TMI Blog2018 (8) TMI 1981X X X X Extracts X X X X X X X X Extracts X X X X ..... on a different ground. Excess depreciation allowed in respect of vehicles - merit of depreciation claimed by the assessee @ 40% on trucks - HELD THAT:- Notably, the higher rate of depreciation @ 40% was allowable in case of vehicles which were used in the business of running them on hire. Initially, in the assessment proceedings, depreciation claimed @ 40% was allowed as such, but the Commissioner vide his order dated 06.03.2003 passed u/s 263 of the Act directed the Assessing Officer to modify the depreciation allowable on vehicles and restricted the same to 20% and not at 40%, as claimed by the assessee. We are narrating these aspects only to bring home the point that the claim of depreciation made by the assessee on trucks @ 40% in return of income, and which stood accepted initially in the assessment u/s 143(3) of the Act, was not a claim which was patently inadmissible on the face of it. It is also worthwhile to note that this aspect of the controversy sprung-up only consequent to the judgment of the Hon'ble Bombay High Court in the case of Kotak Mahindra Finance Ltd. [ 2003 (4) TMI 30 - BOMBAY HIGH COURT] and it was not a case where the claim of assessee was bona ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,782 3 Disallowance of depreciation on asset leased to Tata Telecom 2,08,056 95,705 4 Excess depreciation allowed in respect of vehicles 9,49,69,652 4,36,86,040 Total 14,00,20,338 6,44,09,354 4. At the time of hearing, it was a common point between the parties that so far as the penalty leviable with respect to the aforestated item nos. 1 2 are concerned, the same does not survive. It has been pointed out that insofar as penalty levied in respect of item (1), i.e. disallowance of depreciation on leased assets capitalised in preceding Assessment Year of 1994-95 is concerned, such disallowance amounting to ₹ 45,71,364/- has been set-aside by the Tribunal in the quantum proceedings for Assessment Year 1994-95 vide ITA No. 1472/Ahd/2005 dated 25.01.2017. In this context, we find that the Tribunal vide its order dated 25.01.2017 (supra) for Assessment Year 1994-95 has set-aside the matter back to the file of the Assessing Officer. Similarly, in the instant Assessment Yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ering into the Leasing agreement and that even the Lease Management fees was also received during the year itself. Assessee had referred to the judgment of Hon'ble Madras High Court in the case of CIT vs First Leasing Co. of India, 216 ITR 455 (Mad) and Hon'ble Karnataka High Court in the case of CIT vs Shaan Finance (P). Ltd., 199 ITR 409, which was subsisting at the relevant point of time, to say that actual use of asset by lessee was not relevant so long as assessee, which was in the business of leasing, had leased the relevant asset, thus putting to use such asset for its business of leasing. On this aspect, the learned representative for the assessee also pointed out that ownership and use by the assessee are the relevant criteria for allowability of depreciation in a leasing business and not the use of asset by the lessee. In any case, it has been pointed out that at the time of filing of the return of income on 30.09.1998, the claim was bona fidely made based on the legal understanding of the issue, as supported by the judgment of the Hon'ble Madras High Court, which had taken a view that where the business of the assessee was leasing of assets, assessee must be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... haan Finance (P). Ltd. (supra). Under these circumstances, in our view, the penalty u/s 271(1)(c) of the Act is not justifiable and, therefore, we hereby affirm this aspect of the decision of CIT(A) also, albeit on a different ground. 9. The last issue on which penalty has been levied is excess depreciation allowed in respect of vehicles amounting to ₹ 9,49,69,652/-. In this context, the learned representative for the assessee had explained that the dispute revolves around depreciation allowable on trucks leased out by the assessee. Assessee had claimed depreciation on trucks leased out @ 40%. The learned representative explained that the Commissioner, invoking his jurisdiction u/s 263 of the Act, had directed disallowance of depreciation allowed on trucks @ 40% and instead, restricted the same to 20%. In an appeal against the order of Commissioner u/s 263 of the Act, the Tribunal in its order dated 31.10.2007 in ITA No. 2139/Ahd/2003 partially modified the direction of the Commissioner and directed the Assessing Officer to verify as to whether the hirers had in turn used the vehicles in the business of running them on hire, and if so, the depreciation allowable would be @ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iation claimed by the assessee @ 40% on trucks. Notably, the higher rate of depreciation @ 40% was allowable in case of vehicles which were used in the business of running them on hire. Initially, in the assessment proceedings, depreciation claimed @ 40% was allowed as such, but the Commissioner vide his order dated 06.03.2003 passed u/s 263 of the Act directed the Assessing Officer to modify the depreciation allowable on vehicles and restricted the same to 20% and not at 40%, as claimed by the assessee. This direction of the Commissioner came-up in appeal before the Tribunal and vide its order dated 31.10.2007 (supra), the Tribunal noticed the judgment of the Hon'ble Bombay High Court in the case of Kotak Mahindra Finance Ltd. (supra) wherein it has been held that where the hirer is running the vehicles on hire, higher rate of depreciation is to be allowed to the finance company who has leased the vehicles to such hirer. Based on the said judgment of the Hon'ble Bombay High Court, the Tribunal, in-principle, approved invoking of jurisdiction of the Commissioner u/s 263 of the Act, so however, it directed the Assessing Officer to verify as to whether the hirers had used the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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