one of the modes of
doing business by the assessee and in fact the income
derived from such leasing is treated as business
income of the assessee, it would be clearly
contradictory in terms to hold that the vehicles in
question were not used wholly for the purpose of the
assessees business, which, as noted above, is one of
the requisites stipulated in section 32, apart from the
other two conditions indicated above, which all the
assessees indubitably fulfil."
(emphasis supplied)
6. Recently, the Supreme Court in I.C.D.S. Ltd. Vs. Commissioner
of Income-tax and Another (2013) 350 ITR 527 (SC) affirmed the
said view observing:-
"Finally, learned senior counsel appearing on
behalf of the assessee also pointed out a large
number of cases, accepted and unchallenged by the
Revenue, wherein the lessor has been held as the
owner of an asset in a lease agreement.
[Commissioner of Income-Tax Vs. A.M.
Constructions; Commissioner of Income- Tax Vs.
Bansal Credits Ltd.; Commissioner of Income-Tax
Vs. M.G.F. (India) Ltd.; Commissioner of Income-
Tax Vs. Annamalai Finance Ltd. In each of these
cases, the leasing company was held to be the owner
of the asset, and accordingly held entitled to claim
depreciation and also at the higher rate applicable on
the asset hired out. We are in complete agreement
with these decisions on the said point.
There was some controversy regarding the
invoices issued by the manufacturer - whether they
were issued in the name of the lessee or the lessor.
ITA 6/2000 Page 4 of 6
For the view we have taken above, we deem it
unnecessary to go into the said question as it is of no
consequence to our final opinion on the main issue.
From a perusal of the lease agreement and other
related factors, as discussed above, we are satisfied
of the assessee's ownership of the trucks in question.
Therefore, in the facts of the present case, we
hold that 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.
With regard to the claim of the assessee for a
higher rate of depreciation, the import of the same
term "purposes of business", used in the second
proviso to Section 32(1) of the Act gains
significance. We are of the view that the
interpretation of these words would not be any
different from that which we ascribed to them earlier,
under Section 32 (1) of the Act. Therefore, the
assesseefulfills even the requirements for a claim of a
higher rate of depreciation, and hence is entitled to
the same."
7. Learned counsel for the appellant-revenue has submitted that the
Assessing Officer and the appellate authorities have not gone into the
question of actual use of the vehicles by the lessees and whether the
vehicles were being used for running them on hire. Prima facie there
appears to be some merit in the said contention, but we are not inclined
to remit the matter to the Assessing Officer. We do not think that the
appellant is entitled to raise this contention at this stage as the
Assessing Officer himself did not go into the said question and
examine the same. The Assessing Officer and the appellate authorities
ITA 6/2000 Page 5 of 6
have not dealt with or gone into the question or observed that the
lessees had not used the vehicles for hiring. That apart, we have
quoted above the observations of the Supreme Court in I.C.D.S. Ltd.
(supra) and the Delhi High Court in Bansal Credit (supra) wherein on
identical factual matrix the question of law was answered in favour of
the assessee.
8. In view of the findings recorded above, we do not think that
question D is required to be answered.
9. In view of the aforesaid, questions A, B and C are answered in
affirmative and in favour of the assessee and against the Revenue-
appellant. Question D is left unanswered. No costs.
SANJIV KHANNA, J.
SANJEEV SACHDEVA, J.
JULY 04, 2013
NA
ITA 6/2000 Page 6 of 6
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