Income Tax Appellate Tribunal - Nagpur
Shamsher Ali Abdul Hussain vs Commissioner Of Income-Tax, C. P. & U. P. on 6 April, 1945
Equivalent citations: [1945]13ITR240(NAG)
JUDGMENT
This is an application under Section 66 (3) of the Indian Income-tax Act against an order passed by the Commissioner of Income-tax, Central Provinces and United Provinces, on a combined application made to him under Sections 33 and 66 (2) of the Income-tax Act.
2. The points on which the assessee wishes us to require the Commissioner of Income-tax to state a case are three. The first is in respect of an addition made to the profits by the sale of petrol as shown by the assessee. The second refers to the disallowance of depreciation on motor lorries which the assessee disposed of on hire-purchase system, and the third is in respect of a bad debt alleged to exist by reason of the fact that the recovered a motor lorry from a person who had defaulted in the payment of instalments on the hire-purchase system and the lorry recovered was in such a bad state as to be unsalable, and the claim is in respect of the instalments which were due and not paid.
3. The applicant is a hardware merchant and also deals in petrol and oil. So far as the sale of petrol is concerned, it is quite clear from the orders of the assessing officer, the Appellate Assistant Commissioner of Income-tax, and the Commissioner himself that the accounts were kept in such a way - counterfoils were not kept and receipts were not issued - as to make it impossible to ascertain what the sale in actual fact were. In such circumstances the Income-tax Department is entitled to consider the surrounding circumstances from which, the income of the assessee can be deduced, and this has been done and is permissible. Indeed this point was not much pressed by the learned counsel for the assessee applicant.
4. As regards the claim for depreciation on motor lorries which had been disposed of on the hire-purchase system, no claim was made in the assessees original return. Not until the amendment by the addition of sub-section (3) of Section 12 of the Act in 1939 appeared, did the applicant at the last moment put in a claim for depreciation which would have reduced the income on which he was to be assessed on his own estimate by more than half. He had returned his total income as Rs. 7,693-10-6 and put in his belated application for depreciation allowance to the extent of Rs. 4,384. In the table put in by him 14 vehicles are said to be concerned. But as has been pointed out by the Income-tax Department, this bare statement is not supported by any accounts or entries in account books whatever. The contention is that the property in these vehicles remained with the assessee and that what he received was purely hire for the vehicles and consequently it is machinery let on hire and that he is entitled to depreciation allowance on it. The contention is illogical. With the last instalment paid, if all that is received is hire, the result would be that the hire-purchaser is not a purchaser at all as nothing is paid. It is clear that whatever the terms which are imposed according to the particular contract on the default of any instalment (and we have not been shown the contracts in any case) the hire-purchase system is nothing but a sale or an agreement to sell with extended period of instalments. It is certainly not a case of hiring in which the lessor is entitled to claim depreciation allowance and the lessee would be excluded from so doing. Consequently we hold that in the first place the assessee was not entitled to claim any depreciation as his statement was unsupported by any relevant figures or accounts and secondly because motor vehicles which are disposed of under the hire-purchase system do not come within Section 12 (3) within the definition of "machinery let on hire."
5. The last point urged is that the sum of Rs. 756/-should have been allowed as a bad debt. Normally one would except that a vehicle of which repossession was taken on account of default in the payment of instalments on a hire-purchase agreement would be more valuable than the total sum of instalments still remaining to be paid. Whether that is so or not cannot possibly be challenged until the value of the vehicle is known by subsequent sale. The assessee contended that the vehicle was not worth selling, and the Income-tax Department correctly held that it was impossible to classify this sum as a bad debt until some attempt had been made to realise all the property recovered from the debtor.
6. The result is that the application fails and is dismissed. The deposit of Rs. 100/- is forfeited. Counsels fee Rs. 75.
Appeal dismissed.