Case Law Details

Case Name : Dy. CIT Vs Pradip N Desai (Gujarat High Court)
Appeal Number : Tax Case (Appeal) No. 417 of 2003
Date of Judgement/Order : 06/07/2011
Related Assessment Year :
Courts : All High Courts (3789) Gujarat High Court (318)

Dy. CIT Vs Pradip N Desai (Gujarat High Court)- The assessee company is a leasing company which is engaged in leasing of plant and machinery, motor cars, etc. to its client. It is neither the case of the assessee nor is there anything on record to indicate that the assessee uses the vehicles in question in its business of transportation or that the assessee is engaged in the business of hire.

In the circumstances, the basic requirement for being entitled to depreciation at the higher rate of 50 per cent under Entry No. III (2)(ii) of Appendix-I to the Rules is not satisfied by the appellant. In other words, appellant does not pass the test for the applicability of Entry No. III(2)(ii) of Appendix-I appended to the Rules, viz., the user of the vehicles in the business of the assessee of transportation or the business of hire. The Tribunal was, therefore, justified in holding that the appellant is entitled to depreciation at the rate of 33.33 per cent and not at the rate of 50 per cent as claimed by it.

IN THE HIGH COURT OF GUJARAT AT AHMEDABAD

TAX APPEAL No. 417 of 2003

DY.C.I.T.(A) – Appellant(s)

Vs

PRADIPBHAI NATVERLAL DESAI (HUF) – Opponent(s)

Date : 06/07/2011

ORAL JUDGEMENT

(Per : HONOURABLE MR. JUSTICE AKIL KURESHI)

1. Revenue has filed this appeal challenging the judgment of the Tribunal dated 15.3.2002. While admitting the appeal on 19.11.2003, a Division Bench of this Court framed the question in following manner:

“Whether the appellate tribunal is right in law and on facts in holding that the assessee is entitled to depreciation at the higher rate of 40% though the assessee had leased out the truck and received lease rent thereon and thereby the vehicles were not used in a business of running on hire, as per Appendix No.I, appended to Rule 5 of the Income-tax Rules, 1962?”

2. Under identical circumstances, similar question came up for consideration before this Bench in Tax Appeal No.311 of 2001. By judgement passed today, we allowed the Revenue’s appeal and reversed the judgment of the Tribunal in following terms:

“9. Having thus heard learned counsel for the parties, we are of the opinion that the issue is squarely covered by the decision of the Division Bench of this Court in Tax Appeal No.100 of 2000. In the said case before the Division Bench, facts were that the assessee, a lessee company, was engaged in the business of leasing plant and machinery, motor cars, etc. to its clients. The assessee had claimed depreciation on motor vehicles at a higher rate of 50%, which was denied by the Assessing Officer on the ground that the vehicles were not run on hire by the assessee. The issue ultimately reached the Tribunal which confirmed the view of the Revenue authorities denying higher depreciation to the assessee on the terms that the assessee was not carrying on the business of hiring of the vehicle. Bench, referring to the decision of the Karnataka High Court in the case of Commissioner of Income Tax and another vs. BPL Sanyo Finance Private Ltd. reported in [2006] 287 ITR 69 and decision of the Bombay High Court in the case of Kotak Mahindra Finance Ltd. Vs Deputy Commissioner of Income-Tax reported in [2004] 265 ITR 114 and other decisions of other High Courts , held as under:

“13. In the facts of the present case, as noticed hereinabove, all the authorities below have recorded that the assessee company is a leasing company which is engaged in leasing of plant and machinery, motor cars, etc. to its client. It is neither the case of the assessee nor is there anything on record to indicate that the assessee uses the vehicles in question in its business of transportation or that the assessee is engaged in the business of hire. In the circumstances, the basic requirement for being entitled to depreciation at the higher rate of 50 per cent under Entry No.III (2)(ii) of Appendix-I to the Rules is not satisfied by the appellant. In other words, appellant does not pass the test for the applicability of Entry No. III(2)(ii) of Appendix-I appended to the Rules, viz., the user of the vehicles in the business of the assessee of transportation or the business of hire. The Tribunal was, therefore, justified in holding that the appellant is entitled to depreciation at the rate of 33.33 per cent and not at the rate of 50 per cent as claimed by it.

14. In the light of the above discussion, the question is answered in the affirmative, that is, in favour of the revenue and against the appellant-assessee. 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 the Income Tax Rules, 1962, in respect of vehicles given on lease. The appeals are accordingly dismissed with no order as to costs. “

3. Without giving separate elaborate reasons, the question is answered in favour of the Revenue. The appeal is allowed accordingly.

(Akil Kureshi, J.)

(Ms. Sonia Gokani, J.)

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