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2007 (2) TMI 239 - AT - Income TaxDepreciation on the leased vehicles/assets - Rate of depreciation - Financial lease Or Not - lease agreement between the assessee (lessor) and SIL (lessee) - whether the assessee is entitled to depreciation u/s 32 - HELD THAT:- A combined reading of the terms of the lease agreement clearly reveals that all the features of the finance lease exist in the agreement between the parties. Therefore, respectfully following the judgment of Hon'ble Supreme Court in ABB's case [2004 (10) TMI 325 - SUPREME COURT], it is held that assessee was not the owner of the leased vehicles as the impugned agreement was an agreement of financial lease and not the normal lease. Consequently, the assessee is not entitled to any depreciation. It may be clarified that even after the judgment of the Hon'ble Supreme Court in ABB's case, a clear distinction has to be made between the normal lease and financial lease. If the agreement is a financial lease, then the consequences would be governed by the decision of the Hon'ble Supreme Court in ABB's case but if it is a case of normal lease, then consequences would be governed by the earlier judgment of the Hon'ble Supreme Court in the case of Shaan Finance (P.) Ltd.[1998 (3) TMI 8 - SUPREME COURT]. It may also be mentioned that the learned counsel for the assessee has argued to the effect that the learned CIT(A) was not justified in allowing depreciation to the extent of 50 per cent only. He has also argued that the rate of depreciation should have been 40 per cent instead of 25 per cent allowed by the learned CIT(A). Thus, the order of the CIT(A) is set aside on this issue and consequently the disallowance of depreciation made by the Assessing Officer is restored. The grounds raised by the assessee are, therefore, dismissed while the ground raised by the revenue is allowed. Disallowance in respect of repairs and maintenance - HELD THAT:- We find that the learned CIT(A) has passed a sketchy order without giving any reason in support of his conclusion. He has also not discussed anything about the Explanation 1 to section 32 of the Act which provides that where the business of the assessee is carried on in a building not owned by him and any capital expenditure incurred for the purpose of business on the construction of any structure or do any work in/or relation to and by way of renovation or extension of or improvement to the building, then provisions of section 32 shall apply as if the said structure or work is a building owned by the assessee. When the Assessing Officer had invoked such provisions, it was the duty of the learned CIT(A) to have adjudicated the matter in the light of the above provisions. Thus, we set aside the order of the learned CIT(A) on this issue and restore the matter to his file for fresh adjudication after examining the evidence on record or as may be filed by the assessee before him. In the result, both the appeals stand partly allowed.
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