PRAKASH LEASING LTD. Vs. DY. CIT

JUDGEMENT

(1.) THE assessee company is engaged in the business of finance and leasing. They have filed a return of income for the A.Y. 1996 -97 on 28 -11 -1996 admitting the total loss of income of Rs. 20,58,030. Subsequently, they filed a revised return on 13 -2 -1997 admitting a total loss of Rs. 20,70,930. The return was processed under section 143(1) on 20 -2 -1997 and it was accepted. The assessee company furnished another revised return on 24 -11 -1997 admitting nil income after claiming deduction under section 80M. In the memo of income, it is stated that the assessee had inadvertently claimed depreciation at the rate of 20% on 25 centers costing Rs. 1,10,87,350 which were purchased on 28 -3 -1996. In this return, the depreciation claimed on this was withdrawn. This return was also processed on 9 -3 -1998 accepting the nil return. The case was taken up for scrutiny under section 143(3) of the Act. Notices were issued along with detailed questionnaires. After hearing the assessee, the assessing authority was of the view that it is not clear whether the vehicles were purchased by the alleged lessees under hire purchase finance agreement or taken on lease. If the vehicles were purchased by this alleged lessees, the ownership of the vehicles lies only with them and not with the assessee company. Therefore, the assessee was asked to substantiate his claim that it actually owns the vehicles. The assessee contended that all the vehicles were owned by them and that they were leased out. The sale of the vehicle in the subsequent year for depreciation was under consideration. The assessee was directed to file a detailed note along with the lease agreement, payment particulars and such other evidence stating their case. The assessee furnished all the particulars sought for including the account ledger. Having gone through the same, the assessing authority held that the assessee has been financing for the purchase of vehicles, after receiving margin money from the customer. It is also clear that the interest was charged at 13% to 16% depending on the period of repayment and that the principal with interest is collected in instalments, Therefore, the claim of the assessee that the vehicles were purchased by them is not correct. Relying on the statements of 35 persons, the truck drivers, it was held that they have purchased the vehicles under the financial assistance from the assessee and, therefore, the assessee is not the owner of the 36 motor vehicles owned and, therefore, he is not entitled to depreciation. Similarly, 26 persons to whom summons had been issued did not turn up. Therefore, the assessing authority disallowed the depreciation claimed on these vehicles allegedly leased to the 26 persons. Similarly, depreciation was disallowed in respect of other vehicles to an extent of 20%. Thus, the depreciation in a sum of Rs. 75,28,720 claimed by the assessee was disallowed. Aggrieved by the said order, the assessee preferred an appeal to the CIT(A). The appellate authority was of the view that the assessee only discharged the primary onus to show that it owned the vehicles by showing original purchase bills of the vehicles and also lease agreements to show that the vehicles were leased. But when the AO sought to verify the claim and pointed out the materials to show that the claim was not correct in respect of some other claims, the onus fell on the assessee to prove the claim with additional materials in respect of these. The assessee did not produce any such evidence. Therefore, on that ground, the appellate authority confirmed the finding recorded by the AO. Aggrieved by the same, the assessee preferred an appeal to the Tribunal. The Tribunal held that the claim of depreciation has rightly been rejected by the authorities. The summons and letters issued to the addresses as given by the assessee have not been responded. The assessee did not bother to give the changed addresses to the AO nor supply the basic materials which could have established that the assessee was the owner of these assets. Therefore, it upheld the disallowance of the depreciation and dismissed the appeal. Aggrieved by these orders, the assessee is before this Court. We have heard the learned counsels for the parties.

(2.) THE appeal was admitted on 25 -10 -2005 to consider the following substantial question of law : Whether on the facts and circumstances of the case it is justified in law in holding that the disallowance of depreciation claim is correct, after having accepted the lease rental as income of the appellant ?

(3.) ACCORDING to the findings recorded by the authorities, the lessees have become owners and, therefore, the assessee is not entitled to the benefit of deduction in respect of those vehicles. In the nature of things, the assessee is only in the business of leasing, which necessarily involves financing for purchasing these vehicles. The vehicles were used by the lessees only. He has produced the purchase bills showing the consideration paid by him for acquiring those vehicles. He has also produced the lease agreements. Once the lessee is put in possession of the vehicle, which he has purchased in law, the lessee also becomes the owner under the provisions of the Motor Vehicles Act. The word owner has been defined in the Motor Vehicles Act as under :