TaxTMI 
TaxTMI 
2017 (1) TMI 244
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....mstances of the case, the ITAT was right and justified in holding that in the case of financing agreement the benefit of depreciation would be available to the assessee, financer and not to the real owner purchaser of the vehicle? (iii) Whether on the facts and circumstances of the case, the ITAT was right and justified in allowing the deduction of payment of interest of Rs. 66,395/- when the loans/ advances were provided to the persons related to the Directors without interest and for non business purposes? (iv) Whether on the facts and circumstance of the case, the finding of the ITAT is perverse, contrary to the record and untenable in the eye of law?" DB INCOME TAX APPEAL NO.249/2005 "(i) Whether on the facts and circumstances of the case, the ITAT was right and justified in allowing the benefit of depreciation of Rs. 1,13,10,102/- when the vehicle were not owned and used but merely financed by the assessee? (ii) Whether on the facts and circumstances of the case, the ITAT was right and justified in holding that in the case of financing agreement the benefit of depreciation would be available to the assessee, financer and not to the ....
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....facturers. The assessee, as a part of its business, leased out these vehicles to its customers and thereafter, had no physical affiliation with the vehicles. In fact, lessees were registered owners of the vehicles, in the certificate of registration issued under the Motor Vehicles Act, 1988 (hereinafter referred to as "the MV Act"). The assessee claimed depreciation, which was disallowed by Assessing Officer on the ground that the assessee's use of these vehicles was only by way of leasing out to others and not as actual user of the vehicles in the business of running them on hire. It had merely financed the purchase of these assets and was neither the owner nor user of these assets. The Commissioner of Income Tax (Appeals) affirmed the finding of the Assessing Officer. Thereafter, assessee preferred appeal before the Income Tax Appellate Tribunal, but the same was also dismissed. Thereafter assessee preferred appeal by way of Special Leave Petition before Hon'ble Apex Court. In para 8 of the judgment, the Hon'ble Apex Court referred the substantial questions of law, which were framed by High Court for its adjudication. Para 8 of the judgment is reproduced, as under :- ....
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.... of the asset by the assessee itself. As long as the asset is utilised for the purpose of business of the assessee, the requirement of Section 32 will stand satisfied, notwithstanding nonusage 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 2(24) of the Act, the income derived from leasing of the trucks would be business income, or income derived in the course of business, and has been so assessed. Hence, it fulfills the aforesaid second requirement of Section 32 of the Act viz. that the asset must be used in the course of business". 16. The Hon'ble Apex Court also considered that the lessor is owner of the Vehicle. Section 2(30) of the Motor Vehicles Act was also considered for the purpose of registered owner of the vehicle. Relevant paragraphs i.e. paras 23, 27, 29 and 31 are also reproduced, as under:- 23. A scrutiny of the material facts at hand raises a presumption of ownership in favour of the assessee. The vehicle, along with its keys, was delivered to the assessee upon which, the lease agreement ....
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....preciation and also at the higher rate applicable on the asset hired out. We are in complete agreement with these decisions on the said point. 31. Therefore, in the fact of the present case, we hold that the lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out". 17. From the submissions of learned counsel for the parties, the facts and reasons assigned in the judgment of the Tribunal, it is clear that Hon'ble Apex Court has held that lessor is an owner and thus is entitled to depreciation under Section 32(1) of the Act, and the present case is fully covered by decision of Hon'ble Apex Court in case of Industrial Credit And Development Syndicate Limited (supra) and, therefore, question framed above is answered in favour of assessee and against the revenue." 4. However, Mr. Singhi, learned counsel for the appellants tried to distinguish the judgments. 5. However, the same is not admitted by counsel for the respondent, therefo....
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....lt at all, there cannot be a tax, even though in book-keeping, an entry is made about a "hypothetical income", which does not materialize. Where income has, in fact, been received and is subsequently given up in such circumstances that it remains the income of the recipient, even though given up, the tax may be payable. Where, however, the income can be said not to have resulted at all, there is obviously neither accrual nor receipt of income, even though an entry to that effect might, in certain circumstances, have been made in the books of account" 4.1 In view of the above, the Tribunal did not commit any error in dismissing the appeal of the Revenue and upholding the deletion of the addition in question. The present appeal is devoid of merits. No substantial question of law arises for consideration of this court." 8. And another decision of Gujarat High Court in Commissioner of Income Tax Vs. Raghuvir Synthetics Ltd., [2013] 36 taxmann.com 275(Gujarat) The Tribunal on noting these details, in terms held that there was nothing contrary that could be brought on record by the Department. The assessee's equity share capital Rs. 3.85 cores and reserve and sur....
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....P) Ltd., in the year 1985. It had not charged any interest from the said company whereas it had been charging interest from other debtors. It had borrowed huge sum from the banks and the financial institutions. In the present assessment year, the AO had disallowed the amount towards proportionate interest on the said advances. The Tribunal after examining the balance sheet for the year ending 31st Dec., 1985, had come to the conclusion that the assessee-company was having sufficient fund on account of share capital, share application money, reserve and surplus, and was having sufficient fund at its disposal out of which a small sum of Rs. 17.19 lakhs could easily be diverted. It is well-settled that if an amount has been borrowed not for the business purposes but for some private purposes, then the interest on such borrowings cannot be allowed as a deduction under Section 36(1)(ii) of the Act. The apex Court in the case of Madhav Prasad Jatia (supra) while considering the provision of Section 10(2)(iii) of the Indian IT Act, 1922, which is analogous to Section 36(1)(ii) of the Act, has held that for claiming a deduction under Section 10(2)(iii) of the 1922 Act, three conditions are....