2012 (3) TMI 342 - AT - Income Tax

Summary

Issues:
1. Disallowance of depreciation on leased assets.
2. Treatment of unclaimed liabilities as income.

Disallowance of Depreciation on Leased Assets:
The appeal by the Revenue challenged the deletion of an addition of Rs.11,74,000 on account of disallowance of depreciation on leased assets. The Revenue argued that depreciation is not permissible on financial lease assets, relying on a court decision. The assessee contended that the transaction was accounted for as a financial lease in the books, but the income was disclosed as an operating lease. The ITAT found that the nature of the lease needed re-examination by the Assessing Officer to determine the taxability of lease rent and allowability of depreciation, emphasizing a consistent yardstick for both aspects. The ITAT set aside the previous orders and directed a reevaluation by the Assessing Officer.

Treatment of Unclaimed Liabilities as Income:
The Revenue challenged the deletion of an addition of Rs.62,96,000 on account of unclaimed liabilities treated as income. The Assessing Officer added the amount to income, citing lack of explanation for the unclaimed liabilities. The ITAT noted that nearly 95% of the unclaimed balance arose in the last four months, and there was no evidence of cessation of liability. The ITAT upheld the deletion of the amount by the learned Commissioner of Income-tax (Appeals), as there was no proof of remission or cessation of the trading liability. The ITAT dismissed the Revenue's appeal, affirming the decision of the learned Commissioner of Income-tax (Appeals).