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2014 (8) TMI 799 - AT - Income TaxDepreciation on leased asset - Solar Generating System – Held that:- The lease rentals are as it is accepted by the AO during original assessment proceedings and also during giving effect to the order of ITAT - These lease rentals are not at all doubted by the AO but for disallowing depreciation totally relied on the observations made by ITAT without going into the details and without making enquiries treated the transaction as colourable device - Once, lease rentals are accepted by the revenue, there is no reason to disallow the depreciation – relying upon Commissioner of Income-Tax Versus First Leasing Co. of India Ltd. & Shaan Finance (P.) Ltd. [1998 (3) TMI 8 - SUPREME Court] - In the case of hire purchase agreements, the Department's Circular No. 9 of 1943 dated March 23, 1943, provides that where, under the terms of the agreement the equipment shall eventually become the property of the hirer or confer on the hirer an option to purchase the equipment, the transaction should be regarded as one of hire purchase - the periodical payments made by the hirer should, for tax purposes, be regarded as made up of consideration for hire to be allowed as a deduction in the assessment and payment on account of purchase to be treated as capital outlay, depreciation being allowed to the lessee on the initial value - the order of CIT(A) is upheld in deleting the disallowance of depreciation – Decided against Revenue.
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