2012 (11) TMI 1196 - AT - Income Tax

Summary

Issues involved:
The judgment involves the disallowance of depreciation on assets given under 'sale and lease back basis' and on motor cars given on finance lease, treating the lease transactions as finance transactions.

Disallowed Depreciation on Assets Given Under 'Sale and Lease Back Basis':
The appellant filed appeals against orders of the CIT(A) upholding the disallowance of depreciation on assets given under 'sale and lease back basis.' The Tribunal noted that the issue was covered against the assessee by a previous order in the assessee's own case for assessment years 1995-96, 1996-97, and 1997-98. The Tribunal followed the decision in the case of M/s. IndusInd Bank Ltd vs. ACIT, where it was held that in finance lease transactions, depreciation is not admissible to the lessor. The Tribunal emphasized that the lessee, as the real owner of the asset in a finance lease, is entitled to depreciation, not the lessor. Consequently, the Tribunal rejected the ground of appeal taken by the assessee and upheld the orders of the CIT(A) for the relevant assessment years.

Disallowance of Depreciation on Motor Cars Given on Finance Lease:
The appellant also challenged the disallowance of depreciation on motor cars given on finance lease. The Tribunal, referring to the decision in the case of M/s. IndusInd Bank Ltd vs. ACIT, reiterated that in finance lease transactions, depreciation is not admissible to the lessor. It was clarified that the lessee, being the actual and real owner of the asset in a finance lease, is entitled to depreciation, not the lessor. The Tribunal, in line with its decision on the first issue, dismissed the appeals filed by the assessee for the relevant assessment years.

Conclusion:
Both appeals filed by the assessee were dismissed by the Tribunal based on the precedent set in a previous order and the principle that in finance lease transactions, the lessee is entitled to depreciation as the real owner of the asset. The Tribunal upheld the orders of the CIT(A) disallowing depreciation on assets given under 'sale and lease back basis' and on motor cars given on finance lease. The judgment was pronounced on 12th November 2012.