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2016 (3) TMI 870 - AT - Income TaxRevision u/s 263 - disallowance of proportionate depreciation on Aircraft - Held that:- The order passed by the Learned AO in allowing the depreciation on aircrafts could not be treated as erroneous much less prejudicial to the interests of revenue. In this regard, we place reliance on the decision of the Hon’ble Apex Court in the case of CIT vs Max India Ltd reported in (2007 (11) TMI 12 - Supreme Court of India) wherein held the phrase ‘prejudicial to the interest of the Revenue’ in section 263 of the IT Act, 1961, has to be read and in conjunction with the expression ‘erroneous’ order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interest of the Revenue. For example, when the AO adopts one or two courses permissible in law and it has resulted in loss of revenue, or where two views are possible and the AO has taken one view with which the CIT does not agree, it cannot be treated as an erroneous order prejudicial to the interest of the Revenue , unless the view taken by the AO is unsustainable in law. - Decided in favour of assessee Disallowance of lease rentals on principal repayment of vehicle loan - Held that:- merely because the lease arrangement has been considered as finance lease for the purpose of AS 19 , that itself does not render the lessee (assessee herein) as the owner of asset for IT Act for claiming depreciation. We find that AS 19 provides for various situations in order to decide as to whether the lease can be considered as finance lease or operating lease for the limited purpose of such AS 19. We find that the assessee had duly complied with the Circulars laid down in this regard more so when the CBDT has itself clarified vide Circular No. 2/2001 dated 9.2.2001 that the AS 19 will have no implication on the allowance of depreciation on assets under the provisions of IT Act. It is well settled that the CBDT Circulars are binding on the revenue. As per this Circular No. 2/2001 dated 9.2.2001, in a lease transaction, the owner of the assets is entitled to depreciation. In the instant case, the lessor (Orix Auto) being the owner had the right to claim depreciation and the assessee has not claimed any depreciation as per the provisions of the IT Act and instead had claimed the entire lease rental as revenue expenditure.. Thus safely concluded that the order has been passed by the Learned AO by taking one of the possible views and hence the order cannot be termed as erroneous warranting initiation of revision proceedings u/s 263 of the Act. We also find that the issue is accepted by the revenue in assessee’s own case for the Asst Year 2011-12 pursuant to the directions of the Hon’ble DRP. In these circumstances, we hold that the order passed by the Learned AO cannot be considered as erroneous. Hence the grounds raised by the assessee on the issue of allowability of lease rentals are allowed.- Decided in favour of assessee
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