R.C. Sharma, A.M.: - (1.) THESE are the appeals filed by the revenue against the order of learned Commissioner (Appeals) dated 16-8-2002, for the assessment year 1999-2000, in the matter of disallowance of depreciation at higher rate of 40 per cent. As common grounds are involved in both the appeals, they are dealt simultaneously for the sake of convenience.
(2.) The brief facts of the issue are that the assessees are engaged in the business of hire purchase and lease financing. The income from hire purchase is accounted by the assessees as finance charges and from lease financing as lease rentals. In the course of assessment under section 143(3), the assessing officer observed that the assessees have leased out motor lorries and trucks in its lease business and claimed depreciation at 40 per cent thereon. The assessing officer found that the assessees are engaged in the hire purchase and lease financing business and not in the business of running motor lorries and trucks on hire; he, therefore, asked the assessee to explain justification of its claim of depreciation at 40 per cent. In its reply, the assessees submitted that motor trucks and motor lorries hired on lease by it, have been used in the transport business of running them on hire/lease by the lessess. Therefore, it is entitled to claim depreciation as per Appendix I (read with r. 5), Item No. IH(2)(ii) at 40 per cent. It was further submitted that the clients of the assessee were using the vehicles for running them on hire in transport business. The assessing officer was not convinced with the submission of the assessees and observed that no income as transport charges and freight charges was received by the assessees and it is the kind of use of the assets by the assessees which is to be considered and not the nature of use by a third party, i.e., the lessees. He, therefore, held that the rate of depreciation shall be 25 per cent only and not.40 .per cent as the lessor himself did not use the lorry in a business of running them on hire. By the impugned order, the learned Commissioner (Appeals) allowed the assessee's claim by relying on the judgment of the Hon'ble Supreme Court in the case of CIT v. Maharashtra Apex Corpn. Ltd. (2002) 173 C7R (SC) 475 : (2002) 254 ITR 98 (SC), in which it was held that the assessee, whose business consisted of leasing of machinery, is entitled to benefit of investment allowed as well as extra shift allowance of depreciation, even though it was the lessee who had used the machinery in double shift.
(3.) IT was contended by the learned departmental Representative that as per the judgment of the Hon'ble jurisdictional High Court in the case of Soma Finance & Leasing Co. Ltd. v. CIT (2000) 161 CTR (Cal) 291 : (2000) 244 ITR 440 (Cal); the assessees being lessor, are entitled to general rate of depreciation only and not at a higher rate of 40 per cent as claimed by the assessees.;