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2010 (2) TMI 691 - HC - Income TaxDisallowance - Depreciation - Sale and lease back transaction - As per the SLB Agreement, the appellant purchased certain assets from TNEB and leased them back to it - The assets were eligible for 100% depreciation - since the assets continued to remain with the lessors, it will have to be presumed that the equipments were used in the business of the appellant - the appellant having fully satisfied the condition to claim depreciation, namely ownership and use of the leased assets before the end of the accounting year by the lessee, the appellant was eligible for the depreciation to the extent of 50% - it was more or less like an escrow account, which would only support the stand of the respondent that it was in reality a loan transaction and not a sale and lease back agreement - In fact, the learned senior standing counsel for the respondent brought to our notice that before the Tribunal also, it was submitted by the counsel appearing for the appellant that it was not humanly possible to identify individually all the assets involved in this case - it was submitted by the counsel appearing for the appellant that it was not humanly possible to identify individually all the assets involved in this case - the fact remains that having regard to the nature of the assets dealt with by the appellant and the TNEB, which were all small electrical equipments/machinery, namely meters, shunt capacitor banks and outdoor circuit breakers, identification of the assets at the time of the sale as well as the lease back agreement was impossible of compliance When a claim of sale-cum-lease back agreement is based on an agreement reached between the parties and a clause in the agreement conveys a meaning that the machinery/equipment were to be purchased in future, while as a matter of fact, according to the appellant, it was not so, there was no valid explanation as to how such a clause, namely Clause 15(a) crept into the agreement, providing for a future purchase to be effected by the TNEB, backed by the appellant - sale-cum-lease back agreement along with the subsequent ratification by the Electricity Board discloses that the parties had real intention to pass the property in the plant and machinery to the assessee - So long as the terms of the agreement are not in violation of any statutory provision, there is no scope to hold that the transaction by itself cannot be held to be a make-believe affair or a farce in order to reject the agreement - t is true that the lease back agreement was between the appellant and a public utility service organisation, viz. the Electricity Board - since the assets continued to remain with the lessors, viz. the appellant, it will have to be presumed that the equipments were used in the business of the appellant - the appellant was entitled for the depreciation - Decided in the favour of the assessee
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