IN HIGH COURT OF JUDICATURE AT MADRAS DATED: 19.01.2015 CORAM: HONOURABLE MR.JUSTICE R.SUDHAKAR and HONOURABLE MR.JUSTICE R.KARUPPIAH Tax Case (Appeal) No.1273 of 2005 M/s.Mahendra Hire Purchase Finance Ltd., No.277, Main Road, 1st Floor, Mettupalayam - 641 301. .. Appellant versus Assistant Commissioner of Income Tax Coimbatore. .. Respondent PRAYER: Tax Case Appeal filed under Section 260A of Income Tax Act, 1961 as against order dated 29.07.2003 made in I.T.A.No.1525/Mds/1996 on file of Income Tax Appellate Tribunal, Madras 'D' Bench for assessment year 1990-1991. For appellant : Mr.J.Balachander Standing Counsel for Income Tax For respondent :Mr.T.R.Senthil Kumar Standing Counsel for Income Tax 2 JUDGMENT (Judgment of Court was delivered by R.SUDHAKAR,J.) This Tax Case (Appeal) filed by assessee as against order of Income Tax Appellate Tribunal was admitted by this Court on following substantial questions of law: "i) Whether on facts and in circumstances of case, Appellate Tribunal was right in law in holding that security deposits received from broker (representing hirers) is to be held as Unexplained Investment under section 68 of Income Tax Act, 1961. ii) Whether on facts and in circumstances of case, Appellate Tribunal was right in law in holding that Security Deposits collected through broker is to be treated as Unexplained Investment under section 68 of Income Tax Act, 1961 when income from these vehicles which were let on hire have been treated as income from business of letting out of vehicles on hire. iii) Whether on facts and in circumstances of case, Appellate Tribunal was right in law in not granting higher rate of depreciation on vehicles let out on hire when income forms such vehicles have been assessed as income from business of letting out on hire of vehicles?" 3 2. appellant/assessee is company engaged in business of hire purchase financing. For assessment year 1990-91, assessee filed its return of income on 31.12.1990 admitting income as Rs.1,61,350/-. According to assessee, income of assessee consists of income from hire purchase charges and income from leasing of vehicles. Assessing Officer, while completing assessment held that assessee is not entitled to depreciation at higher rate, since vehicles owned by them have not been let on hire. Assessing Officer also made addition of Rs.1,75,000/- in terms of Section 68 of Income Tax Act towards unexplained income, as assessee did not offer any explanation as to receipt of said amount. 3. Aggrieved by order of Assessing Officer, assessee preferred appeal before Commissioner of Income Tax (Appeals), who dismissed appeal in respect of unexplained investment, but granted certain relief in respect of depreciation. 4. As against order of Commissioner of Income Tax (Appeals), assessee again pursued matter before Income 4 Tax Appellate Tribunal. 5. Tribunal did not accept plea of assessee that amount alleged to be unexplained investment is nothing but security deposit given by customers on basis of lease. In this regard, Tribunal relied upon statement of individuals and broker one Ibrahim and held that it was not case of security deposit and assessee have failed to cross examine persons, who had given evidence. Further, Tribunal came to hold that intention of parties was to sell vehicle on instalment basis and purchasers have made clear statement before Assessing Officer that they had purchased vehicle on instalment basis and not taken them on hire. Accordingly, Tribunal confirmed addition made towards unexplained income. 6. With regard to issue on claim of depreciation, Commissioner of Income Tax (Appeals) partially granted claim. Tribunal has clearly held that assessee is not owner of vehicle and at best they are entitled to recover outstanding amount from purchaser and purchaser is entitled to claim depreciation. Hence, Tribunal disallowed claim of depreciation. 5 Accordingly, Tribunal dismissed appeal filed by assessee. 7. Aggrieved by order of Tribunal, assessee has preferred present Tax Case (Appeal). 8. Heard learned counsel appearing for assessee and learned standing counsel appearing for Revenue and perused materials placed on record. 9. perusal of order of Tribunal shows that amount collected by assessee was towards purchase price, as vehicles were sold under hire purchase scheme, which was evident from examination of broker M.A.Ibrahim. It is also to be noted that purchasers have stated that they had paid amount towards purchase of vehicle in instalments and not for hire. Since assessee had not given any explanation towards receipt of amount, Tribunal was right in confirming order of Commissioner of Income Tax (Appeals). Hence, we find no infirmity in order of Tribunal. 6 10. Accordingly, question of law Nos.1 and 2 are answered against assessee and in favour of Revenue. 11. With regard to issue on depreciation, it is seen that agreement between parties did not contain any default clause to repossess vehicle in question. As assessee has no right to repossess vehicle, question of lease does not arise. Since, it is clear case of sale of vehicle to parties coupled with commitment to pay amount in instalments, question of granting depreciation does not arise. However, in respect of two or more vehicles, depreciation has been granted based on records. We are not concerned with that issue in this appeal. In such situation, we are not inclined to interfere with order of Tribunal. 12. Accordingly, third substantial question of law is answered against assessee and in favour of Revenue. 13. In result, this Tax Case (Appeal) stands dismissed. No costs. Index: Yes No (R.S.,J.) (R.K.,J.) Internet: Yes / No 19.01.2015 sl 7 To 1. Income Tax Appellate Tribunal, Madras 'D' Bench. 2. Commissioner of Income Tax (Appeals), Coimbatore. 3. Assistant Commissioner of Income-tax, Company Circle-II(1), Coimbatore. 8 R.SUDHAKAR,J. AND R.KARUPPIAH,J. sl Tax Case (Appeal) No1273 of 2005 19.01.2015 M/s. Mahendra Hire Purchase Finance Ltd. v. Assistant Commissioner of Income-tax, Coimbatore