Hire-purchase depreciation turns on beneficial ownership and effective control, not bare legal title.

Depreciation on a truck acquired under a hire-purchase arrangement could not be withdrawn merely because legal title remained with the financier. For tax purposes, the decisive factors were the hirer's possession, effective control, and beneficial enjoyment of the asset rather than bare de jure ownership. The circulars relied on in the order also supported treating hire-purchase payments as capital outlay and allowing depreciation to the hirer on the asset's initial value. On that basis, the withdrawal of depreciation was held unjustified and the allowance originally granted was restored.

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Issues: Whether depreciation on a truck acquired under a hire-purchase arrangement could be withdrawn on the ground that legal ownership remained with the financer and the assessee was only a hirer.

Analysis: The claim was examined in the light of the hire-purchase terms and the established view that, for tax purposes, possession and effective control under such an arrangement are material. The reasoning accepted that the relevant consideration is not merely de jure title but the practical ownership or beneficial enjoyment of the asset. The departmental circulars cited in the order also supported treatment of hire-purchase payments as involving capital outlay and allowance of depreciation to the hirer on the initial value.

Conclusion: The withdrawal of depreciation was unjustified and the assessee was entitled to the allowance.

Final Conclusion: The appeal succeeded and the depreciation originally allowed was restored.

Ratio Decidendi: For depreciation in a hire-purchase transaction, the hirer's possession and effective ownership for tax purposes can justify allowance of depreciation despite title remaining with the financier.

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