2009 (3) TMI 91 - HC - Income Tax

Depreciation - Business of leasing Leased equipment - contention of the assessee that the breakers were given on lease before the end of previous year and therefore, the same should be considered as used for the purpose of business - Assessee, admittedly had supplied the machinery before the end of the financial year and the assessee had received the lease rentals for the same. The fact whether the lessee had put to use the leased equipment would be irrelevant revenue s appeal dismissed Tribunal is right in allowing the assesses claim of deprecation

Summary

The High Court of Bombay, in the case of F.I. REBELLO and R.S. MOHITE, JJ., 2009 (3) TMI 91, addressed an appeal by the Revenue regarding the allowance of depreciation to an assessee engaged in leasing. The dispute arose from the assessee claiming depreciation for breakers leased to Tata Electric Company Limited. The Revenue disallowed the claim as the breakers were not installed or used in the previous year. The Tribunal, however, held that depreciation could also account for the reduction in usable value due to wear and tear, obsolescence, and other factors. The court referred to Section 32 of the Income Tax Act and relevant case law to determine that the act of leasing assets could constitute "use" for the purposes of depreciation claims. Citing precedent cases, including Commissioner of Income Tax Vs. Shaan Finance (P) Ltd. and Commissioner of Income Tax Vs. First Leasing Co. of India Ltd., the court concluded that the assessee was entitled to claim depreciation as the leased machinery was used for the business. The appeal by the Revenue was dismissed based on the principles established in MCorp Global Pvt. Ltd. v. Commissioner of Income Tax.