Finance lease depreciation and section 14A consistency: identical facts supported allowance of depreciation and sustained disallowance.

Consistent acceptance of an income-tax computation in earlier assessment years can justify upholding disallowance under section 14A read with Rule 8D when the facts remain unchanged. The commentary also notes that depreciation may be allowed on assets acquired under a finance lease where the assets form part of the block of assets and the assessee bears the economic burdens, including cost and insurance. On identical facts, the Tribunal followed prior years' treatment and allowed depreciation on the leased server, storage and accessories, while sustaining the 14A disallowance. The stated principle is that depreciation cannot be denied merely by disputing ownership in a later year absent any change in facts.

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Issues: (i) Whether the disallowance under section 14A read with Rule 8D was to be interfered with. (ii) Whether depreciation on assets taken on finance lease was allowable to the assessee.

Issue (i): Whether the disallowance under section 14A read with Rule 8D was to be interfered with.

Analysis: The issue had already been decided in the assessee's own case for earlier assessment years. The same methodology for computing the disallowance had been accepted in prior years by the Tribunal and upheld by the jurisdictional High Court. The factual position remained unchanged, and the coordinate bench view was followed.

Conclusion: The disallowance under section 14A read with Rule 8D was upheld and no interference was called for.

Issue (ii): Whether depreciation on assets taken on finance lease was allowable to the assessee.

Analysis: The claim concerned servers and related assets acquired under finance lease arrangements. The Tribunal had earlier allowed depreciation on the old server in the assessee's own case, and the claim had also been allowed in later years. The assets had entered the block of assets, the assessee bore the cost and insurance burden, and the subsequent consistency of allowance supported the claim. On the same reasoning, the newly acquired server, storage and accessories were treated on the same footing.

Conclusion: Depreciation on the finance-leased assets was allowable to the assessee.

Final Conclusion: The appellate challenge failed, as the order of the first appellate authority was sustained on both issues and the revenue appeal did not succeed.

Ratio Decidendi: Where an issue has been consistently accepted in earlier assessment years on identical facts, and an asset is treated as part of the block of assets under a finance lease, depreciation cannot be denied merely by disputing ownership in a later year absent a change in facts or a disturbed first-year allowance.

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