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2012 (12) TMI 15 - ITAT AHMEDABADDepreciation – dis-allowance in respect of assets given on lease – assessee contended it to be operating lease whereas Revenue as Financial lease – Held that:- Lessee purchased the asset on a lease finance of assets required by him and that the asset is user specific and is selected by the lessee for his own use and hence the first condition regarding finance lease is satisfied in the present case. The second aspect is that risk and rewards, incidental to ownership are passed on to the lessee. Since clauses of lease agreement go to show that risk and rewards incidental to the ownership of the asset in question is passed on to the lessee and hence, the second condition of finance lease is also satisfied in the present case. The third condition is that single lease repays the cost of the asset together with the interest. It is evident as per deed that total cost of asset together with interest is recovered through lease rentals; hence third condition is also satisfied. The other important feature is that the lessor does not bear the cost of repairs, maintenance and operation, which is also satisfied since lessee is required to pay all taxes penalty etc. levied either in connection with the transaction or the asset by sales tax, interest tax etc. and he is also to bear all costs in connection with the preservation of asset by insurance, repair etc. Hence the lease in the present case is the finance lease and consequently depreciation is allowable to the lessee and not to the lesser. See Induslnd Bank Ltd. vs. ACIT (2012 (3) TMI 212 - ITAT MUMBAI), Asea Brown Boveri Limited v. IFCI (2004 - TMI - 106804 - Supreme Court Of India). Penalty u/s 271(1)(c) – dis-allowance of depreciation - Held that:- In the present case, the penalty u/s 271(1)(c) is not justified in respect of dis-allowance of depreciation. It is seen that the same is in respect of dis-allowance of depreciation on finance lease although the claim was on this basis that these are operating lease. We find that there was no clarity on this aspect and therefore, it cannot be said that there is any concealment of income or furnishing of inaccurate particulars of income in the facts of present case because issue was debatable till very recently when Special Bench of the Tribunal clarified the legal position. We, therefore, delete the penalty – Decided in favor of assessee
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