TaxTMI 
TaxTMI 
2002 (11) TMI 76
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.... proceed to dispose of all the appeals at this stage itself. The appeals pertain to different assessment years, but there being no material difference in the language of the relevant provisions, for the sake of convenience, we shall take the facts, as found by the Tribunal in I.T.A. No. 16 of 2002, as illustrative. The assessee-company, like the other assessees, is a finance company engaged in the business of leasing out commercial vehicles. In its profit and loss account for the assessment year 1988-89 it claimed depreciation at 40 per cent. on the commercial vehicles leased out by it, which, according to the assessee, were being actually used in the business of running them on hire. Since the Assessing Officer was not satisfied with the assessee's claim, he required the assessee to show cause as to why the depreciation allowance should not be allowed at the normal rate of 25 per cent. Rejecting the submissions of the assessee that the leased out commercial vehicles were actually used in the business of running them on hire and thus it was entitled to the higher rate of depreciation, the Assessing Officer allowed the depreciation at 25 per cent. on the ground that the vehicles h....
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....sed out vehicles were not being used for running them on hire. In support of their stand, learned counsel have placed reliance on the decisions of the Andhra Pradesh High Court in A.M. Constructions' case [1989] 238 ITR 775, the Guwahati High Court in A.B.C. India Ltd. v. CIT [1997] 226 ITR 914, the Madhya Pradesh High Court in Income-tax Commissioner v. Anupchand and Co. [1999] 239 ITR 466 and the Madras High Court in CIT v. Madan and Co. [2002] 254 ITR 445. To appreciate the rival contentions, it would be necessary to notice the relevant provisions. Section 32 of the Act (as on April 1, 1988) reads as follows: "32. Depreciation.--(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed--... (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed: Provided that where the actual cost of any machinery or plant does not exceed five thousand rupees, the actual cost thereof shall be allowed as a deduction in respect of the previous year in which su....
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....ts, the assessee's ownership thereof and these being used in running them on hire are not in dispute. The only objection of the Revenue to the grant of higher rate of depreciation is that the assessee is not himself running these vehicles on hire. Therefore, the short question for consideration is whether for availing of the higher rate of depreciation, it is mandatory that the said vehicles are not merely used in a business of running them on hire but the assessee should himself use these vehicles for the said purpose? In our opinion, on a bare reading of the aforenoted provisions, the answer to the question has to be in the negative. In support of the Revenue's stand, Mr. Khanna has laid too much emphasis on the expression "as are used for the purposes of the business or profession of the assessee" appearing in rule 5. The submission is that it is the nature of the assessee's business which is the determining factor for rate of depreciation. If the assessee, even though the owner of the vehicles, does not use these for running them on hire himself, the higher rate of depreciation cannot be granted. We are unable to persuade ourselves to agree with learned counsel. The cardinal ....
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....pulated in section 32, apart from the other two conditions indicated above, which all the assessees indubitably fulfil. At this juncture we may, with advantage, refer to the decision of the apex court in Shaan Finance P. Ltd. [1998] 231 ITR 308, strongly relied upon by learned counsel for the assessees. The question which came up for consideration in that case was whether for grant of investment allowance under section 32A of the Act in respect of the specified machinery, it was necessary that the assessee should not merely use the machinery for the purpose of his business but should "himself" use it for the purpose of manufacture, etc. To appreciate the ratio of the said decision, it would be appropriate to extract the relevant portion of section 32A, which reads as follows: "32A. (1) In respect of a ship or an aircraft or machinery or plant specified in sub-section (2), which is owned by the assessee and is wholly used for the purposes of the business carried on by him... Provided that--... (2) The ship or aircraft or machinery or plant referred to in sub-section (1) shall be the following, namely: (a) a new ship or new aircraft acquired after the 31st day of March, 1976, by....