The assessee company was engaged in the business of finance and leasing. The assessing authority disallowed the depreciation claimed on the vehicles leased on the ground that, the vehicles which were purchased were under financial assistance and the assessee was not the owner, therefore, he was not entitled to depreciation.
Both CIT(A) and Tribunal confirmed the order of Assessing Officer.
The issue before , Delhi High Court in Prakash Leasing Ltd vs DCIT 2012] 208 TAXMAN 204 (KAR.)/ was
Whether on the facts and circumstances of the case it is justified in law in holding that the disallowance of depreciation claim is correct, after having accepted the lease rental as income of the appellant?
The Delhi High Court held vide its order 27-02-2012 as under :
5. According to the findings recorded by the authorities, the lessees have become owners and therefore, the assessee is not entitled to the benefit of deduction in respect of those vehicles. In the nature of things, the assessee is only in the business of leasing, which necessarily involves financing for purchasing these vehicles. The vehicles were used by the lessees only. He has produced the purchase bills showing the consideration paid by him for acquiring those vehicles. He has also produced the lease agreements. Once the lessee is put in possession of the vehicle, which he has purchased in law, the lessee also becomes the owner under the provisions of the Motor Vehicles Act. The word ‘owner’ has been defined in the Motor Vehicles Act as under :-
“Section 2(30) : Owner means a person in whose name a motor vehicle has been registered and where such person is a minor, the guardian of such minor and in relation to a motor vehicle which is the subject matter of a hire purchase agreement, or an agreement of lease or an agreement of hypothecation, the person in possession of the vehicle under that agreement.”
6. Therefore, if 36 persons to whom summons issued by the department replied by saying that they are the owners of the vehicles, it does not mean that the assessee ceased to be the owner of the vehicles. The law recognizes dual ownership in respect of motor vehicles. The person, who is in possession of hire purchase agreement or agreement of lease or agreement of hypothecation, is also recognised as the owner apart from the persons in whose name the motor vehicles stand registered. Therefore, merely because the 36 persons to whom summons were issued claim that they are the owners, it does not mean that the assessee has failed to establish his claim of ownership. The purchase receipt and the lease agreement shows that the assessee is the owner and the lessee who was put in possession under the agreement is also owner under the Act. This legal aspect has not been kept in mind by the authorities.