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TMI Blog2001 (9) TMI 260X X X X Extracts X X X X X X X X Extracts X X X X ..... iation at hundred per cent on the Continuous Pusher Type Hardening Furnace that was leased to M/s. Jonas Woodhead Sons (India) Ltd. (JWSIL for short). The appellant-company was represented by Mr. Vijayaraghavan and the Department was represented by Mr. Venkatesa Gopinath. 2. The brief facts related to the claim of depreciation are that vide invoice dated 10-8-1995 the assessee claimed had purchased the said furnace from JWSIL for a consideration of Rs.1.05 crores. The consideration for the purchase was made over to the said party. The said furnace is shown as leased to the same party the next day and a receipt of Rs.30 lakhs as lease advance has been shown. The Income-tax Rules, 1962 has prescribed that the furnace is entitled to hundre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s absent in the instant case. The absence of delivery which he believed as a condition that must be satisfied, he concluded that the transaction in fact was one of advance of loan to the lessee. He also noted that the payment of Rs.30 lakhs as lease advance by the lassee is only to give the transaction the colour of genuine one. He noted that the certificate of the valuer could not be relied upon as acceptable evidence and a true indicator of the price of the furnace. He rejected the claim of depreciation. In appeal to the CIT(A) the appellant had placed the arguments along with the invoice, valuer's certificate, lease agreement, receipt of lease advance of Rs.30 lakhs. CIT(A) was of the opinion that Rs.30 lakhs was in the nature of securit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accepted by the Assessing Officer of the lessee. He contended that the transaction has been established as genuine, with its value also as the price paid by the assessee and its business of leasing as given on lease and the furnace is found in the premises of the lessee. He insisted that the claim of the appellant should be accepted in the light of these facts. Mr. Venkatesa Gopinath on the other hand insisted that the authorities had come to the correct conclusion on the facts as a made-up affair and placed heavy reliance on the observation about the furnace could not appreciated in value from under Rs.2 lakhs in 1976. He referred to the lease agreement that indicated that the advance lease of Rs.30 lakhs would not be adjusted against f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h reference to an enhanced cost), the actual cost to the assessee shall be such an amount as the Assessing Officer may, with the previous approval of the Deputy Commissioner determine having regard to all the circumstances of the case. Explanation 4.-Where any asset which had once belonged to the assessee and had been used by him for the purposes of his business or profession and thereafter ceased to be his property by reason of transfer or otherwise, is reacquired by him, the actual cost to the assessee shall be-- (i) the actual cost to him when he first acquired the asset as reduced by-- (a) the amount of depreciation actually allowed to him under this Act or under the corresponding provisions of the Indian Income-tax Act, 1922 (11 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alue the asset after obtaining the prior approval of the Deputy Commissioner of Income-tax. Explanation 4 is applicable to a situation of an asset used in business but sold by him only to be reacquired, the cost of the said asset would be taken to be its written down value only. Explanation 4A is applicable to a situation of a person (first owner) owning an asset, used by him in business and depreciation claimed on that asset and the person (first owner) transferring to another person (second owner) the said asset followed by the person (first owner) acquiring it on lease, hire purchase or otherwise from the second owner, and in that situation the cost to the person (second person) would be taken at the written value as in the hands of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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