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2017 (12) TMI 925 - AT - Income TaxDenial of depreciation - treating the transaction of purchase of machinery from Primark Labels (P) Ltd and lease back the same to the said concern as the sham transaction - Held that:- The affair was designed for tax evasion and also providing interest-free fund to the sister concern. The assessee has claimed additional depreciation on the said machine even though it was well known that sister concern had already claimed the same. Thus, A.O. has regarded such arrangement as sham transaction and finally has disallowed depreciation of ₹ 98,29,345/-. We find that now before us, the learned counsel for the assessee could not controvert the above findings of CIT(A) and that also of the AO. Once the assessee has designed the transaction in such a way to reduce the tax and claimed the depreciation on the asset first by the sister concern and consequently, the assessee also, this is a Sham transaction. Accordingly, the AO and CIT(A) has rightly confirmed the disallowance of depreciation. We confirm the orders of the lower authorities - Decided against assessee Taxation of lease rentals - exclusion of lease rentals of the Gallus Machine leased to Primark Levels (P). Ltd - Held that:- Once, we have given finding that no depreciation is allowed on Gallus Machine leased to Primark Levels (P). Ltd. holding the same as Sham transaction, the consequence of the same will be that the lease rentals included by the assessee as income has to be excluded. Accordingly, we direct the AO to exclude the lease rental income of ₹ 12 lacks earned by the assessee from lease of Gallus Machine to Primark Levels (P). Ltd. The AO will examine the claim of assessee after verification of facts. This issue of assessee’s appeal is allowed.
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