2008 (9) TMI 488 - HC - Income Tax

Depreciation - Whether the Appellate Tribunal is right in law and on facts in confirming the order of the Commissioner of Income-tax (Appeals) in deleting the disallowance of depreciation of Rs. 1,18,10,500 made on account of excess depreciation ? - both the Commissioner (Appeals) and the Tribunal have concurrently found that ownership of assets in the hands of the assessee-lessor is not disputed and delivery of assets on September 30, 1996, is also not disputed. In so far as usage of assets is concerned, it has been held that there was no evidence to justify that assets were not put to use. no any legal infirmity in the impugned order of the Tribunal - No question of law, much less a substantial question of law, as proposed or otherwise arises from the impugned order of the Tribunal. The appeal is accordingly dismissed. Held that assessee is entitled to depreciation

Summary

Issues involved:
1. Disallowance of depreciation by the Appellate Tribunal.
2. Ownership and usage of assets for depreciation claim.
3. Interpretation of legal precedents in the context of depreciation claim.

Analysis:
1. The appellant-Revenue challenged the Appellate Tribunal's decision to delete the disallowance of depreciation amounting to Rs. 1,18,10,500. The court noted that the Assessing Officer's observations were reiterated by the appellant's counsel. However, the court found no distinction in the facts of the present case compared to a previous case where the High Court followed the apex court's decision. The court examined the issue in light of legal precedents and the appellant's contentions.

2. Both the Commissioner (Appeals) and the Tribunal confirmed that the ownership of assets by the assessee-lessor was not disputed, and the delivery of assets was accepted. The court emphasized that there was no evidence suggesting that the assets were not utilized. The Tribunal's decision highlighted that the assets should be considered used in the lessor's business, not the lessee's, based on ownership, leasing agreement, and asset delivery. Therefore, the assessee was deemed entitled to full depreciation as of the delivery date.

3. Referring to a previous case, the court reiterated the apex court's position that when an assessee's business involves hiring out machinery and derives income from such hiring as business income, the machinery is deemed used for business purposes. In the absence of legal flaws in the Tribunal's order, the court dismissed the appeal, stating that no substantial question of law arose from the impugned order. The court upheld the Tribunal's decision regarding the depreciation claim based on ownership and usage of assets in the lessor's business context.