The Commissioner Of Income-Tax, Central-Ii, Mumbai Appellant v. M/S.mazda Industries & Leasing Ltd.,Mumbai Respondent

IN THE HIGH COURT OF JUDICATURE AT BOMBAYORIGINAL SIDE INCOME TAX APPEAL NO.1270 OF 2000 The Commissioner of Income-tax,Central-II, MumbaiAppellant vs. M/s.Mazda Industries & Leasing Ltd.,MumbaiRespondent Mr. K. R. Chaudhary i/b. M/s. R. N. Bandopadhyay for the appellant. P.C.: CORAM : R.M. LODHA &J. P. DEVADHAR,JJ.Date :12[h] August 2004 Heard Mr. Chaudhary, the learned counsel for the revenue. 2.The Tribunal in its order considered the matter thus: “3.On due consideration of the matter, we agreewith the view taken by the CIT(A). By allowingdepreciation at 30% AO is not disputing that theassessee is the owner of the assets. What remains is theuser of the asset. It is not disputed that the asset is usedfor running it on hire. Item IIIE(1A) clearly mentionsthat the asset specified therein used in a business ofrunning them on hire will command a depreciation at40%. On the fact that M/s. Urmila was running it hire,CIT (A) was justified in allowing the claim of the assessee. We uphold the same. 4. Next ground in the appeal is against allowingdepreciation on assets given on hire purchase basis.The claim was made on the ground that the ownershipof these assets denied with the assessee and thatdepreciation had not been claimed by the hirers andthat they had the option to purchase the asset after theexpiry of the term of hire purchase on payment of Rs.1/-. AO observed that the assets given on hire purchasehad been shown as stock-in-trade by the assessee in itsbalance sheet. According to him, therefore, thequestion of giving depreciation on assets shown asstock-in-trade did not arise. CIT (A) accepted theclaim of the assessee on the ground that the title of theasset remained with the assessee till the option wasexercised by the hirer. 5.We have carefully considered the matter. It islaw that accounting entry does not determine theallowability or otherwise of an expenditure under theIncome Tax Act. The assessee may have classified theassets given on hire purchase basis as stock in trade onthe basis of accounting principles and/or convenience.However, the fact remains that these are capital goodson which depreciation is allowable and the fact thathirer have not claimed the depreciation thereon, wouldentitle the assessee to claim depreciation. It is alsonoteworthy that in case of motor trailors, AO himselfhas allowed depreciation to the assessee. Thus, there isno reason to attach the double stands and hence weuphold the order of the CIT(A) to allow depreciation onassets given on hire purchase basis.” 3.The consideration of the mater by the Tribunal does not suffer fromany error of law. 5.The appeal is dismissed in limine. (R. M. LODHA, J.) (J. P. DEVADHAR,J.)