2014 (3) TMI 185 - HC - Income Tax

Deletion of disallowance u/s 32 of the Act - Claim of higher depreciation on leased back assets Held that - The decision in I.C.D.S. Ltd. vs. Commissioner of Income-Tax and another 2013 (1) TMI 344 - SUPREME COURT followed - for claiming higher rate of depreciation, there is no requirement under the Act of usage of the assets by the assessee himself - The vehicles were purchased by the assessee from manufacturer and leased out to customers - Such vehicles were used in the course of leasing business thus, the assessee would be entitled for the depreciation - There is nothing on record even otherwise to suggest that the transaction itself was sham or bogus Decided against Revenue.

Summary

Issues Involved:
1. Appeal against the judgment of the Income Tax Appellate Tribunal regarding higher depreciation on leased back assets.
2. Disallowance under section 14A of the Act.

Analysis:

Issue 1: Appeal against the judgment of the Income Tax Appellate Tribunal regarding higher depreciation on leased back assets

The Revenue appealed against the Tribunal's decision allowing the claim of higher depreciation on leased back assets by the assessee. The Tribunal observed that the assessee, a State-owned company providing financial assistance to industrial units, had claimed higher depreciation on assets leased to various entities. The Tribunal allowed the depreciation on the written down value of the leased out assets, citing previous decisions in the assessee's favor. The Tribunal emphasized that the sale and lease back transactions were genuine and continuous, following which the claim for higher depreciation was justified. The Tribunal's decision was based on consistency with earlier rulings and the absence of evidence to suggest any fraudulent activity in the transactions. The High Court noted that the issue was settled by a Supreme Court judgment, which clarified that the assessee, even as a lessor, could claim higher depreciation on assets used in the leasing business. Consequently, the Court upheld the Tribunal's decision, dismissing the Revenue's appeal.

Issue 2: Disallowance under section 14A of the Act

The second issue involved a remand made by the Tribunal, which was challenged by the assessee in separate appeals. The High Court mentioned that these appeals challenging the Tribunal's remand order had been previously rejected through reasoned orders. As a result, the Court dismissed the Tax Appeal, thereby affirming the Tribunal's decision on the remand issue.

In conclusion, the High Court upheld the Tribunal's decision regarding the higher depreciation claim on leased back assets, citing consistency with previous rulings and the Supreme Court's clarification on the matter. Additionally, the Court dismissed the appeal concerning the remand made by the Tribunal, as it had already been rejected in separate appeals.