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2021 (2) TMI 286 - HC - Income TaxDepreciation on the flameless furnace and steel rolls - AO denied the depreciation as it is a financial transaction - whether the assessee-Company ascertained that the supplier himself is the manufacturer or who is the actual manufacturer of the machinery and whether the assessee received quotation for approval of purchase of the machinery? - AO denied the depreciation as it is a financial transaction - depreciation claim in respect of the rolls given on lease to Bellary Steels and Alloys Limited (BSAL) - HELD THAT - Following the ratio laid down by the Hon'ble Supreme Court in Vasisth Chay Vyapar Ltd. 2018 (3) TMI 56 - SUPREME COURT and the ratio laid down in M/S. INDBANK MERCHANT BANKING SERVICES LTD. 2019 (7) TMI 1740 - MADRAS HIGH COURT the order passed by the Income Tax Appellate Tribunal is liable to be set aside. Accordingly, the same is set aside. The substantial questions of law are decided in favour of assessee.
Issues:
Challenging order on assessment year 1996-97 regarding depreciation claim on machinery and steel rolls. Denial of depreciation by Assessing Officer. Alleged non-genuine lease transaction with BSAL. Appeal filed before Income Tax Appellate Tribunal. Substantial questions of law admitted. Analysis: 1. The appellant, a Public Limited Company engaged in hire purchase financing and equipment leasing, challenged the order on assessment year 1996-97 pertaining to depreciation claims on machinery and steel rolls. The Assessing Officer questioned the depreciation claim on the grounds of the nature of transactions and authenticity of lease agreements. The Commissioner of Income Tax (Appeals) upheld the denial of depreciation, leading to the appeal before the Income Tax Appellate Tribunal. 2. Regarding the claim for depreciation on machinery transactions, the Assessing Officer raised concerns about the authenticity of the transactions and the source of the machinery. The appellant contended that the transactions were genuine and conducted in the normal course of business. However, the Assessing Officer and the Commissioner of Income Tax (Appeals) denied the depreciation claim, alleging financial motives behind the transactions. 3. In the case of steel rolls leased to BSAL, the Assessing Officer found the transaction to be non-genuine, aimed at financial arrangements rather than legitimate leasing. This led to the denial of depreciation claims for the asset leased to BSAL. The Income Tax Appellate Tribunal upheld the Assessing Officer's decision, prompting the appellant to challenge the order on substantial questions of law. 4. The appellant cited a previous decision by the High Court in a similar case, where the court ruled in favor of the assessee based on the principles laid down by the Supreme Court. The appellant argued that the same principles should apply in the present case, supporting the authenticity of the transactions and the entitlement to depreciation. 5. The court examined the relevant portions of the previous decision and the principles established by the Supreme Court. By applying the precedent, the court found in favor of the appellant, setting aside the order of the Income Tax Appellate Tribunal. The substantial questions of law were decided in favor of the appellant, resulting in the allowance of the Tax Case Appeal. 6. The Senior Standing Counsel for the respondent did not present any contradictory judgments, leading the court to rely on the previous decisions and principles established by higher courts. The court concluded that the precedent set by the Supreme Court and previous High Court decisions favored the appellant's case, resulting in the allowance of the appeal and setting aside of the Income Tax Appellate Tribunal's order.
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