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Depreciation should be charged @ 33.33% and not 50% on vehicles given on lease
Depreciation should be charged @ 33.33% and not 50% on vehicles given on lease
Assessee leasing company claimed 50% depreciation on motor vehicles. AO held that vehicles not run for hire, and only 33.33% depreciation allowed. Commissioner (Appeals) and Tribunal upheld AO's oredr. High Court held that Entry No 111(2)(ii) of Appendix to the Income Tax Rules not satisfied by the assessee. Appeal dismissed. -MB-10960
1. The assessee-company, was engaged in leasing of plant and machinery, motor-cars, etc., to its clients, and claimed depreciation on motor vehicles at the rate of 50 per cent.
2. The Assessing Officer 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 at 50 per cent as claimed.
3. On appeal, the Commissioner (Appeals) upheld the order of the Assessing Officer.
4. The Tribunal also upheld the order of the Commissioner (Appeals) holding that a motor car running on hire cannot be equated with a motor car running on lease.
5. The High Court on appeal held as under:
The controversy involved in the instant case stood more or less concluded by the decision of the Supreme Court in the case of CIT v. Gupta Global Exim (P.) Ltd. [2008] wherein the Court has held that under item (2)(ii) of heading III of the depreciation table given in Appendix I to the Income-tax Rules, 1962, the higher rate of depreciation is admissible on motor trucks used in a business of running them on hire. Therefore, the user of the same in the business of the assessee of transportation is the test.
All the authorities below had recorded that the assessee-company was a leasing company which was engaged in leasing of plant and machinery, motor cars, etc. to its client. It was neither the case of the assessee nor was there anything on record to indicate that the assessee used the vehicles in question in its business of transportation or that the assessee was 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 to the Rules was not satisfied by the assessee. In other words, the assessee did not pass the test for the applicability of Entry No. III(2)(ii) of Appendix 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 assessee was entitled to depreciation at the rate of 33.33 per cent and not at the rate of 50 per cent as claimed by it.
