Court affirms hire status of trucks, upholds depreciation claim. Appeals dismissed in favor of assessee.

The Court held that there was sufficient material before the Tribunal to establish that the trucks were given on hire and that the Tribunal correctly accepted the assessee's claim for depreciation. Consequently, the appeals were dismissed in favor of the assessee and against the revenue.

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Issues Involved:
1. Whether there was any material before the Tribunal to come to the conclusion that the trucks in question were given on hire.
2. Whether the Tribunal was correct in law in accepting the assessee's claim of depreciation on the trucks.

Issue-wise Detailed Analysis:

Issue 1: Material Before the Tribunal to Conclude Trucks Were Given on Hire
The Tribunal's discussion on whether the trucks were given on hire is detailed in paragraphs 6.19 to 6.31 of its order. The Tribunal found that the truck chassis were purchased between 03.03.1986 and 15.03.1986, and the body was built on each truck at a cost of Rs.40,000/-. The total expenses, including transport, registration, and insurance, amounted to Rs.25,73,952/-. These facts were not disputed by the revenue. The trucks were registered between 14.03.1986 and 28.03.1986, and the payments were made via demand drafts on 17th and 19th March 1986. The Tribunal noted that the expenses were duly accounted for in the assessee's books, with purchase bills, insurance cover notes, and registration books produced during the assessment proceedings. Thus, the ownership of the trucks was established based on these materials.

The Tribunal also found that the body building was done by five body builders, paid through cheques, and supported by affidavits. Although the summons to the body builders were unserved, the registration certificates and cheque payments confirmed the existence and ownership of the trucks. The Tribunal concluded that the trucks were registered after completing all formalities, and the ownership was not disputed.

Regarding the receipt of hire charges, Vijay Kumar, Accountant of Bombay Okara Cargo Ltd. and Bombay Okara Carriers and Movers (Regd.), confirmed the payment of hire charges through cheques for the period 25.03.1986 to 07.04.1986. An affidavit from Sardar Inder Singh, Director of the transport companies, supported this, stating that hiring trucks was a regular business practice. The Tribunal noted that the affidavit was uncontroverted as the assessing officer did not verify its contents.

The Tribunal also noted that the hire charges were assessed as the assessee's income for the relevant years. The trucks were sold in the accounting year relevant to the assessment year 1987-88, with the sale consideration received from finance companies. The Tribunal found no reason to doubt the genuineness of the sale.

The Tribunal observed that the assessee had been hiring out trucks and receiving hire charges since the assessment year 1984-85, with depreciation claims allowed in those years. The assessing officer had consistently assessed the hire charges and profits from truck sales as business income but disallowed depreciation claims without justification.

Issue 2: Tribunal's Acceptance of Assessee's Claim for Depreciation
The Tribunal concluded that both conditions of Section 32(1) of the Income Tax Act, 1961, were satisfied: the assessee was the owner of the trucks, and the trucks were used for the assessee's business. The Tribunal relied on the materials presented, including purchase bills, registration certificates, insurance cover notes, and affidavits, to establish ownership and usage for business purposes. The Tribunal found that the assessing officer failed to discredit the evidence or prove the claim as bogus.

Conclusion:
The Court answered both substantial questions of law in the affirmative, holding that there was material before the Tribunal to conclude that the trucks were given on hire and that the Tribunal was correct in law in accepting the assessee's claim for depreciation. Consequently, the appeals were dismissed in favor of the assessee and against the revenue.

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