Beneficial CBDT circulars bind revenue authorities and support depreciation on vehicles held under hire purchase.

A hire purchase truck remained eligible for depreciation because a beneficial CBDT circular directed allowance of depreciation on vehicles held under hire purchase, and such circulars are binding on revenue authorities. The Tribunal held that the assessee could not be denied depreciation merely on the basis that ownership was disputed under the strict legal position or because contrary judicial opinion existed. The circular had to be followed by the assessing authorities, so the withdrawal of depreciation was set aside and the assessee's claim was restored.

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Issues: Whether depreciation on a truck held under a hire purchase agreement could be withdrawn on the ground that the assessee was not the owner, and whether a CBDT circular directing allowance of depreciation in such cases was binding on the revenue authorities.

Analysis: The assessee's claim for depreciation was rejected by the AAC on the footing that a vehicle held under hire purchase was not owned by the assessee. The Tribunal noted the CBDT circular directing ITOs to grant depreciation even in respect of vehicles held under hire purchase, and relied on the principle that benevolent circulars issued by the CBDT are binding on the revenue even if they depart from the strict legal position. On that basis, the existence of contrary judicial opinion did not permit withdrawal of the benefit conferred by the circular.

Conclusion: The assessee was entitled to depreciation, and the withdrawal of depreciation by the AAC was set aside in favour of the assessee.

Ratio Decidendi: Beneficial CBDT circulars binding on the revenue must be followed and cannot be disregarded merely because they differ from the strict legal position or contrary judicial authority.

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