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Issues Involved:
The judgment involves two main Issues: 1. Whether depreciation can be allowed on trucks purchased on hire-purchase basis. 2. Whether interest paid to partners of a firm can be treated as payment to the partners themselves. Issue 1 - Depreciation on Hire-Purchase Trucks: The court referred to a previous Division Bench decision in Addl. CIT v. General Industries Corporation [1985] 155 ITR 430, which held that depreciation is allowable to the user in a hire purchase agreement. The Tribunal was correct in allowing depreciation on trucks purchased by the assessee on hire purchase basis. Issue 2 - Interest Payment to Partners: The controversy arose from the payment of interest by one firm to another firm where the partners were common. The Income-tax Officer applied section 40(b) which overrides section 36 of the Income-tax Act, treating the payment as to the partners of the firm. However, the Tribunal held that payment of interest to another firm cannot be considered as payment to the partners of that firm under section 40(b) despite common partners. The court agreed with the Tribunal's view, emphasizing that the firm and its partners are distinct legal entities under the tax law. Therefore, payment of interest to a firm should not be equated with payment to its partners. In conclusion, the court answered both questions in the affirmative, ruling in favor of the assessee and against the Revenue.
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