1996 (11) TMI 42 - HC - Income Tax

Depreciation claim denied due to lack of genuine transactions and passing of title.

Goyal Gases Pvt. Limited Versus Commissioner Of Income-Tax

The court dismissed the assessee's claim for depreciation on computers purchased and leased, as the transactions lacked genuineness and evidence of actual ... Question Of Law Issues:The judgment involves the disallowance of depreciation claimed by the assessee in the return of income for the assessment year 1989-90, specifically related to the purchase and lease of computers, leading to questions of law regarding the genuineness of the transactions and the validity of the claim of depreciation.Issue 1:The assessee claimed depreciation on 15 computers purchased from Pertech Computers Ltd. and leased to Altos India Ltd., but the claim was disallowed. The Tribunal concluded that the transaction lacked actual sale and the title to the computers did not pass to the assessee due to the interwoven nature of the transaction involving Altos and Pertech Computers Ltd., both having common management. The Tribunal found no material to establish the actual passing of title to the assessee, leading to the disallowance of depreciation.Issue 2:The Tribunal questioned the validity of the lease agreement between the assessee and Altos for the computers, dated March 18, 1989. It was concluded that the transaction lacked genuineness and propriety, given the interwoven nature of the dealings between Altos, Pertech Computers Ltd., and the assessee. The Tribunal found no valid material to support the conclusion that the lease agreement was valid and genuine, leading to the denial of depreciation claim.Issue 3:The Tribunal, based on the interpretation of section 32 of the Income-tax Act, held that the assessee was rightly denied the claim of depreciation on the computers. The Tribunal's decision was based on the factual findings regarding the lack of actual sale and passing of title to the assessee, rendering the claim of depreciation invalid under the provisions of the Income-tax Act.Issue 4:The Tribunal considered whether the consideration for the claim of depreciation amounting to Rs. 37,69,273 could be regarded as valid in law. The Tribunal's findings indicated that the transaction lacked substance and actual sale, leading to the denial of the depreciation claim based on the lack of valid consideration in law.Issue 5:Regarding the delivery of the computers, the Tribunal found that the actual delivery was not taken by the assessee, despite claims made by the petitioner. The common management between Altos and Pertech Computers Ltd. raised doubts about the authenticity of the transaction, leading to the denial of the benefit of the depreciation claim amounting to Rs. 37,69,273.The judgment dismissed the application under section 256(2) of the Income-tax Act, as the findings of the Tribunal were deemed to be findings of fact involving no question of law. The Tribunal's conclusions were based on the interwoven nature of the transactions and the lack of evidence establishing the genuineness of the dealings, resulting in the denial of the depreciation claim.