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2015 (4) TMI 20 - SUPREME COURT

2015 (4) TMI 20 - SUPREME COURT - [2015] 373 ITR 42 (SC) - Depreciation on the 1250 gas cylinders disallowed - High Court concurred with the opinion of the Tribunal in denying the depreciation on the ground that the cylinders were not purchased for leasing business and one of the parties to whom the cylinders were leased out is the manufacture and seller of the cylinders. It is further stated that the cylinders were dispatched to the other party only a day before the closing of the accounting pe .....

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wo parties to enable it to earn some income, rather than keeping those cylinders idle, is also not in dispute. On the contrary, as mentioned above, the income which is generated from leasing out those gas cylinders is treated as "business income". Once the income from leasing those gas cylinders is accepted as the "business income", which is taxed at the hands of the assessee as such, we see no reason how the depreciation on these gas cylinders could be disallowed on the ground that the cylinder .....

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n, Adv. For the Respondent : Mr. Arijit Prasad, Adv. Mr. D.L. Chidananda, Adv. Ms. Anil Katiyar, Adv. ORDER This appeal relates to the assessment year 1986-87. The issue pertains to depreciation on the 1250 gas cylinders which the assessee had claimed in that year, and which has been disallowed by the authorities below. The brief facts which require mention for the purpose of the present appeal are as under: The appellant-assessee had set up its unit some time in September, 1985 to carry on the .....

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e gas cylinders at the rate of 100 per cent, as provided under the rules on the aforesaid item. The Assessing Officer, however, rejected the claim of depreciation on the ground that hiring business was not proved. It would be significant to state that the appeal filed by the assessee before the Commissioner of Income Tax (Appeals) was accepted on the ground that the income received from leasing the aforesaid equipments would be treated as business income and on that basis he allowed the deprecia .....

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rs was despatched to the two parties on 20.9.1985. Leasing out of cylinders, in this case amounted to the business of the assessee and once the cylinders had been despatched to the lessee, it can be said that they have been put to use by the lessor for the business of hiring/leasing the cylinders. Whether the lessee uses the cylinders or keep them unused with him is his outlook. Once the cylinders have been given to the lessee, the lessor looses control over them and he has no right to direct th .....

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nditions for allowing depreciation are, therefore, fulfilled in this case. The ITO was not justified in rejecting assessee's claim for allowance of depreciation. He is directed to allow the depreciation on cylinders as per rules." The aforesaid order of the CIT(Appeals) was set aside by the Income Tax Appellate Tribunal, and the order of the Income Tax Appellate Tribunal was upheld by the High Court. The High Court has concurred with the opinion of the Tribunal on the ground that the cy .....

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