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2019 (10) TMI 308

..... that it purchased and in M/S ICDS. LTD. [2013 (1) TMI 344 - SUPREME COURT] held that the income derived from leasing of the trucks would be business income and, therefore, the requirement of section 32 i.e. the assets must be used in the course of business stood fulfilled. In the present case also it is undisputed that the assessee is earning income from leasing activities and the leased out assets are being used by the lessees for their business purposes. A perusal of the profit and loss account also shows that the assessee has been earning income from lease business. Circular No. 2/2001 issued by the CBDT on 9.2.2011 explicitly provides that under the Income Tax Act, in all leasing transactions, the owner of the assets is entitled to depr .....

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..... 015 pertains to assessment year 2003-04. Both the appeals were heard together and they are being disposed of by this common order for the sake of convenience. 2.0 Brief facts of the case are that the assessee is a Finance Corporation and it had started lease financing activity in the year 1994-95. The assessee corporation purchases machineries on behalf of the loanees and the plant and machinery were installed at the premises of various loanees. It has been claimed by the assessee that the ownership of the plant and machinery has always remained with the assessee corporation. The assessee corporation had claimed depreciation on such plant and machinery leased out to the borrowers and depreciation had been allowed as deduction since the year .....

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..... er dispute amounted to ₹ 52,48,755/- and the dispute relating to this disallowance travelled up to the ITAT and the ITAT set aside this issue to the file of the AO with similar directions for determining as to whether the lease was a finance lease or operating lease vide order dated 12.10.2012 in ITA No. 482/Ahd/2011. 2.4 In set-aside proceedings for assessment year 2003-04 the AO again held that the nature of lease was finance lease and proceeded to again disallow depreciation to the tune of ₹ 52,48,755/-. 2.5 The assesee s appeals before the Ld. CIT (A) for both the years under consideration were dismissed and now the assessee is before this Tribunal again challenging the action of the lower authorities in treating the transac .....

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..... Ld. AR placed reliance on judgment of Hon ble Apex Court in the case of ICDS Ltd. vs. CIT Mysore (2013) reported in 350 ITR 527 (SC) wherein the Hon ble Apex Court has held that section 32 of the Act required use of asset for the purpose of business and it did not mandate usage of asset by the assessee itself. It was submitted that in this case the Hon ble Apex Court has held that even though motor vehicles were registered in the name of the lessee, the lessor would be entitled to depreciation. 3.4 The Ld. AR also submitted that the reliance by the Department in the case of Asea Brown Boveri Ltd. vs International Finance Corporation of India reported in 2006 154 Taxman512 (SC) was misplaced as no issue of depreciation was involved in this c .....

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..... able on such assets. 5.1 Although the lower authorities have taken a view that the impugned transaction is a finance lease transaction, we are not in agreement with the same due to the following reasons :- (1) We have perused a copy of the lease arrangement between the assessee and M/s. Add-Life Pharma Ltd. and it is seen that the agreement provides that the assets are owned by the assessee corporation and after the period of expiry of lease, the leased assets are restored to the lessor. It is also seen that the insurance policies are taken in the name of lessor by the lessee and the lessee is also required to affix a sign on the assets indicating that assets belong to the lessor. (2) It is further seen that the lessee uses the equipment le .....

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..... d satisfied notwithstanding the non usage of the assets by the assessee. In this case the assessee was a leasing company which leased out trucks that it purchased and the Hon ble Apex Court held that the income derived from leasing of the trucks would be business income and, therefore, the requirement of section 32 i.e. the assets must be used in the course of business stood fulfilled. In the present case also it is undisputed that the assessee is earning income from leasing activities and the leased out assets are being used by the lessees for their business purposes. A perusal of the profit and loss account also shows that the assessee has been earning income from lease business. 5.4 We further note that Circular No. 2/2001 issued by the .....

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