TaxTMI 
TaxTMI 
2018 (1) TMI 1355
X X X X Extracts X X X X
X X X X Extracts X X X X
.... noticed that the assessee has claimed depreciation of Rs. 55,02,27,226, on assets leased by it which includes depreciation @ 50% amounting to Rs. 16,04,71,679, on leased assets depreciation on which was disallowed in assessment year 1998-99. The Assessing Officer being of the view that allowability of depreciation is based on fulfillment of twin condition of ownership of assets by the claiment and its user for the purpose of business, called upon the assessee justify its claim. Though, the assessee made elaborate submissions justifying its claim of depreciation, however, the Assessing Officer did not find merit in the submissions of the assessee. The Assessing Officer referring to the sale and lease back transactions entered with different companies held that they are simply in the nature of finance / loan transaction, therefore, the assessee is neither the owner of the assets nor such assets were used for the purpose of its business. Accordingly, he disallowed assessee's claim of depreciation on leased assets. 4. Though, the assessee challenged the disallowance of depreciation before the first appellate authority, however, he also sustained the disallowance. 5. The learned Sr. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....e find that impugned assets underlying lease agreements were very much in existence, that purchase consideration of assets was discharged by the assessee through banking channels, that copies of the cheques were also produced, that the lease transactions were completed as per all legally prescribed procedures, that it was a rightful owner of leased assets that the leassees had confirmed the ownership of assets, that lease rentals earned by the assessee was offered to tax and same was assets by the AO.s in the year under consideration as well as in the subsequent AY.s. Here, we would like to discuss the matter of I.C.D.S. Ltd.(supra).In that case the Hon'ble Apex Court has held as under:- "The provision on depreciation in the Income-tax Act, 1961, reads that the asset must be "owned, wholly or partly, by the assessee and used for the purpose of the business". Therefore, it imposes a twin requirement of "ownership" and "usage for business" for a successful claim under section 32 of the Act. The section requires that the assessee must use the asset for the "purposes of business". It does not mandate usage of the asset by the assessee itself. As long as the asset is utilized for th....
X X X X Extracts X X X X
X X X X Extracts X X X X
...., were applied we allow depreciation claimed by the assessee. This ground is allowed. 9. In ground no.2, assessee has challenged the disallowance of an amount of Rs. 89,10,830, being expenses incurred for increase in authorised share capital. 10. Brief facts are, the Assessing Officer while examining the nature of the expenditure claimed found that it was related to increase of authorised share capital of the company. Therefore, treating the expenditure incurred as capital nature, he disallowed the claim. 11. The learned Commissioner (Appeals) also sustained the disallowance for the very same reason. 12. We have considered rival contentions and perused the material on record. Learned Sr. Counsel for the assessee fairly conceded that in view of the decision of the Hon'ble Supreme Court in Punjab State Industrial Development Corporation v/s CIT, 225 ITR 792 and Brooke Bond India Ltd v/s CIT, 225 ITR 798, the expenditure incurred by the assessee has to be treated as capital in nature. In view of the aforesaid, we uphold the decision of the first appellate authority on this issue. Ground no.2 is dismissed. 13. In ground no.3, the assessee has challenged the disallowance of pri....
X X X X Extracts X X X X
X X X X Extracts X X X X
....mmissioner (Appeals). 19. We have considered rival contentions and perused material on record. We have also applied our mind to the decisions relied upon. In so far as the factual aspect of the issue is concerned, there is no dispute that in the relevant previous year the assessee has offered prior period income of Rs. 76,06,741=23 and claimed prior period expenditure of Rs. 9,87,760=54. Before the Assessing Officer, the assessee also justified its claim by stating that such expenditure did crystallize in the impugned assessment year. The Assessing Officer has not rebutted the aforesaid claim of the assessee with any cogent reasoning. Moreover, when the Assessing Officer has no objection in accepting the prior period income, applying the same principle he should not have objected to the claim of prior period expenditure when such expenditure claimed by the assessee is far less than the prior period income. Even the expenditure could have been netted off against the income relating to prior period. Therefore, keeping in view the ratio laid down by the learned Sr. Counsel, we allow assessee's claim and delete the addition made on account of disallowance of prior period expenditure. ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....rned, the first appellate authority deleted the disallowance on the reasoning that there is nothing on record to suggest that the assessee has incurred any other expenditure for earning the dividend income. While the assessee is challenging disallowance of interest expenditure, the Department is aggrieved with the decision of the learned Commissioner (Appeals) in deleting disallowance of other expenditure. 23. The learned Sr. Counsel for the assessee reiterating the stand taken before the Departmental Authorities submitted that own surplus interest free fund available with the assessee during the relevant previous year far exceeds the investments made in shares, therefore, no disallowance of interest expenditure can be made. He submitted, considering the aforesaid factor, the Tribunal in assessee's own case for assessment year 1999-2000 to 2002-03, has deleted the disallowance of interest expenditure. Further, in support of his contention, the learned Sr. Counsel for the assessee relied upon the following decisions:- i) HDFC Bank Ltd. v/s CIT, 383 ITR 529 (Bom.); ii) CIT v/s HDFC Bank Ltd., 366 ITR 505 (Bom.); and iii) CIT v/s Reliance Utilities & Power Ltd., 313 ITR 340 (Bo....