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of <h1>Tribunal allows depreciation claim on leased medical instruments, emphasizes 'actually used' for business. Dismisses puja bonus disallowance.</h1> <h3>Reflexions Narayani Impex (P) Ltd. Versus Income-tax Officer</h3> The Tribunal allowed the depreciation claim on medical instruments given on lease, overturning the lower authorities' decisions. The requirement for ... Depreciation disallowed on medical instruments given on lease - Held that:- Assessee claimed depreciation on C.T. Scan machine and Angio machine were claimed in last two years as these machinery were leased out to Biva Park Radiology Pvt. Ltd. and earning lease rentals from last two years but during April, 2003 due to internal problem the lessee company temporarily closed their business and after two years, it again started the business and assessee got rental income. No doubt, according to assessee, during this year, these assets were leased out but actually lessee company was unable to use due to closure of business but that does not mean that assessee is not entitled for depreciation. The word 'used' would include actual use or at least keep ready for use which would mean that non-user even for temporary period qualifies for being treated as 'user', which embraces 'passive' user. Regarding depreciation of flat no. 1(4WA) and 111(5E) assessee is providing hospitality in these two flats to the customers of assessee for its business and it has provided guest house facility. The assessee has filed copies of lease agreement between assessee and Biva Park Radiology Pvt. Ltd. for lease of medical instruments and appliances. The assessee has also filed copy of lease agreement received in respect of medical instruments and appliances during the year ending on 31.03.2001, 31.03.2002, 31.03.2003, 31.03.2006 and 31.03.2007. From the above, it is clear that the assessee has put to use i.e. passive use of the medical equipments and also the flats were put to use for the business purposes as the same were used for company's business as guest house - thus the depreciation could have been allowed - in favour of assessee. Issues:1. Disallowance of depreciation on medical instruments given on lease.2. Disallowance of puja bonus under section 43B of the Income-tax Act.Issue 1: Disallowance of Depreciation on Medical Instruments Given on Lease:The appeal by the assessee challenges the order of the CIT(A) confirming the disallowance of depreciation on medical instruments given on lease. The Assessing Officer (AO) disallowed depreciation amounting to Rs. 22,30,944, stating that the assets were not actually used for business purposes. The CIT(A) upheld this decision, emphasizing the requirement for assets to be 'actually used' to qualify for depreciation. The appellant argued that even passive use should suffice, citing case laws, but the CIT(A) found the appellant's explanations vague and lacking merit. The appellant's claim regarding the use of two flats for business purposes was also rejected due to insufficient evidence. The appellant contended that despite the temporary closure of the lessee company, the assets were leased out, justifying the claim for depreciation. The appellant provided lease agreements and argued that passive use of the medical equipment and the flats for business purposes should qualify for depreciation. The Tribunal agreed with the appellant, allowing the depreciation claim and reversing the lower authorities' decisions on this issue.Issue 2: Disallowance of Puja Bonus under Section 43B:The next issue pertains to the disallowance of puja bonus under section 43B of the Income-tax Act. The appellant's counsel conceded that they were not interested in pursuing this issue, leading to its dismissal as not pressed. Consequently, the appeal of the assessee was partly allowed, with the Tribunal ruling in favor of the appellant on the depreciation issue but dismissing the puja bonus disallowance under section 43B.In conclusion, the Tribunal's judgment addressed the disallowance of depreciation on medical instruments given on lease, emphasizing the requirement for assets to be actually used for business purposes to qualify for depreciation. The Tribunal allowed the depreciation claim, overturning the decisions of the lower authorities. Additionally, the issue of the disallowance of puja bonus under section 43B was dismissed as not pressed by the appellant's counsel.
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