TMI Blog2000 (11) TMI 108X X X X Extracts X X X X X X X X Extracts X X X X ..... on the facts and circumstances of the case, the Tribunal was justified in holding that the applicant was not entitled to the claim of depreciation on the consumer durables which were leased by the applicant to various customers ? 2. Whether, on the facts and circumstances, the Tribunal was right in concluding that there was no 'actual cost' incurred by the applicant as defined under section 43(1) of the Act to justify the claim of depreciation ? 3. Whether the Tribunal was right in interpreting the lease rent received as a recovery of cost of materials leased to hold that the actual cost in the hands of the applicant as 'nil' ?" The assessee is a non-banking company engaged in the business of hire purchase and lease. For the assessmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ugh their written down value had become zero. The assets on which the depreciation was claimed were consumer durables like TV, VCR, refrigerators and scooters etc., and therefore there was no question of those assets being put to any commercial use by the assessee. On these findings the assessing authority concluded that the transactions entered into by the assessee with its customers were in fact not leasing transactions inasmuch as the goods were never returned to the assessee at the end of the lease period. The Assessing Officer, therefore, declined to allow depreciation on the assets. The assessee being aggrieved against the order of the assessing authority filed an appeal before the Commissioner of Income-tax (Appeals). The Commissio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earlier part of the judgment to this court for its opinion along with the statement of case. Question No. 1 : Counsel for the assessee argued that an assessee is entitled to depreciation under section 32 of the Act on tangible assets like building, machinery, plant or furniture and intangible assets like know-how, patents, copyrights, trade marks, licences, etc., if he owns the assets and uses them for the purpose of business/profession. For this he has placed reliance on the judgment of this court in CIT v. Shaan Finance (P.) Ltd. [1993] 199 ITR 409 which was later on affirmed by the Supreme Court in CIT v. Shaan Finance (P.) Ltd. [1998] 231 ITR 308. The assessee being engaged in the business of leasing out/letting out of his articles, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee to the customer automatically. The customers are not required to return the goods to the assessee. It is like selling goods by way of equated instalments. The contention that the assessee remains the legal owner of the goods and he is engaged in the leasing business and, therefore, entitled to the depreciation on the assets leased out, would not hold good in the present case as consumer durables are actually stock-in-trade in the business of the assessee on which there is no provision for allowance of depreciation. The judgments on which the reliance is placed by counsel for the assessee are of no assistance to him as in those cases the courts were considering as to whether the assessee is entitled to investment allowance in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the respective customer in respect of the said entire cost. The cost of the goods incurred by the assessee thus becomes recoupable by it from its customers. Had the assessee been leasing out the goods then after the expiry of the lease period the leased goods would be returned to the assessee for further leasing. As pointed out earlier the consumer becomes the owner of the goods before the expiry of the lease period as he pays the purchase price of the goods along with interest by way of instalments. The assessee has not even declared the scrap value of the goods at any time during the life time of the goods or when the written down value becomes zero. In these circumstances, we are of the opinion that the Tribunal was right in holding tha ..... X X X X Extracts X X X X X X X X Extracts X X X X
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