TaxTMI 
TaxTMI 
2011 (4) TMI 40
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....peals, the Court had formulated the following question of law in each of the appeals: "Whether, on the facts and in the circumstances of the case, the Income-tax Appellate Tribunal was right in law in holding that the appellant was not entitled to depreciation allowance under Entry No. III(2)(ii) of Appendix-I of Income-tax Rules, 1962, in respect of vehicles given on lease?" 4. The relevant assessment years are 1989-90, 1990-91, 1991-92 and 1992-93 respectively. The sole issue in the present cases relates to the claim of depreciation. The assessee company is a leasing company which is engaged in leasing of plant and machinery, motor-cars, etc. to its clients. The assessee had claimed depreciation on motor vehicles at the rate of 50 per cent. The Assessing Officer, while framing assessment under section 143(3) of the Act, held that as the vehicles were not run on hire by the assessee, depreciation on the written down value was allowable at 33 per cent and not 50 per cent as claimed. Being aggrieved, the assessee preferred appeals before the Commissioner (Appeals) but did not succeed. The assessee carried the matters in second appeals before the Tribunal, but failed. 5. Mr.....
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....les in question on lease. Inviting attention to the question formulated at the time of admitting the appeal, it was submitted that from the very frame of the question it is apparent that it is the specific case of the appellant that the vehicles have been given on lease. According to the learned counsel, it is not the case of the appellant that the vehicles are given on hire and as such, in second appeal the assessee cannot be permitted to change the factual matrix. It was submitted that the source of income of assessee is lease rent and not hire charges and that all the authorities below have recorded findings of fact to the effect that the assessee is not carrying on the business of hire. Inviting attention to Entry No. III of Appendix-I of the Rules, it was submitted that from the language of the entry it is apparent that the same does not contain the expression 'lease' and that while interpreting the said entry, the Court cannot change its language by interpreting 'hire' to mean 'lease' as the Legislature has consciously used the word 'hire'. Reliance was placed upon the decision of the Supreme Court in the case of CIT v. Gupta Global Exim (P.) Ltd. [2008] 305 ITR 1322, wherein....
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.... a motor car running on hire cannot be equated with a motor car running on lease and accordingly did not find any infirmity in the order passed by the Commissioner (Appeals). 8. Before considering the merits of the case, it may be pertinent to refer to the case law in this regard. On behalf of the appellant the learned advocate has placed reliance on the decision of the Karnataka High Court in the case of BPL Sanyo Finance (P.) Ltd. (supra) wherein the Court had held that when the assessee was carrying on the business of hiring its vehicles and was not using them for its own business, it was immaterial whether the vehicles were hired to a sister concern or to a third party or to a total stranger. The Court accordingly held that the assessee therein was entitled to 40 per cent depreciation as provided in item III(3)(ii) of Appendix-I to the Rules. Reliance has also been placed upon the decision of the Kerala High Court in the case of Balakrishna Transports (supra), wherein the Court has held that the real question was that whether the assessee engaged in the business of plying vehicles as an activity used the concerned vehicles for hire or not. The Court found that the assessee w....
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....out the entitlement to depreciation at 40 per cent and 30 per cent. In the case of motor buses and motor lorries other than those used in a business of running them on hire, they are entitled to depreciation at 30 per cent while the motor buses, motor lorries and motor taxis used in a business of running them on hire are entitled to depreciation at 40 per cent. If a truck is not used for hiring but for the purpose of one's own business, then it would be entitled to depreciation at 30 per cent and not 40 per cent. The Court observed that the limit of 40 per cent depreciation to motor buses, motor lorries and motor taxis is provided because more running is required in the business of running them on hire. 11. The Bombay High Court in the case of Kotak Mahindra Finance Ltd. v. Deputy CIT [2004] 265 ITR 1143, was dealing with a case similar to the present one. The assessee there in was a leasing and financing company having its income from lease rent, bill discounting and service charges. The Court held that there is a basic difference between "lease" and "hire". This difference is borne out by the basic difference in the meaning of the expression "property" and the expression "poss....