TMI Blog2005 (8) TMI 569X X X X Extracts X X X X X X X X Extracts X X X X ..... briefly are that the assessee-company was engaged in these years in the business of leasing and other related financial activities. For assessment year 1995-96, the assessee claimed depreciation on hire-purchase assets to the tune of Rs. 2,46,03,665. The assessee explained that it was a financing company and assets owned by it were given on hire to various parties under hire-purchase agreements entered into with them. These agreements provided that on payment of all instalments and exercise of option by the hirer the title or interest in the property would pass to the hirer. Until then the assessee was the true owner of the assets and, therefore, the assessee was claiming depreciation in its returns of income though no provision had been made in the books of account. In support of this contention, the assessee relied on the judgments in Sardar Tara Singh v. CIT [1963] 47 ITR 756 (MP), CIT v. Hindustan Cold Storage Refrigeration (P.) Ltd. [1976] 103 ITR 455 (Delhi) and Addl. CIT v. Mercury General Corpn. (P.) Ltd. [1982] 133 ITR 525 (Delhi). The assessee argued that as per the provisions of section 32 depreciation was allowable on the assets owned by an assessee and u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assets ownership was governed by possession. The assessee-company was required to file confirmation from the hire-purchasers to confirm whether they had exercised option to purchase assets at the end of termination of hire-purchase agreement or not. The assessee failed to file such confirmation even after an opportunity had been given to him. Based on these facts the learned Assessing Officer disallowed the assessee s claim of depreciation. 6. Arguments of the assessee and the findings of the learned CIT (Appeals) are the same as already enumerated by us in relation to assessment year 1995-96. As a matter of fact the learned CIT (Appeals) has passed on 28-2-2001 a consolidated order for assessment years 1995-96 and 1996-97. 7. For assessment year 1997-98 the assessee-company claimed depreciation of Rs. 11,73,13,134 on the vehicles supplied under hire-purchase finance agreements. Admittedly the assessee had not provided any depreciation on those assets in its books of account. However, during the course of assessment proceedings the assessee relied upon hire-purchase agreements and stated that till the payment of last instalment and exercise of option by the hirer, the tit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... used by the hirer in the capacity of a bailee without any right of ownership in the asset. The learned CIT (Appeals), therefore, held that there was no extinguishment of the ownership right of the lessor in the hired assets in the business of leasing. There was no element of sale and the assets belonged to the lessor on which depreciation was admissible to the lessor. The learned CIT (Appeals), therefore, directed the Assessing Officer to allow the assessee depreciation as claimed. 10. Aggrieved by the orders of the learned CIT (Appeals) for assessment years 1995-96 and 1996-97 the assessee is in appeal before us while for assessment year 1997-98 it is the revenue who is the appellant. The facts and issue involved in all these three appeals are, however, one and the same. 11. During the course of hearing before us the learned counsel for the assessee reiterated his contention that under the agreement the hirer could become owner of the vehicle only on payment of the last instalment and only after he exercised his option to purchase the vehicle. He argued till then the ownership vested in the assessee. In view of the judgment of Hon ble Supreme Court in the case of Shaan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pn. [1985] 155 ITR 430 as well as CIT v. Nagpur Golden Transport Co. [1998] 233 ITR 389. The view taken by Hon ble Delhi High Court was also supported by the judgment of Hon ble Supreme Court in Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 and CIT v. Mirza Alaullaha Baig [1993] 202 ITR 291 (Bom.). As to the rule of consistency the learned D.R. said that for assessment year 1997-98 the revenue was in appeal and there was no reason to hold that the revenue had given up its stand. 13. We have carefully considered the rival submissions. In our opinion, the issue stands squarely covered in favour of revenue and against the assessee by the judgments of Hon ble Delhi High Court. In the case of General Industries Corpn. ( supra ) the Hon ble Delhi High Court decided upon the issue in the following words : "On a careful examination of the nature of the hire-purchase agreement, it can be said that though it is worded as a hiring agreement which matures into a sale, it can also be regarded as a sale on instalments. The property passes in such agreements on the payment of the last instalment. However, during the period of hire, the purchaser is also paying the price, so ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bunal was right in law in allowing depreciation on trucks purchased by the assessee on hire-purchase basis. Relying upon the earlier judgment in the case of General Industries Corpn. ( supra ), Hon ble Delhi High Court answered the question in the affirmative in favour of the assessee and against the revenue. Thus, both in the case of General Industries Corpn. ( supra ) as well as Nagpur Golden Transport Co. ( supra ), Delhi High Court has held that in a hire-purchase scheme, the hirer would be entitled to claim depreciation. These judgments clearly go against the contention of the learned counsel for the assessee that until the last instalment was paid, the ownership vested in the assessee and not in the hirer. It would go without saying that the same assets cannot be liable to depreciation allowance in the hands of two different assessees at the same time. Either the lessor- cum -seller or the hirer- cum -buyer could be entitled to depreciation allowance. As Hon ble High Court have held the hirer- cum -purchaser to be rightly entitled to depreciation allowance, as a corollary it follows that the assessee is not entitled to claim any depreciation allowance. 14. This view ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Owners." It is seen that as long as the hirer discharge his obligation he had an uninterrupted right over the vehicles and the assessee was eventually to loose all right, title and interest in the vehicle. 15. The view taken by the Assessing Officer in the assessment orders is amply supported by the judgment of Hon ble Supreme Court in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775. In that judgment the assessee was in possession of a building on part payment of price. The building not registered in the name of the assessee was not considered to be a circumstance coming in the way of the assessee being treated as owner of building for purposes of section 32. For all purposes the assessee s case is hit by the judgment in the case of Mysore Minerals Ltd. ( supra ). The only difference is that in that case it was an immovable property; whereas in the present case the asset in question is a movable property. In that judgment Hon ble Supreme Court held as under : "It is well-settled that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting section 32 of the Act would be best ..... X X X X Extracts X X X X X X X X Extracts X X X X
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