14 April 2010
The 1943 Circular of the Department allows depreciation in case of hire-purchase to the hirer of the asset. You can refer Board Circular No.9 dt. 23-03-1943, this governs the tax treatment of such cases. You can also refer to Case-Law of Karimjee (P) Ltd Vs. ITO 15 SOT 128 (Mum).
Inspite of the old Circular, there have been problems once in a while in claiming depreciation. There have been problems on the part of the hirers in getting depreciation allowed; and there has been a unique case where the financier has claimed depreciation in a hire-purchase transaction [A P Paper Mills].
However, in general, Departmental circulars are understood as binding on lower tax authorities, and therefore, the Circular can be safely treated as decisive.
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