High Court Of Madras
CIT vs. Madan & Co.
Section Appendix I, Part I, Entry III(2)(ii)
Asst. Year 1991-92
R. Jayasimha Babu & Mrs. A. Subbulakshmy, JJ.
Tax Case No. 230 of 2001
7th September, 2001
Counsel Appeared
Mrs. Chitra Venkataraman, for the Revenue : V.D. Gopal, for the Assessee
JUDGMENT
R. JAYASIMHA BABU, J. :
The Revenue contends that when the owner of the lorry leases it to another for an agreed rental for a specific period, the owner cannot claim the higher rate of depreciation provided in Appendix I, entry III(2)(ii) under the sub-heading “Machinery and plant”, the appendix being the appendix to the IT Rules. That entry reads as under : “Motor buses, motor lorries and motor taxis used in a business of running them on hire.”
2. Owners of vehicles who used it for their own purposes are allowed to claim depreciation at the normal rates. Owners of vehicles mentioned in the entry when they allow it to be used for a price are allowed to obtain a higher rate of depreciation. The distinction is based upon the fact that a person who obtains the temporary right to use of the vehicle on payment of a charge price is likely to, by the nature of his user, such user being for the purpose of the hirer and not the owner, depreciate the value of the vehicle faster. All such vehicles, which are so used, are likely to undergo a little more rough use than vehicles owned by and used for the personal purposes of the owner. It is in recognition of that fact of the depreciation occurring at a faster rate for such vehicles that the law provides for the higher rate of depreciation.
The fact that the assessee here chose to lease out the vehicle does not on that score disentitle the assessee to claim the benefit of the higher depreciation. The lease of the vehicle enables the lessee to have possession of the vehicle, and have the right to use the vehicle as the lessee wishes, subject to the terms of any contract between the parties. The lessee during the period of user is also likely to have to maintain the vehicle subject to the terms of the contract between the parties. For having the benefit of the user of the vehicle, the lessee is required to pay a price which is the lease amount, whether called rent or hire charges. The terminology used for describing the payment makes no difference in substance. What is paid is an amount in consideration of the right obtained from the owner to have the use of the vehicle for the benefit of the lessee for the stated period, and, or the stated purpose, whether or not by employing his own drivers, and whether or not also undertaking to maintain the vehicle during the period of the lease or hire.
The word “hire” used in this entry is only meant to denote that the use of the vehicle is not by the owner himself for his own purposes, but it is given to another for use for a limited period of that other for a consideration. For the purpose of this entry there is no qualitative difference between lease of the vehicle for a specified period for consideration and letting the vehicle on hire for short duration on payment of hire charges.
The Tribunal, in our view, has rightly held that when the owner-assessee leased out the motor lorries owned by the assessee, and received consideration therefor in the form of lease rentals, the assessee was using those vehicles in the business of running them on hire and was, therefore, entitled to the higher rate of depreciation. The question referred for the asst. yr. 1991-92. “Whether, the Tribunal was right in law in granting higher depreciation to trucks as falling under entry III(2)(ii) of Appendix I to the IT Rules ?” is therefore, answered in favour of the assessee, and against the Revenue.
[Citation : 254 ITR 445]