9911796707
TMI Blog2024 (8) TMI 1026X X X X Extracts X X X X X X X X Extracts X X X X ..... sets in question, by virtue of having made payments to the seller of the assets, and that the assessee had not acquired the risk of ownership of such assets and further that the assessee s concern was only to recover the contracted amount of lease rentals provided in the agreements, the lease agreements being in fact loan transactions, in disguise of finance lease and that the lessee was the owner of the assets would disentitle the assessee to claim depreciation cannot be accepted. The reasons as rendered by the assessing officer have been rightly not accepted by the Tribunal, that the documents have artificially empowered the assessee with the ownership of the assets, although its economic life was vested with the lessee, and only to claim depreciation, the academic ownership was shown to be with the assessee company. Such observations of the assessing officer which is the case of the revenue in appeal, cannot be accepted, considering the plain reading of Section 32 as interpreted by the Supreme Court in I.C.D.S. (supra). First question of law as raised by revenue would not arise for consideration of this Court. Decided in favour of assessee. Addition of Interest u/s 220(2) - ITAT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 3) of the Income-tax Act (for short the Act ) disallowing the claim of depreciation on assets given on lease by the assessee, by holding that the transactions of lease of various assets were mere financial transactions and the assessee was not entitled to depreciation under section 32 of the Act. The assessee carried the order passed by the Assessing officer in appeal before the CIT (A), who upheld the disallowance made by the Assessing officer. Against such concurrent findings as rendered by both the authorities, the assessee initially approached the Tribunal in the proceedings of Income-tax Appeal No. 2937/MUM/2001, which came to be allowed and the proceedings were restored to Assessing officer for a fresh order to be passed. On remand, the Assessing officer passed an order dated 12 December, 2006 under section 143 (3) read with Section 254 of the Act and again disallowed the depreciation claimed by the assessee. The assessing officer while passing an order under section 143 (3) read with section 254 of the Act charged interest under section 220 (2) of the Act of an amount of Rs. 3,16,716/-, which is subject matter of second question of law as raised by the revenue. 5. The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ese assets. The First Appellate Authority also disallowed assessee s claim for additional depreciation. The assessee hence had appealed before the Tribunal. The Tribunal confirmed the view taken by the First Appellate Authority against which the proceedings reached the Supreme Court. In such context, whether the assessee is entitled to depreciation on vehicles financed by it, which were not used or owned by it by virtue of the business, was one of the questions which fell for consideration of the Supreme Court. The Supreme Court held that the assessee was engaged in the business of hire purchase, leasing and real estate etc. and that the vehicles on which depreciation was claimed, were purchased by the assessee against direct payment to the manufacturers. It was observed that the assessee, as a part of its business, leased out these vehicles to its customers and thereafter, had no physcial affiliation with the vehicles. It was observed that also the lessees were registered as the owners of the vehicles, in the certificate of registration issued under the Motor Vehicles Act. In its return of income for the relevant assessment years, the assessee claimed that the depreciation relatin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ul claim under Section 32 of the Act. 13. The Revenue attacked both legs of this portion of the section by contending: (i) that the assessee is not the owner of the vehicles in question and (ii) that the assessee did not use these trucks in the course of its business. It was argued that depreciation can be claimed by an assessee only in a case where the assessee is both, the owner and user of the asset. 14. We would like to dispose of the second contention before considering the first. Revenue argued that since the lessees were actually using the vehicles, they were the ones entitled to claim depreciation, and not the assessee. We are not persuaded to agree with the argument. The Section requires that the assessee must use the asset for the purposes of business . It does not mandate usage of the asset by the assessee itself. As long as the asset is utilized for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding non-usage of the asset itself by the assessee. In the present case before us, the assessee is a leasing company which leases out trucks that it purchases. Therefore, on a combined reading of Section 2 (13) and Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hinery for specified purposes under Section 32-A (2) (b) (iii). That person, however, is not the owner of the machinery. The High Courts of Karnataka and Madras have held that looking to the requirements specified in Section 32-A the assessees, in the present case, fulfil all the requirements of that section, namely, (1) the machinery is owned by the assessees; (2) the machinery is used for the purpose of the assessees' business and; (3) the machinery is as specified in sub-section (2). 16. The same judgment commented on the analogous nature of Section 33 on Development Rebate and clarified that the phrase used for the purpose of business does not necessarily require a usage of the asset itself. It held thus: 11. The provisions relating to investment allowance are akin to the provisions under Section 33 of the Income Tax Act, 1961 relating to development rebate 12. Since the provisions of Section 33 dealing with development rebate are similar to the provisions of Section 32-A, it is necessary to look at cases dealing with the grant of development rebate under Section 33. In the case of CIT v. Castlerock Fisheries (1980) 126 ITR 382 the Kerala High Court considered the case of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee and the income derived from leasing out is treated as business income it would be contradictory, in terms, to say that the machinery is not used wholly for the purpose of the assessee's business. 17. Hence, the assessee meets the second requirement discussed above. The assessee did use the vehicles in the course of its leasing business. In our opinion, the fact that the trucks themselves were not used by the assessee is irrelevant for the purpose of the section. (emphasis supplied) 9. In Commissioner of Income-tax vs. Apollo Finvest (I) Ltd. (2016) 382 ITR 33 (Bom), the Division Bench of this Court was dealing with the revenue s appeal on a question of law, as to whether the Tribunal was correct in holding that the respondent/assessee would be entitled to depreciation on assets of the Haryana State Electricity Board, with whom the respondent /assessee had a sale and lease back transaction, which was both in form and content a financial lease. Applying the decision of the Supreme Court in I.C.D.S. Ltd. (supra) as also the decision of this Court in West Coast Paper Mills Ltd. vs. Joint CIT [2006] 100 TTJ 833 (Mumbai) which was also a decision rendered on a similar fact-situa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d consistently followed the decision of the Supreme Court in I.C.D.S. Ltd. (supra) and in similar facts and circumstances, had allowed the assessee s claim for depreciation under section 32. The Tribunal in the order as impugned in the present proceedings has accordingly followed the mandate of the decision of Supreme Court in I.C.D.S. Ltd. and its own view taken for the previous years, which is clear from the following observations as made by the Tribunal: 5. We have considered the rival submission of the parties and perused the material available on record carefully. Besides the year under consideration, the ld. CIT (A) sustained the similar disallowance of depreciation of leased asset for AYs 1995-96, 1996-97, 1997-98 and 1998-99. The assessee has filed appeal before the ITAT vide ITA No. 6214/Mum/2003 for AY 1997-98 and ITA No. 7148/Mum/2004 for AY 1998-99 and the Tribunal passed the following order: 18.15. We have heard the rival submissions and perused the material before us. We find that impugned assets underlying lease agreements were very much in existence, that purchase consideration of assets was discharged by the assessee through banking channels, that copies of the che ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e agreement, that the assessee although was the purchaser of the assets in question, by virtue of having made payments to the seller of the assets, and that the assessee had not acquired the risk of ownership of such assets and further that the assessee s concern was only to recover the contracted amount of lease rentals provided in the agreements, the lease agreements being in fact loan transactions, in disguise of finance lease and that the lessee was the owner of the assets would disentitle the assessee to claim depreciation cannot be accepted. The reasons as rendered by the assessing officer have been rightly not accepted by the Tribunal, that the documents have artificially empowered the assessee with the ownership of the assets, although its economic life was vested with the lessee, and only to claim depreciation, the academic ownership was shown to be with the assessee company. Such observations of the assessing officer which is the case of the revenue in appeal, cannot be accepted, considering the plain reading of Section 32 as interpreted by the Supreme Court in I.C.D.S. (supra). 12. In the light of the aforesaid discussion, first question of law as raised by revenue would ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ppeal of the revenue would be required to be rejected. 18. Insofar Appeal No. 673 of 2019 is concerned, it gives rise to two questions of law, similar to the question which have fallen for consideration in the facts of Income Tax Appeal No. 1567 of 2018. For the reasons and conclusions, as rendered in the said decision, we dismiss the revenue s appeal by holding that the questions of law would not arise for consideration of the Court. 19. Both the appeals are accordingly rejected. No costs. Income Tax Appeal No. 1729 of 2018 and Income Tax Appeal No. 1730 of 2018 20. Both these appeals raise only the second question which has fell for our consideration in Income Tax Appeal No. 1567 of 2018, namely, the Tribunal deleting the interest amount in question by holding that the interest under section 220 (2) of the Act was chargeable upto original assessment order passed u/s. 143 (3) or 144 of the Act but not upto the order passed u/s. 143 (3) r.w.s. 254 of the Act. It needs to be observed that such question of law itself would be rendered academic in view of the fact that the case of the revenue that depreciation on leased assets as claimed by the assessee was required to be disallowed, ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
