TaxTMI 
TaxTMI 
2010 (1) TMI 742
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....at the respondents/assessees, which are engaged in financing of vehicle purchases, are entitled to higher rate of depreciation applicable to motor vehicles used in the business of running them on hire. Rightly or wrongly, the assessing officer allowed depreciation at the rate of 20% which is the rate applicable to motor vehicles used in business or profession by the assessees. When the appeals came up for hearing in the earlier occasion, this Court expressed doubt about the correctness of the facts stated before the lower authorities including the Tribunal and therefore, the assessing officer was directed to conduct enquiry about ownership and nature of transaction between the respondents/ assessees and customers purchasing vehicle on avail....
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....ing out commercial vehicles, were entitled to depreciation at the higher rate of 40%, as provided in Item III(2)(ii) of Part A of Appendix I to the Income Tax Rules, 1962. We notice that this judgment is rendered by the Delhi High Court following the decision of the Supreme Court in Commissioner of Income Tax v. Shaan Finance (P) Ltd. (1998 (231) ITR 308) wherein the Supreme Court held that when hiring out or leasing out of machinery itself is the business of the assessee, such hiring or leasing of machinery for use by the lessees would entitle the finance company to claim depreciation. The Supreme Court has clearly stated that while the lessee company, using the machinery in the manufacture of goods, is entitled to deduction of hire charge....
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....submitted before us that "the owner" takes in not only the registered owner, but the person in whose favour hypothecation agreement is entered into. We are unable to accept this contention because the definition 'owner' as contained in S.2(30) of the Motor Vehicles Act, 1988 (for short 'the Act') is as follows:- "2(30) "owner" means a person in whose name a motor vehicle stands registered, and where such person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase, agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement." What is clear from the above is that the ownership of the motor ve....
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....se cases, the respondents/assessees are only financiers engaged in financing of vehicles partly or fully and the amount repaid under the agreement by the registered owner is essentially repayment of loan in instalment together with agreed rate of interest. We have explained in detail the nature of transaction in the interest tax case referred above. If the respondents/assessees have only financed or purchased the vehicle and the borrowers are the registered owners, then the respondents/assessees are not entitled to claim any depreciation because they are neither the owners of the vehicle nor have they used the vehicle in their profession or business entitling them for depreciation under S.32(1) of the Act. Similarly, the repayment made by t....
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....ither given on lease or given under hire purchase agreement giving an option to the hirer to purchase it after the payment of lease rental s or hire charges during the agreed period, then the respondents/assessees will be entitled to depreciation at the higher rate. The assessing officer can easily find out the factual position because if the respondents/assessees have continued as registered owners of the vehicle, they would have been involved in large number of compensation cases under the Motor Vehicles Act in which case, they would have incurred large amounts towards the insurance of the vehicle and payment of compensation which would have been claimed as deduction in the income tax assessment itself. In any case, we find no justificati....