LAW FOR ALL

claim of the assessee for depreciation under Section 32 of the Income Tax Act, 1961 (for short “the Act”).The assessee is a public limited company, classified by the Reserve Bank of India (RBI) as a non-banking finance company. It is engaged in the business of hire purchase, leasing and real estate etc. The vehicles, on which depreciation was claimed, are stated to have been purchased by the assessee against direct payment to the manufacturers. The assessee, as a part of its business, leased out these vehicles to its customers and thereafter, had no physical affiliation with the vehicles. In fact, lessees were registered as the owners of the vehicles, in the certificate of registration issued under the Motor Vehicles Act, 1988 (hereinafter referred to as “the MV Act”). = where the business of the assessee consists of hiring out machinery and/ or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purpose of business. 40. In the present case, the business of the assessee consists of hiring out machinery and trucks where the income derived by the assessee from hiring of such machinery is business income. Therefore, the assessee- appellant viz. ICDS should be considered as having used the trucks for the purpose of business. 41. It was further brought to our notice that the Hon’ble Karnataka High Court in its judgment in ITRC No. 789 of 1998 for the asst. year 1986- 87 in the case of the assessee- appellant itself (viz. ICDS) has already decided the issue in question in favour of the assessee, confirming the decision of the CIT (A) and the ITAT holding that the assessee company is entitled to the investment allowance and additional depreciation. In this judgment of the Karnataka High Court the decision of the Supreme Court reported in 231 ITR 308 was relied upon. Therefore we have no hesitation to hold that the appellant- company is entitled to a higher rate of depreciation at 50% on the trucks leased out by it. We therefore, reverse the orders of the CIT (Appeals) on this issue.” 32. For the foregoing reasons, in our opinion, the High Court erred in law in reversing the decision of the Tribunal. Consequently, the appeals are allowed; the impugned judgments are set aside and the substantial questions of law framed by the High Court, extracted in para 6 (supra), are answered in favour of the assessee and against the Revenue. There will, however, be no order as to costs.