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TMI Blog2016 (9) TMI 954X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer while disallowing the claim of the assessee on account of depreciation of ₹ 7,27,04,961 has not excluded the principle component in the lease rental of ₹ 14,84,88,074. If the Assessing Officer would have computed the correct income of the assessee then despite being disallowance of the depreciation the total income of the assessee would have been much less than the total income by allowing the claim of depreciation. We note that the assessee has included in the total income a sum of ₹ 17,63,40,728 being lease rentals which includes principle as well as finance charges. Therefore in view of the above facts when the Assessing Officer while disallowing the claim of depreciation has not considered the exclusion ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Year 2004-05. 2. The assessee has raised the following grounds : 1. The order of learned CIT (Appeals) is opposed to law and facts of the case. 2. The CIT (Appeals) erred in deleting the penalty imposed by the Assessing Officer on the issue of claim of depreciation on financed leased assets, even though the CIT (Appeals) as well as ITAT has upheld the addition made in the assessment order on the issue. 3. For these and such other grounds that may be urged at the time of hearing. 3. While completing the assessment under Section 143(3) of the Act on 29.12.2006 the Assessing Officer disallowed the claim of depreciation in respect of lease assets on the ground that the depreciation can be allowed only on the capital a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... icer that when the assessee has already claimed the entire purchase cost as business expenditure then the claim of depreciation is a bogus claim by the assessee and therefore the Assessing Officer is justified in levying the penalty under Section 271(1)(c) of the Act. He has relied upon the order of the Assessing Officer as well as the order of the Tribunal in the claim appeal. 5. On the other hand, the learned Authorised Representative of the assessee has submitted that the CIT (Appeals) has deleted the penalty by noting the fact that the assessee has disclosed all the material facts in the assessment proceedings and therefore there is no concealment or furnishing of inaccurate particulars by the assessee. He has further contended that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... accounts the assessee has given the treatment to this transaction as purchase of the asset as well as sale of the asset. Therefore only by taking the entries in the books of accounts the Assessing Officer observed that the entire cost of asset has been claimed by the assessee as business expenditure. We note that in the computation of income the assessee has given the treatment of this transaction as lease transaction and added to the income the entire amount of lease receipts and per contra claimed the depreciation on the lease assets. It is not a disputed fact that the assessee has purchased the machinery in question from third party and thereafter leased out to other party. Therefore, it is not a case of purchase and lease back of the m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to finance lease transactions. * Point number 27(b) of the notes to accounts which is an integral part of the audited financial statement of the company for the subject A.Y discloses the status of finance lease transactionentered by the company for the subject A.Y discloses the status of finance lease transaction entered by the company on or after April 1, 2001 which is required to be disclosed in compliance to the Account Standard 19 issued by the Institute of Chartered Accountants of India. * Clause 13(d) of the tax audit report for the subject A.Y discloses the lease rental received during the A.Y. * Note to tax audit report discloses the accounting and tax treatment of assets leased on finance lease basis and deprecia ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee then only the interest component in the lease/repayment amount received by the assessee can be assessed to tax instead the entire lease amount. Therefore we find that the Assessing Officer while disallowing the claim of the assessee on account of depreciation of ₹ 7,27,04,961 has not excluded the principle component in the lease rental of ₹ 14,84,88,074. If the Assessing Officer would have computed the correct income of the assessee then despite being disallowance of the depreciation the total income of the assessee would have been much less than the total income by allowing the claim of depreciation. We note that the assessee has included in the total income a sum of ₹ 17,63,40,728 being lease rentals which ..... X X X X Extracts X X X X X X X X Extracts X X X X
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