1964 (9) TMI 69 - HC - Income Tax

High Court grants development rebate to assessee in ownership dispute over bus used as collateral

S.P.B.P. Srirangacharyulu Versus Commissioner of Income-Tax, Andhra Pradesh

The High Court ruled in favor of the assessee regarding the entitlement to development rebate under section 10(2)(vib) of the Indian Income-tax Act. ... - Issues:- Entitlement to development rebate under section 10(2)(vib) of the Indian Income-tax Act based on an agreement dated March 20, 1957.- Determination of ownership of a bus for the purpose of claiming development relief.Analysis:The case involved a dispute regarding the entitlement to development rebate under section 10(2)(vib) of the Indian Income-tax Act based on an agreement dated March 20, 1957. The assessee, who ran a bus service, claimed development rebate for a new bus put on the road during the relevant accounting year. The Income-tax Officer initially denied the claim, stating that the bus was not installed within the meaning of the Act. The Appellate Assistant Commissioner also rejected the claim on the grounds that the assessee was not the owner of the bus. The case was referred to the Income-tax Appellate Tribunal, which agreed with the Appellate Assistant Commissioner's decision, leading to the present reference before the High Court.The key issue revolved around the ownership of the bus in question. The agreement in question, dated March 20, 1957, was analyzed to determine the nature of the transaction. The agreement, which appeared to be a hire-purchase agreement, outlined various terms where the Madras party was described as the owner of the vehicle, and the assessee as the hirer. It was stipulated that the hirer would register the vehicle in the owner's name, pay all associated fees, and indemnify the owner against third-party claims. The agreement also provided for the right of the hirer to purchase the vehicle by paying a nominal sum at the end of the hiring period. However, a crucial clause stated that until the vehicle became the property of the hirer, it would remain the absolute property of the owner.Upon examining the facts and circumstances of the case, the High Court concluded that the agreement, despite its form as a hire-purchase agreement, was essentially a loan transaction with the bus offered as security. The court noted that the assessee continued to be the owner of the bus, as evidenced by the vehicle's registration in his name and the effective permit standing till a specific date. The court emphasized that the transaction, though structured as a hire-purchase agreement, functioned more as a loan arrangement with the bus serving as collateral. Therefore, the court held that the assessee was the rightful owner of the bus during the relevant period, entitling him to claim the development rebate under section 10(2)(vib) of the Act.In conclusion, the High Court answered the question of entitlement to development rebate in the affirmative, ruling in favor of the assessee. The court determined that the true nature of the transaction, considering the facts and circumstances alongside the agreement terms, established the assessee's ownership of the bus. The court awarded costs to the assessee and fixed the advocate's fee accordingly.