JUDGMENT
S.H. Kapadia, J.
Being aggrieved by the decision of the Tribunal dated 20-8-2001 in ITA No. 9987/Bom/92 in respect of assessment year 1989-90, the assessee has come by way of appeal under section 260A of the Income Tax Act, 1961. This appeal involves interpretation of an Entry in Appendix I ‘Depreciation Table’, which prescribes Table of Rates at which depreciation is admissible. The entry reads as under :
“III. Machinery and Plant
(1) Machinery and plant other than those covered by sub-items (2) and (3) below
(2) (i) Aeroplanes-Aeroengines
(ii) Motor buses, motor lorries and motor taxis used in a business of running them on hire.”
Facts
2. Return of income was filed on 6-10-1989 by the assessee declaring its total income of Rs. 73,47,279 as profits under section 115J. The assessee is a leasing and financing company having its income from lease rent, bill discounting and service charges. During the course of hearing, certain issues were raised. One of the issues was concerning depreciation. The assessee had claimed 50% depreciation on trucks, buses and motor vans. This was disallowed. At this stage, it may be clarified that in this case, depreciation was allowed at 33.33% under the above Entry. However, the assessee had claimed higher depreciation under the above Entry. The assessing officer took the view that the higher depreciation was allowable only in the case of motor buses, motor lorries and motor taxis used in the business of running them on hire. That, if the motor buses, motor lorries and motor taxis were not used in the business of running them on hire, they were entitled to normal depreciation at the rate of 33.33% of the written down value which was admissible in respect of plant and machinery. That, in this case according to the assessing officer, no evidence has been shown to prove that these motor buses, motor lorries and motor taxis have been used in the business of running them on hire. Hence, the assessee’s claim of higher depreciation at the rate of 50% of written down value came to be rejected and what was allowed was normal depreciation at the rate of 33.33% of the written down value. This view has been confirmed by the First Appellate Authority and the Tribunal which took the view that the assessee was in the business of leasing and financing having its income from lease rent, bill discounting and service charges. It has been held by the Tribunal that by merely leasing out motor trucks, motor buses and motor vans, it cannot be stated that the assessee had used them in the business of running them on hire. That, the assessee did not run them on hire nor did it carry on the business of running them on hire. Hence, the Tribunal took the view that the claim of depreciation at 50% cannot be allowed. However, it was argued in the alternative by the assessee that even if the lessees of the assessee had used motor trucks, motor buses and motor vans in the business of running them on hire, the assessee was entitled to a higher rate of depreciation in view of the judgment of the Supreme Court in the case of CIT v. Shaan Finance (P) Ltd. (1998) 231 ITR 308 (SC). This alternative contention of the assessee was accepted by the Tribunal subject to an enquiry by the assessing officer, who is directed to ascertain whether the motor trucks, motor buses and motor vans leased out by the assessee were used by the lessees in the business of running them on hire. It is against this Remand order that the department has filed an appeal being ITA No. 251 of 2002. However, in this appeal filed by the assessee, the question which arises for determination is as follows:
“Whether on interpretation of the above Entry, the Tribunal was right in holding that the assessee was not entitled to higher depreciation as the assessee did not run motor trucks, motor buses and motor vans on hire nor did it carry on the business of running them on hire
Arguments
3. Mr. Irani learned counsel appearing on behalf of the assessee, submits that in the above Entry, the words used are as follows. “Motor buses, motor lorries and motor taxis used in the business of running them on hire”. (Emphasis here italicised in print, supplied). He contended that for the purposes of this Entry, there is no difference between the connotation of the word “Hire” and the word “Lease”. He contended that for the purposes of this Entry, the word “Lease” and the word “Hire” mean the same thing. That, there was no difference between the two. He submitted that his argument was restricted to the scope of this Entry. He contended that in general law, there is a difference between these two words but, when it comes to this particular entry being interpreted, there is no difference in the meaning to be assigned to the word “Hire”. That, the assessee buys motor buses, motor lorries and motor taxis and these are let out to the lessees. That, merely because the assessee is a leasing and financing company cannot deprive the assessee of higher depreciation under the above Entry. In this connection, he relied upon the judgment of the Madras High Court in the case of CIT v. Madan & Co. (2002) 254 ITR 445 (Mad). He contended that the word ‘Hire” used in the above Entry was only to denote that the use of the vehicles is not by the owner himself for his own purposes but it is given to another for use for a limited period for consideration and for this purpose there was no qualitative difference between Lease of the vehicles for a specified period for consideration and letting the vehicle on Hire for a short duration on payment of higher charges. Mr. Irani also referred to the dictionary meaning of the word “Hire” to mean letting out or leasing out or employing the asset. In this connection, he referred to the meaning of the word “Hire” in The Random House Dictionary of the English Language and in The Law Lexicon by P. Ramanatha Aiyar and he contended that “Lease” was similar to “Hire”. That, the “Lease” was a contract between the parties by which the transferor conveyed the property to the other for a prescribed term in consideration of a periodic payment. He contended that on construct` on of the above Entry in the light of the judgment of the Madras High Court and in the light of the meaning assigned by the Dictionary, there is no qualitative difference between the words “hire” and “lease”. That, even assuming for the sake of argument that there was some doubt of interpretation of the above Entry then, the court should examine the object of the above Entry. He, therefore, submitted that the Tribunal erred in rejecting the argument of the assessee that the word “Hire” was qualitatively having the same meaning of the word “Lease” for the purpose of the above Entry. In the alternative, he contended that in this case we are concerned with assessment year 1989-90. He contended that for the assessment year 1989-90, depreciation was to be given on written down value of the block of assets. It was pointed out that admittedly for these very assets, higher depreciation was granted to the assessee for the assessment year 1988-89 and, therefore, it was incumbent on the department to grant depreciation thereon to the assessee at the same rate in the assessment year in question, i.e., 1989-90. It was argued that one the said assets were found to be eligible for depreciation at a higher rate during the earlier years, they were to be regarded as separate and identifiable block of assets which were eligible for depreciation at the same rate in the subsequent years. He submitted that this alternative argument was not at all considered by the Tribunal. He, therefore, contended that the assessee was entitled to higher depreciation at 50% of the written down value and not at 33.33%.
In reply, Mr. R.V. Desai, learned senior counsel appearing on behalf of the department, submitted that the assessee was in the business of leasing and financing. That, its income was from lease rent, bill discounting and service charges. He contended that the benefit of higher depreciation was admissible only for the vehicles used for business of “Hire”. That, in this case, the assessee was deriving its income from leasing and financing. That, in this case, the assessee. As not in the business of running the vehicles on hire and, merely because the assessee has leased them out, in cannot be stated that he had used the vehicles in the business of running them on hire. In this connection reliance was placed on the judgment of the Madhya Pradesh High Court in the case of ITC v. Anupchand & Co. (1999) 239 ITR 466 (MP). He also relied upon the judgment of the Madhya Pradesh High Court in the case of Kailash Chand Bagaria v. CIT (2001) 249 ITR 720 (MP). Mr. Desai contended that the Tribunal was right in coming to the conclusion that the above Entry did not apply to the case of the assessee as the assessee has merely leased out the vehicles and that the assessee did not run the vehicles on Hire nor did the assessee carry on the business of running them on Hire. He, therefore, contended that there was no reason for the Tribunal to examine the alternative argument of the assessee as stated above. He contended that under the Income Tax Act, each assessment year is a separate event. That, merely because higher depreciation was wrongly granted for assessment year 1988-89, did not bind the department to grant the same depreciation for the assessment year 1989-90. He contended that the principles analogous to res judicata do not apply to income-tax proceedings.
Findings
4. We do not find any merit in this appeal. There is a basic difference between “Lease” and “Hire”. This difference is borne out by the basic difference in the meaning of the expression “Property” and the expression “Possession”. A transaction of Hire is essentially a contract of Bailment of a vehicle. In the case of a Hire, only a licence is given to the Hirer to use the vehicle for a temporary period the vehicle so hired-Melluish (Inspector of Taxes) v. BMI (No. 9) Ltd. (1996) 218 ITR 548 (HL). In the case of Hire, the Hirer has an option to buy the equipment which is one of the main distinguishing feature between the words “Hire” and “Lease”. However, it is argued on behalf of the assessee that for the purposes of the above Entry, the word “Hire” and the word “Lease” should be read as equivalent. We do not find any merit in this argument. The Entry, read as a whole, states that the assessee must run the vehicle on Hire or that the assessee must carry on the business of running the vehicles on Hire. In this case, the assessee is a leasing and financing company. Its income is from lease rent, bill discounting and service charges. Therefore, merely because the assessee lets out motor buses, motor trucks and motor vans to its customers, it cannot be stated that the assessee is using the said vehicles in the business of running them on Hire. In the circumstances, we see no reason to interfere with the order passed by the Tribunal.
5. Before concluding, we may clarify that in this case, the assessee is given the benefit of normal depreciation. That, in this case normal depreciation has not been denied by the department. That, the department has not impugned the genuineness of the Lease. That, the only argument advanced before the department was that the word “Hire” in the above Entry was equivalent to the word “Lease”. Therefore, we are confining the judgment only to the facts of this case. There is no merit in the argument that because higher depreciation was granted by the department for the earlier years, the department was bound to grant higher depreciation for the assessment year in question. Under the Income Tax Act, each year is a separate event of assessment. That, the principle of res judicata is not applicable. In the circumstances, we do not find merit in this argument of the assessee.
Conclusion
6. For the reasons stated hereinabove, we answer the above question in the affirmative, i.e., in favour of the department and against the assessee. Accordingly, appeal is dismissed with no order as to costs.