Madras H.C : Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in directing that the assessee is entitled to depreciation in respect of the ten motor cars purchased on 30th March, 1989, and 31st March, 1989, even though the assessee had not proved the fact that the assets were used for the purpose of business during the relevant accounting year ?

High Court Of Madras

CIT vs. Maps Tours And Travels

Section 32

Asst. Year 1989-90

R. Jayasimha Babu & K. Raviraja Pandian, JJ.

Tax Case No. 502 of 1996

5th September, 2002

Counsel Appeared

T.C.A. Ramanujam, for the Revenue : None, for the Assessee

JUDGMENT

R. Jayasimha Babu, J. :

The question referred to us at the instance of the assessee is :

“Whether, on the facts and in the circumstances of the case, the Tribunal is right in law in directing that the assessee is entitled to depreciation in respect of the ten motor cars purchased on 30th March, 1989, and 31st March, 1989, even though the assessee had not proved the fact that the assets were used for the purpose of business during the relevant accounting year ?”

The assessment year is 1989-90. The assessee is a firm engaged in the business of renting out cars. It had purchased ten motor cars on 30th March, 1989, and 31st March, 1989. The formalities with regard to the registration of the vehicles, payment of road tax, etc., had not been completed before the end of 31st March, 1989. The assessee also did not produce any proof of having used those cars for its business before the end of 31st March, 1989.

The assessee’s claim for depreciation of these vehicles was negatived by the AO. That order was affirmed by the appellate authority. The Tribunal, on further appeal, however, has held that depreciation is to be allowed by observing that the assessee as a businessman would have definitely used the cars though the same was purchased on the last day of the accounting year. No evidence of any such use has been placed before the authorities or the Tribunal by the assessee.

The Supreme Court in the case of Liquidators of Pursa Ltd. vs. CIT (1954) 25 ITR 265 (SC), has held, inter alia, that the words, “used for the purpose of the business” obviously mean “used for the purpose of enabling the owner to carry on the business and earn profits in the business”. Sec. 32 of the IT Act provides for depreciation being allowed in respect of any building, machinery, plant, etc., “owned wholly or partly by the assessee and used for the purposes of the business or profession”. In this case, as the cars were bought on the last day of the accounting year, had not been registered for being brought on roads, and there was no evidence of having used those cars before the end of the accounting year in the business of the assessee, the Tribunal was clearly in error in holding that the assessee was entitled to depreciation in respect of these vehicles.

The question referred to us is answered in favour of the Revenue and against the assessee.

[Citation : 260 ITR 655]

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