Leased vehicle depreciation cannot be denied when purchase records and lease agreements support ownership and rental income is accepted.

Depreciation on leased vehicles could not be disallowed merely because ownership was questioned where the assessee produced purchase bills and lease agreements and had treated the lease rentals as income. In a lease or hire-purchase arrangement, possession under the agreement may support recognised ownership for motor vehicle purposes, and lessee statements or unanswered summons did not, without more, rebut the documentary proof of title. Acceptance of the lease income was inconsistent with denying depreciation on the same assets absent a legally sustainable basis. The disallowance was therefore held unsustainable and the depreciation claim on the leased vehicles was upheld.

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Issues: Whether depreciation on vehicles given on lease could be disallowed on the ground that the assessee had not proved ownership, although the lease rental was accepted as income and purchase bills and lease agreements were produced.

Analysis: The assessee had produced the original purchase bills and lease agreements and had shown the lease rentals in its accounts. The dispute arose because some lessees claimed ownership and some summons went unanswered. The legal effect of the arrangement was decisive: in a lease or hire-purchase context, ownership for motor vehicles may be concurrent, and the person in possession under such agreement is also recognised as owner under the Motor Vehicles Act. Mere statements by lessees or non-response to summons did not, by themselves, rebut the assessee's documentary proof of title. Once the lease rental was accepted, the assessment could not inconsistently deny the corresponding depreciation on the same assets without a legally sustainable basis.

Conclusion: The disallowance of depreciation was unsustainable and the assessee was entitled to depreciation on the leased vehicles.

Final Conclusion: The assessment orders were set aside and the depreciation claim was upheld in full for the relevant assessment year.

Ratio Decidendi: In a leasing transaction, documentary ownership and lease agreements can establish entitlement to depreciation, and acceptance of lease rental income cannot be coupled with denial of depreciation on the same assets merely on adverse inference from lessee statements or non-response to summons.

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