CHAGANLAL AUTOMOBILES Vs. COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE Income-tax Appellate Tribunal, Jaipur Bench, Jaipur, by its order dated September 14, 1977, referred the following question of law arising out of its order dated September 26, 1973, to this court for its opinion :

(2.) THE assessee is a partnership firm engaged in the business of reconditioning of automobile engines. In the year 1967, the assessee imported a crankshaft regrinding machine from U.S.S.R., for which finance was provided by M/s. National Small Scale Industries Corporation Ltd., New Delhi, (hereinafter referred to as " the Corporation "). THE crankshaft machine was purchased under a hire purchase agreement dated June 7, 1967. wherein the Corporation became the owner of the said machine and it agreed that the assessee would use the machine for a period of 3 years as the hirer thereof. THE total price of the machine was settled at Rs. 1,00,767.08 out of which a sum of Rs. 16,957 was paid by the assessee before the execution of the hire purchase agreement, while the remaining amount of Rs. 89,810.08 was made payable in 13 equal instalments due on 1st September and 1st March of every year, beginning from September 1, 1968. THE agreement provided that if the hire charges were regularly paid by the hirer during the period of three years, the hirer could exercise his option for the purchase of the said machine ; but if during the period of payment of hire charges, the hirer failed to make payment of any of the instalments, the Corporation being the owner could terminate the hiring without any prior notice and take possession of the machine in question. Thus, the hirer could exercise the option to purchase the machine only after the expiry of 3 years of the hiring of the machine in case the hire charges were paid regularly and the remaining amount towards the purchase price of the machine was paid at the end of the third year or thereafter.

(3.) ON the other hand, learned counsel for the Revenue submitted that even in accordance with the terms of the hire purchase agreement, the assessee-firm had not become the owner of the machinery until September 17, 1974, when the ownership was transferred to the assessee-firm by the Corporation after the payment of the entire sale price thereof, by way of hire purchase instalments. It was submitted that the title to the property should have passed to the person who claims the ownership of the machinery, plant or furniture, for the purposes of claiming depreciation under Section 32 of the Act.