Depreciation on leased assets requires cogent proof of ownership and genuine lease transactions; adverse inference upheld here.

Depreciation under section 32 on leased wind turbine generators requires the assessee to prove ownership, installation and the genuineness of the lease transaction with cogent evidence. Here, the assessee failed to produce the primary lease deed, title documents or reliable secondary material to establish exclusive ownership, receipt of lease rentals or the true nature of the arrangement. On the seized records and surrounding circumstances, the court drew an adverse inference, accepted the Assessing Officer's findings and restored the block assessment order, setting aside the contrary appellate view.

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Issues: Whether the assessee was entitled to claim depreciation under section 32 on the alleged leased wind turbine generators in the absence of cogent proof of ownership, installation and genuine lease transactions.

Analysis: The search material, bank documents, import papers, transport records, fax message, and the surrounding circumstances showed that the assets were not proved to be owned by the assessee or leased to REPL in the manner claimed. The assessee did not produce the primary lease deed, title documents, or reliable secondary evidence to establish exclusive ownership, receipt of lease rentals, or the true nature of the transaction. The onus lay on the assessee to prove the facts on which the depreciation claim depended, and the failure to do so justified an adverse inference. The findings of the Assessing Officer were supported by the seized material and could not be displaced on the basis of the assessee's bare assertion.

Conclusion: The claim for depreciation was not proved and the Revenue's challenge succeeded; the block assessment order was restored and the contrary findings of the appellate authorities were set aside.

Ratio Decidendi: A depreciation claim founded on ownership and lease of assets must be established by the assessee through cogent evidence, and where the assessee withholds material documents or fails to discharge that burden, an adverse inference may be drawn and the Revenue's finding sustained.

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