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2016 (8) TMI 1093 - ITAT MUMBAIClaim for depreciation on the leased vehicles - Held that:- The economic life of the vehicle depends also on its’ user, and that a period of five years, coupled with extensive user, may exhaust the life of a vehicle and, in any case, with reference to a particular (standard) operating efficiency. Even so, the fact remains that the assessee extends various lease terms to its’ clients and, two, a higher term opted by a lessee would necessarily imply a low salvage/sale value, so that the assessee is entitled to recover the principal (along with profit), so that its claim for depreciation – which is a charge toward the capital consumed, would be in any case exigible; the only caveat being that in such a case, i.e., where the depreciation is preferred on the basis of the accounting theory, the same shall have to be on a systematic basis, and not necessarily at the rates as defined under the Act. The insurance premium, though recovered from the lessee (as part of fleet management charges), is the obligation of the lessor, whose name is shown therein as the beneficiary. Confirmation from all major clients also stands furnished before the AO. In our view, therefore, the finding by the ld. CIT(A) of the character of the lease as an operating lease cannot, under the circumstances, be faulted, and the assessee, accordingly, entitled to it’s claim for depreciation on the leased vehicles. Transfer (of a part) of fleet management charges to maintenance accounts - Held that:- We observe several expenses forming part of the fleet management services, viz. providing relief vehicles, drivers, emergency breakdown services, door to door services, etc., and which are essentially period costs, so that all such costs which do not exhibit a pronounced increase with time, i.e., in relation to the age of the corresponding vehicle, would not be subject to such appropriation. The AO’s finding shall further include that in respect of reversal of the credit (on the basis of the rule being purportedly followed) as well. Reference to the said rule, we may add, is only toward the assessee following a scientific basis in allocating the revenue over the term of the lease and, accordingly would stand to be examined by the A.O., and the allowance of the assessee’s claim by us is subject to his returning positive findings. We decide accordingly.
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