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Issues: (i) Whether there was legal evidence before the Tribunal to justify allowing depreciation at the rate of 25 per cent on trucks and 20 per cent on motor cars taken on hire-purchase; (ii) whether, in computing the sale price in a hire-purchase transaction, the deduction for depreciation had to be made from the entire hire-purchase value including interest, finance service commission and extra interest for late payment.
Issue (i): Whether there was legal evidence before the Tribunal to justify allowing depreciation at the rate of 25 per cent on trucks and 20 per cent on motor cars taken on hire-purchase.
Analysis: The Tribunal had proceeded essentially from the illustration referred to in the earlier Supreme Court decision and had treated the resulting percentage as a reasonable rate of depreciation, without discussing the evidence on record or showing how the relevant facts of the vehicles, their use and condition supported that rate. A finding can stand in reference only if there is legal evidence to support it; a conclusion reached mechanically, without appraisal of material evidence, is not sustainable.
Conclusion: There was no legal evidence to justify the finding allowing depreciation at 25 per cent on trucks and 20 per cent on motor cars.
Issue (ii): Whether, in computing the sale price in a hire-purchase transaction, the deduction for depreciation had to be made from the entire hire-purchase value including interest, finance service commission and extra interest for late payment.
Analysis: In a hire-purchase transaction, the sale price for tax purposes is to be worked out from the hire-purchase arrangement as a whole, and depreciation is to be deducted from the entire hire price agreed between the parties. The original price alone is not the proper base for determining the taxable sale price.
Conclusion: The Tribunal was justified in treating the hire-purchase value, including interest and service-related charges, as the basis for determining sale price.
Final Conclusion: The references were substantially answered against the assessee on the depreciation issue, while the method of computing sale price on the full hire-purchase value was upheld.
Ratio Decidendi: In a sales tax reference, a factual finding on depreciation cannot stand unless supported by legal evidence, and in hire-purchase transactions the taxable sale price may be worked out from the full hire-purchase value by allowing depreciation on that amount rather than on the original price alone.
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