TaxTMI 
TaxTMI 
2021 (7) TMI 121
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....of 1961) was issued. The assessee filed its reply to the notice and appeared before the authorities. The assessing officer visited the office of the assessee on 19.7.2011 and recorded the statement on oath of one Sri.Eswar Hariharan, Lease Accounts Manager, who had been authorized to give statement on behalf of the company. The statement of Sri Eswar Hariharan has been approved by Sri.Shrihari Varnasi, Manager Taxation. The assessment was completed under Section 143(3) read with Section 144(C) of the Act of 1961 on 12.10.2012, wherein the assessing officer has disallowed the excess depreciation claimed on networking equipments. 3. The Principal Commissioner of Income Tax, Bengaluru, thereafter issued a notice under Section 263 of the Act of 1961 on 5.3.2015 and called upon the assessee to explain as to why the assessment order passed by the assessing officer under Section 143(3) of the Act of 1961 should not be revised. The Principal Commissioner of Income Tax proposed to revise the assessment order under Section 263 of the Act of 1961 on the ground that the assessment order passed by the assessing officer is erroneous, prejudicial to the interests of the revenue on account of t....
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....under Section 263 of the Act of 1961 by relying upon the decision of the Hon'ble Supreme Court in the case of Malabar Industrial Co. Ltd., v. CIT even when the said authority passed the order under Section 263 of the Act of 1961 in terms of parameters of said section and as the order of assessment passed by assessing authority was erroneous and prejudicial to the interests of the revenue and as the assessing authority ignored the issue of ownership of assets to ascertain that whether assessee is eligible to claim depreciation or not; and (b) That the Income Tax Appellate Tribunal ought to have seen that the order passed by the Principal Commissioner of Income Tax under Section 263 of the Act of 1961 was in accordance with the principles laid down by the Apex Court and the High Courts and the Income Tax Appellate Tribunal failed to consider the decisions relied upon by the revenue. 6. This Court has admitted the appeal on the following substantial question of law; "Whether on the facts and in the circumstances of the case, the Tribunal is right in law in setting aside the order passed by the Pr.Commissioner of Income Tax under Section 263 of the Act by Tribunal ....
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....s placed reliance upon a judgment delivered in the case of Malabar Industrial Co.Ltd., v. Commissioner of Income Tax, reported in (2000) 109 Taxman 66 (SC) as well as upon a judgment delivered in the case of Commissioner of Income Tax, Mumbai v. Amitabh Bachchan, reported in (2016) 69 taxmann.com 170(SC). 9. On the other hand, learned counsel for the respondent/assessee has vehemently argued before this Court that the Principal Commissioner of Income Tax has erred in law and in facts in initiating the proceedings under Section 263 of the Act of 1961 without appreciating the fact that the proceedings under Section 263 of the Act of 1961 can be initiated only if the order passed by the assessing officer is erroneous and prejudicial to the interests of the revenue. He has also argued that a detailed and an exhaustive enquiry was held in the matter. The assessing officer has applied his mind on the issue of allowability of the depreciation on the leased assets on finance lease arrangement and has adopted a particular view which is evident from the order passed by the assessing officer and therefore, a mere change of view, on the part of the Principal Commissioner of Income Tax, will....
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....y or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed- (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed10; (ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed11: Provided that no deduction shall be allowed under this clause in respect of- (a) any motor car manufactured outside India, where such motor car is acquired by the assessee after the 28th day of February, 1975 but before the 1st day of April, 2001, unless it is used- (i) in a business of running it on hire for tourists ; or (ii) outside India in his business or profession in another country ; and (b) any machinery or plant if the actual cost thereof is allowed as a deduction in one or more years under an agreement entered into by the Central Government under section 42 : Provided further that where an asset referred to in clause (i) or clause (ii) or clause (iia) or the first proviso to....
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....st day of April, 1991, the deduction in relation to any block of assets under this clause shall, in the case of a company, be restricted to seventy-five per cent of the amount calculated at the percentage, on the written down value of such assets, prescribed under this Act immediately before the commencement of the Taxation Laws (Amendment) Act, 1991: Provided also that the aggregate deduction, in respect of depreciation of buildings, machinery, plant or furniture, being tangible assets or knowhow, patents, copyrights, trademarks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets allowable to the predecessor and the successor in the case of succession referred to in clause (xiii), clause (xiiib) and clause (xiv) of section 47 or section 170 or to the amalgamating company and the amalgamated company in the case of amalgamation, or to the demerged company and the resulting company in the case of demerger, as the case may be, shall not exceed in any previous year the deduction calculated at the prescribed rates as if the succession or the amalgamation or the demerger, as the case may be, had not taken place, and such de....
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....allowed as deduction under clause (ii) : Provided that where an assessee, sets up an undertaking or enterprise for manufacture or production of any article or thing, on or after the 1st day of April, 2015 in any backward area notified by the Central Government in this behalf, in the State of Andhra Pradesh or in the State of Bihar or in the State of Telangana or in the State of West Bengal, and acquires and installs any new machinery or plant (other than ships and aircraft) for the purposes of the said undertaking or enterprise during the period beginning on the 1st day of April, 2015 and ending before the 1st day of April, 2020 in the said backward area, then, the provisions of clause (iia) shall have effect, as if for the words "twenty per cent", the words "thirty-five per cent" had been substituted : Provided 13[further] that no deduction shall be allowed in respect of- (A) any machinery or plant which, before its installation by the assessee, was used either within or outside India by any other person; or (B) any machinery or plant installed in any office premises or any residential accommodation, including accommodation in the nature of a gu....
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....rred to in sub-section (15) of section 45 of the said Act, sanctioned and brought into force by the Central Government under sub-section (7) of section 45 of that Act, of any asset by the banking company to the banking institution. (iv) [***] (v) [***] (vi) [***] (1A) [***] (2) Where, in the assessment of the assessee, full effect cannot be given to any allowance under sub-section (1) in any previous year, owing to there being no profits or gains chargeable for that previous year, or owing to the profits or gains chargeable being less than the allowance, then, subject to the provisions of sub-section (2) of section 72 and subsection (3) of section 73, the allowance or the part of the allowance to which effect has not been given, as the case may be, shall be added to the amount of the allowance for depreciation for the following previous year and deemed to be part of that allowance, or if there is no such allowance for that previous year, be deemed to be the allowance for that previous year, and so on for the succeeding previous years." 13.2 Section 143(3) of the Act of 1961 reads as under; "(3) [On the day specified in the no....
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....h news agency or fund or trust or institution has been rescinded : Provided further that where the Assessing Officer is satisfied that the activities of the university, college or other institution referred to in clause (ii) and clause (iii) of sub-section (1) of section 35 are not being carried out in accordance with all or any of the conditions subject to which such university, college or other institution was approved, he may, after giving a reasonable opportunity of showing cause against the proposed withdrawal to the concerned university, college or other institution, recommend to the Central Government to withdraw the approval and that Government may by order, withdraw the approval and forward a copy of the order to the concerned university, college or other institution and the Assessing Officer: Provided also that notwithstanding anything contained in the first and the second provisos, no effect shall be given by the Assessing Officer to the provisions of clause (23C) of section 10 in the case of a trust or institution for a previous year, if the provisions of the first proviso to clause (15) of section 2 become applicable in the case of such person in such....
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....oner or Deputy Commissioner or the Income-tax Officer on the basis of the directions issued by the Joint Commissioner under section 144A; (ii) an order made by the Joint Commissioner in exercise of the powers or in the performance of the functions of an Assessing Officer conferred on, or assigned to, him under the orders or directions issued by the Board or by the Principal Chief Commissioner or Chief Commissioner or Principal Director General or Director General or Principal Commissioner or Commissioner authorised by the Board in this behalf under section 120; (b) "record" shall include and shall be deemed always to have included all records relating to any proceeding under this Act available at the time of examination by the Principal Commissioner or Commissioner; (c) where any order referred to in this sub-section and passed by the Assessing Officer had been the subject matter of any appeal filed on or before or after the 1st day of June, 1988, the powers of the Principal Commissioner or Commissioner under this sub-section shall extend and shall be deemed always to have extended to such matters as had not been considered and decided in such appeal. ....
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.... transactions by issuing show cause notice. The assessee has filed all relevant documents including the copies of agreements entered with the customers and the assessee has also referred to the Circulars issued by the CBDT clarifying the legal position to claim depreciation on assets under operating lease as well as finance lease. The assessing officer being satisfied with the explanation and after conducting a thorough enquiry has allowed the depreciation claimed on assets under lease transactions, but disputed the rate of depreciation claimed by the assessee and therefore, by no stretch of imagination it can be held that the assessment order passed by the assessing officer was erroneous within the meaning of Section 263 of the Act of 1961. 15. The learned counsel for the Income Tax Department has vehemently relied upon the judgments delivered in the case of Malabar Industrial Co.Ltd., (supra) as well as in the case of Amitabh Bachchan (supra) on the issue that the order passed by the assessing officer is prejudicial to the interests of the revenue. In the considered opinion of this Court as rightly held by the Income Tax Appellate Tribunal every loss of revenue as a consequenc....
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....under Section 32 of the Act for the Assessment Year 2002-03 and 2003-04. Therefore, the revenue cannot be allowed to take a different stand for the Assessment Year 2004-05. 8. In view of preceding analysis, the substantial questions of law are answered against the revenue and in favour of the assessee. In the result, the order of the Tribunal dated 09.1.2012 in so far as it pertains to the rejection of the claim of the assessee for depreciation in respect of leased assets under Section 32 of the Act is hereby quashed and the assessee is held entitled to depreciation in respect of leased assets under Section 32 of the Act. Accordingly, the appeal is allowed." 17. The Division Bench of this Court has placed reliance upon a judgment delivered in the case of M/s ICDS Ltd (supra), wherein again the same issue was involved. Paragraphs 26 to 32 of the judgment delivered by the Hon'ble Supreme Court in M/s ICDS Ltd's case are reproduced as under; "26. We do not find merit in the Revenue's argument for more than one reason: (i) Section 2(30) is a deeming provision that creates a legal fiction of ownership in favour of lessee only for the purpose of the MV Act. It define....
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....iod for which the certificate cancelled under this sub-section would have been in force." Therefore, the MV Act mandates that during the period of lease, the vehicle be registered, in the certificate of registration, in the name of the lessee and, on conclusion of the lease period, the vehicle be registered in the name of lessor as owner. The Section leaves no choice to the lessor but to allow the vehicle to be registered in the name of the lessee Thus, no inference can be drawn from the registration certificate as to ownership of the legal title of the vehicle; and (iii) if the lessee was in fact the owner, he would have claimed depreciation on the vehicles, which, as specifically recorded in the order of the Appellate Tribunal, was not done. It would be a strange situation to have no claim of depreciation in case of a particular depreciable asset due to a vacuum of ownership. As afore- noted, the entire lease rent received by the assessee is assessed as business income in its hands and the entire lease rent paid by the lessee has been treated as deductible revenue expenditure in the hands of the lessee. This reaffirms the position that the assessee is in fact th....
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.... "15. The CBDT vide Circular No. 652, dated 14-6-1993 has clarified that the higher rate of 40% in case of lorries etc. plying on hire shall not apply if the vehicle is used in a non- hiring business of the assessee. This circular cannot be read out of its context to deny higher appreciation in case of leased vehicles when the actual use is in hiring business. (Emphasis supplied) Perhaps, the author meant that when the actual use of the vehicle is in hire business, it is entitled for depreciation at a higher rate. *** *** *** 39. The gist of the decision of the apex court in the case of Shaan Finance (P) Ltd. is that where the business of the assessee consists of hiring out machinery and/ or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purpose of business. 40. In the present case, the business of the assessee consists of hiring out machinery and trucks where the income derived by the assessee from hiring of such machinery is business income. Therefore, the assessee-appellant viz. ICDS should be considered as having used the ....