TaxTMI 
TaxTMI 
2025 (6) TMI 462
X X X X Extracts X X X X
X X X X Extracts X X X X
....are as under:- Whether on the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing AO to delete the addition made by the AO on account of depreciation claimed by the assessee company of Rs. 2,75,24,307/- on lease-hold asset treating the same as asset owned by the assessee company, when the facts are that owner of the lease-hold asset i.e M/s. Hewlett Packard Financial Services (1) Pvt. (HPFS) has also claimed such depreciation, which was allowed to it by the department in its case in ITA No. 2845/Mum/2013 dated 23/03/2016. 3. Facts of the case are that subsequent to the order u/s 143(3) of the Act passed on 04.03.2014, information was received by the ld.AO from the Dy. Commissioner of Income Tax 2(1)(2), Mumbai that during the course of the assessment proceedings, in the case of Hewlett Packard Financial Services (I) Pvt. Ltd. (herein after referred as HPFS), a lease arrangement existed between HPFS and the assessee. Further, it was found that both the companies were claiming depreciation on the leased assets which led to double claim of deduction on account of depreciation. On perusal of the records, it was noted by him that the asse....
X X X X Extracts X X X X
X X X X Extracts X X X X
..... Also, at the end of the lease term, the ownership of the asset i.e. the title and all its interests in the asset are transferred to the Appellant on an "AS IS, WHERE IS" basis without any further payment as is evident from letter from HPFS on termination of the lease. 5. The ld.CIT(A), deleted the addition by holding that the lessor here has no commercial right, title or interest in the asset, after the termination of lease period, meaning thereby, that this is purely a financial lease. He relied on Mumbai ITAT order in ITA No.: 1048/Mum/2020 Assessment year: 2015-16 in Deputy Commissioner of Income Tax Circle - 2 (1)(1), Mumbai Vs. M/s. BSE Ltd.) quoting the relevant extracts as below. ..... "12. Briefly the facts are, in course of assessment proceedings, the assessing officer noticed that the assessee had claimed depreciation of Rs. 1,14,26,646/- on a 'server' taken on financial lease. Noticing that similar claim made by the assessee in Assessment Year 2012-13 was disallowed, the assessing officer called upon the assessee to explain why similar disallowance should not be made. Though, the assessee objected to the proposed disallowance; the assessing officer, relying....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ad of finance cost. We noted that the AO has disallowed depreciation of 6 crores on the ground that HPFS has claimed depreciation on the said asset not only in this year but in subsequent years. The assessee before us explained that the Income Tax Department for AY 2009-10 has already disallowed the claim of depreciation in the hands of the HPFS. We noted that in the very first year i.e. AY 2011-12, the depreciation has already allowed the claim of depreciation We noted that in the income tax code, there is a provision/ concept of block of asset and once any asset enters into block asset and claim of depreciation in very first year is allowed, in subsequent year deprecation cannot be disallowed in case the first year is not disturbed. We noted that even in subsequent years, the Revenue is allowing the claim of the assessee as noted in above chart. Hence, we allow the claim of depreciation on the issue of consistency. This issue of assessee's appeal is allowed." 6. Before us, the ld.DR relied on the assessment order claiming that depreciation was correctly disallowed. On the other hand, the ld.Authorised Representative relied on the appellate order. A paper book was also filed in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....he actual owner of the vehicles; therefore no depreciation can be allowed to the assessee. It was how the matter reached the Apex Court. The important observations made by the hon'ble Supreme Court are: 1. Section 32 of the Income Tax Act lays down twin requirements of "ownership" and "usage for business" for a successful claim under Section 32 of the Act. 2. The income tax law requires the use of the asset by the assessee for "the purpose of business"; it does not mandate the use of the asset by the assessee itself. The lessor, in the instant case, is a leasing company, engaged in the business of leasing trucks it purchases. Therefore, it satisfies the criteria of "usage for business" as it used the vehicles in the course of its leasing business. 3. As regards "ownership", the Apex Court cited the observations made in Mysore Minerals Ltd., M.G. Road, Bangalore vs. Commissioners of Income Tax, Karnataka, Bangalore; definition of the term "owner" in the Black's Law Dictionary, and the various clauses of the lease agreement that established the lessor to be the "exclusive owner" of the vehicles at all points of time and that the lessee was under an obligati....
X X X X Extracts X X X X
X X X X Extracts X X X X
....usiness. Based on the grounds discussed, the decision was rendered in favour of the lessor: depreciation claim was allowed to the lessor and at a higher rate. 8. Thus, we find that Hon'ble apex court in the judgment rendered in the case of ICDS Ltd. Vs. CIT(supra)has held that if the assets in question are utilized for the purpose of business of the assessee, the requirement of the section stands satisfied notwithstanding non usage of the assets itself by the assessee. Before concluding, it is to be mentioned that the judgment of the Hon'ble Apex Court relied on by the assessee on the case of ABB (supra) does not have application to the instant case. In the case of ABB, the issue involved was relating to "offences relating to transactions in securities" and not connected to Income-tax Act and the claim of depreciation, whereas, the facts in the case of ICDS (supra) are more similar to the facts of the instant case. Moreover, CBDT Circular No.2 dated 09.02.2001 has clearly mentioned that the claim of depreciation is dependent on the test of ownership. The test of ownership is discernible only on interpretation of various clauses in the lease agreement. 8.1 In this connecti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....on of the Ld. AO of initiating reassessment and in upholding the validity of the order passed u/s. 147." 10. It is noticed that the AO has discussed the issue in detail in the assessment order inter alia holding that this is not case of change of opinion. Moreover, the assessment was reopened within four years from the relevant assessment year and what was important is 'Reasons To Believe' which was apparently there in existence. He has also relied on the decision of hon'ble Supreme Court in the case of CIT vs Rajesh Jhaveri Stock Brokers P.Ltd 291 ITR 500 in which the court held that all that is required for issue of notice u/s 147 is reasons to believe that some income has escaped assessment. In this case, information received regarding double claim of deprecation was enough for drawing this belief. 11. It is seen that the ld.CIT(A) has affirmed the conclusion drawn by the AO in this regard. We have also considered the relevant facts and find no merit in the contentions of the assessee. Therefore, the Cross objection-I is dismissed. CROSS-OBJECTION-II: "On the facts and circumstances of the case and in law, in case the Department's appeal is wholly or partly....