Court allows higher depreciation on leased trucks if lessee has possession, right to use, and pays lease

The High Court held that the assessee is entitled to a higher rate of depreciation on leased out trucks. The court emphasized that leasing a vehicle does not disqualify the assessee from claiming higher depreciation if the lessee has possession and the right to use the vehicle, along with payment for the lease. The court ruled in favor of the assessee, dismissing the Revenue's appeal and affirming the entitlement to the higher rate of depreciation on leased out trucks.

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Issues:
1. Entitlement to a higher rate of depreciation on leased out trucks.
2. Applicability of the rate of depreciation for vehicles given on hire to vehicles leased out.

Analysis:
1. The respondent filed its income tax return for the assessment year 1991-92, claiming a higher rate of depreciation on leased out trucks. The Assessing Officer disallowed the claim under section 143(3) of the Income-tax Act, 1961. The Commissioner of Income-tax (Appeals) allowed the claim, leading to an appeal by the Revenue before the Income-tax Appellate Tribunal. The Tribunal dismissed the Revenue's appeal, prompting the present appeal by the Revenue against the Tribunal's order dated January 28, 2003.

2. The High Court, upon admitting the appeal, framed substantial questions of law regarding the entitlement to a higher rate of depreciation on leased out trucks. The court considered a previous decision by a Division Bench in CIT v. Madan and Co. [2002] 254 ITR 445, which highlighted the distinction in depreciation rates based on the use of vehicles for personal purposes versus allowing them to be used for a price. The court emphasized that the lease of a vehicle does not disentitle the assessee to claim the benefit of higher depreciation. The lessee's possession and right to use the vehicle, along with payment for the lease, support the entitlement to a higher rate of depreciation.

3. In light of the precedent cited, the court concluded that the respondent/assessee is indeed entitled to the higher rate of depreciation on leased out trucks. Consequently, the questions of law raised were answered in favor of the assessee and against the Revenue. As a result, the appeal by the Revenue was dismissed, affirming the entitlement of the assessee to claim a higher rate of depreciation on leased out trucks.

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