INCOME TAX ACT, 1961

Section 32

Depreciation - Allowability - Leasing of assets -

Assessee-company earned lease rentals from certain assets being equipments which were leased out to various persons. In terms of the lease agreements entered into by the lessees, the assessee was the owner of the equipments and the lessees had no right or interest in the equipments during or after the period of lease. Assessee claimed depreciation on assets given on lease under section 32. AO was of the view that the assessee was not entitled to claim depreciation on assets leased by it on the ground that it was the lessee and not the lessor. Held: From perusal of the lease agreement entered into by assessee, it was evident that the lessee had to ensure the equipment showing assessee's name as owner and no alteration or improvements to the equipment could be made by the lessee without prior consent from the assessee. Thus, the assessee alone could claim the depreciation allowance. Further, the Revenue accepted the claim of the assessee for depreciation given on lease under section 32 for the earlier assessment years, therefore, the revenue could not be allowed to take a different stand for the relevant assessment year under consideration. Hence, the assessee was entitled to benefit of depreciation on leased assets under section 32.

REFERRED : ICDS. Ltd. v. CIT & Anr. (2013) 350 ITR 527 (SC) : 2013 TaxPub(DT) 414 (SC) and Radhasoami Satsang v. CIT (1992) 193 ITR 321 (SC) : 1992 TaxPub(DT) 858 (SC).

FAVOUR : In assessee's favour.

A.Y. : 2004-05

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