9911796707
TMI Blog2022 (2) TMI 1315X X X X Extracts X X X X X X X X Extracts X X X X ..... se, all the risks and rewards incidental to ownership of an asset is transferred to the lessee and the lessor cannot claim depreciation on the leased plant and machinery citing the reason that the lessee has not claimed depreciation on the leased plant & machinery? 2) Whether on the facts and in the circumstances of the case and in law, the Ld.CIT(A) was justified in deleting the disallowance of Rs.21,33,99,431/- on account of Depreciation on Assets (Finance Lease) without appreciating that AS-19 allows the lessee to claim depreciation on the asset and not the lessor, in case of Finance Lease? 3) The appellant prays that the order of the CIT(A) on the above grounds be set-aside and that of the Assessing Officer. 4) The appellant craves leave to amend, alter, delete or add grounds which may be necessary. 2. The brief facts of the case the assessee company is engaged in the business of providing infrastructure support services. The assessee has filed the return of income electronically on 29.11.2013 for the A.Y 2013-14 declaring a total loss of Rs. 120,57,37,408/- and the book profits calculated u/s 115JB of the Act of Rs. Nil. The case was selected for scrutiny and notice ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent without considering the various facts and provisions. Further, the revenue has not accepted the decision of the Honble Tribunal and the matter is being contested. 5. Contra, the Ld. AR supported the order of the CIT(A) and relied on the Honble Tribunal decision for the A.Y 2013-14 and prayed for dismissal of the Revenue appeal. 6. We heard the rival submissions and perused the material on record. The sole disputed issue envisaged by the Ld. DR that the CIT(A) has erred in granting the relief to the assessee, irrespective of the fact that the decision of the Hon'ble Tribunal is being challenged by the revenue before the Higher Forums. At this juncture, we considered it appropriate to consider the observations of the Hon'ble Tribunal in ITA No. 4717&4873/Mum/2017 for the A.Y 2011-12 at page 28 to 40 Para 16 to 21, which is read as under: 16. We have beard both parties, perused the material available on record and gone through the orders of authorities below. The assessee had entered in to lease agreement with M/s Reliance Industries Ltd. and leased out Polymer Plant located at 5, TTC Industrial area, Ghansali, Thane, Belapur road, Navi Mumbai. As per lease agreement dated 31/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gue that it is entitled for depreciation. The assessee has filed a confirmation from the lessee and stated that lessee did not claim the precaution on plant and machinery, because the ownership of the asset is not truant, erred to the lessee during subsistence of lease period. Accordingly, the assesseeEUR argued that particular mode of recording the transactions in books is of no sequence, but what is relevant is nature of the transactions which to be considered to arrive at proper conclusion. The assessee has also referred circular No. 2 of 2001 of CBDT, where it was mentioned that the method prescribed in AS-19 per se will not effect the claim of depreciation in the hands of the owner of the assets and the depreciation on assets will be guided by ownership of the asset and use of assets for the purpose of business. As regards the location of the asset, the physical shifting of the relevant plant and machinery from its present location to the location of the lessee was carried out for better utilisation of the asset in the business which has been leased out, otherwise the AO has never disputed the fact of the ownership of the asset i.e. remains with the assessee and also use of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t was clarified that AS-19 Nill not have any implication on allowance of depreciation on assets under the revisions of the Income Tax Act. Further, the assessee has also filled a confirmation from the lessee, where it was stated that lessee did not claim depreciation on lessee asset. From the above facts, it is very clear that the assessee is continued to be owner of the asset even after the lease. Further entries in books of account is not determinative for deciding the nature of income which is assessable under the Act, what is relevant is statute as per which ownership of an asset is must for claiming depreciation and in this case, there is no doubt of whatsoever with regard to ownership which is clearly evident from the lease agreement and accordingly we are of the considered view that the assessee is rightly claimed depreciation on leased asset under the Income Tax Act. 19. Coming back to the case laws relied upon by the assessee. The assessee has relied upon the decision of Hon'ble Supreme Court in the case of ICDS vs CIT(supra). We find that Hon'ble Supreme Court had considered an issue of depreciation in case of leased asset, where it was held that in case of lea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... possess or use a thing to the exclusion of others. The right by which a thing belongs to some one in particular, to the exclusion of all other persons. The exclusive right of possession, enjoyment or disposal; involving as an essential attribute the right to control, handle, and dispose." The same dictionary defines the term "own" as 'To have a good legal title'. These definitions essentially make ownership a function of legal right or title against the rest of the world. However, as seen above, it is "nomen generalissimum, and its meaning is to be gathered from the connection in which it is used, and from the subject-matter to which it is applied." 22. A scrutiny of the material facts at hand raises a presumption of ownership in favour of the assessee. The vehicle, along with its keys, was delivered to the assessee upon which, the lease agreement was entered into by the assessee with the customer. Moreover, the relevant clauses of the agreement between the assessee and the customer specifically provided that: (i) The assessee was the exclusive owner of the vehicle at all points of time; (ii) If the lessee committed a default, the assessee was empowered to re-posses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deemed to be the tenant of the assets at the same rental and upon the same terms herein expressed and such tenancy may be terminated by the Lessor immediately upon default by the lessee hereunder or upon 7 days notice previously given.." 23. The Revenue's objection to the claim of the assessee is founded on the lease agreement. It argued that at the end of the lease period, the ownership of the vehicle is transferred to the lessee at a nominal value not exceeding 1% of the original cost of the vehicle, making the assessee in effect a financer. However we are not persuaded to agree with the Revenue. As long as the assessee has a right to retain the legal title of the vehicle against the rest of the world, it would be the owner of the vehicle in the eyes of law. A scrutiny of the sale agreement cannot be the basis of raising question against the ownership of the vehicle. The clues qua ownership lie in the lease agreement itself, which clearly point in favour of the assessee. We agree with the following observations of the Tribunal in this regard: "20. It is evident from the above that after the lessee takes possession of the vehicle under a lease deed from the appellantcompany ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch person is a minor, the guardian of such minor, and in relation to a motor vehicle which is the subject of a hire-purchase agreement, or an agreement of lease or an agreement of a hypothecation, the person in possession of the vehicle under that agreement." 25. The general opening words of the Section say that the owner of a motor vehicle is the one in whose name it is registered, which, in the present case, is the lessee. The subsequent specific statement on leasing agreements states that in respect of a vehicle given on lease, the lessee who is in possession shall be the owner. The Revenue thus, argued that in case of ownership of vehicles, the test of ownership is the registration and certification. Since the certificates were in the name of the lessee, they would be the legal owners of the vehicles and the ones entitled to claim depreciation. Therefore, the general and specific statements on ownership construe ownership in favour of the lessee, and hence, are in favour of the Revenue. 26. We do not find merit in the Revenue's argument for more than one reason: (i) Section 2(30) is a deeming provision that creates a legal fiction of ownership in favour of lessee only fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g period for which the certificate cancelled under this sub-section would have been in force." Therefore, the MV Act mandates that during the period of lease, the vehicle be registered, in the certificate of registration, in the name of the lessee and, on conclusion of the lease period, the vehicle be registered in the name of lessor as owner. The Section leaves no choice to the lessor but to allow the vehicle to be registered in the name of the lessee Thus, no inference can be drawn from the registration certificate as to ownership of the legal title of the vehicle; and (iii) if the lessee was in fact the owner, he would have claimed depreciation on the vehicles, which, as specifically recorded in the order of the Appellate Tribunal, was not done. It would be a strange situation to have no claim of depreciation in case of a particular depreciable asset due to a vacuum of ownership. As afore- noted, the entire lease rent received by the assessee is assessed as business income in its hands and the entire lease rent paid by the lessee has been treated as deductible revenue expenditure in the hands of the lessee. This reaffirms the position that the assessee is in fact the owner of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee is not owner of the asset held that ownership of asset must for claiming depreciation. In this case, on perusal of facts available on record, we find that the assessee is continued to have ownership of the asset even after leave and license agreement with Reliance Industries Ltd and the assessee has claimed depreciation for earlier two ears. In fact, it has been accepted by the department in assessment proceedings. The assessee further explained that the lessee did not claim depreciation on the leased asset. Therefore, considering over all acts of this case and also by following the ratio of the Hon'ble Supreme Court in the case of ICDS Vs. CIT (supra), we are of the considered view that the assessee is entitled for depreciation on the leased asset as per provisions section 32(1)(ii) of the Act. The Ld CIT(A) after considering relevant facts has right ly deleted additions made by the AO towards disallowance of depreciation, hence we are inclined to uphold the findings of the Ld. CIT(A) and reject the ground taken by the revenue. 7. The Ld. DR could not controvert the findings of the CIT(A) with any new cogent material or information. whereas the CIT(A) has considered the pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
