High Court Of Gujarat
CIT vs. Pinnacle Finance Ltd.
Sections 32(1), 260A
Asst. Year 1992-93
D.H. Waghela & D.A. Mehta, JJ.
Tax Appeal No. 225 of 2003
1st September, 2003
Counsel Appeared
Tanvish U. Bhatt, for the Petitioner : S.N. Soparkar for Mrs. Swati Soparkar, for the Respondent
ORDER
D.A. Mehta, J. :
The following questions have been proposed by the appellant-Revenue stated to arise out of the Tribunal’s order dt. 13th March, 2002 in ITA No. 3614/Ahd/1995:
“(i) Whether the Tribunal is right in law and on facts in holding that the assessee engaged in the business of lease finance is entitled to depreciation under s. 32 of the IT Act, 1961, on the assets merely on signing of the lease agreement even though the asset is not put to use in the relevant year?
(ii) Whether the Tribunal has erred in holding that, since 40 per cent depreciation is granted by the AO, the order of the CIT(A) did not call for any interference disregarding the aspect that the depreciation was granted at 40 per cent without prejudice to the main contention of the nonallowability of depreciation in the relevant year.”
The assessment year is 1992-93 and the relevant accounting period is year ended 31st March, 1992. The assessee is a company carrying on business of financing, investment, leasing, etc. The assessee-company leased one boiler to M/s Anil Starch Products and claimed depreciation of Rs. 16,18,444. The said claim was disallowed by the AO as, according to the AO, the asset was not used either by the assessee-company or the lessee. Alternatively the AO held that the boiler in question was not a high efficiency boiler and hence, was eligible only @ 40 per cent depreciation. The assessee carried the matter before the CIT(A) and succeeded on the aspect of allowability of depreciation. The CIT(A) did not give any decision as consequence in relation to rate of depreciation.
On being aggrieved, the Revenue carried the matter in appeal before the Tribunal and the Tribunal, Ahmedabad Bench ‘C’, Ahmedabad, relying upon the decision of the Supreme Court in the case of CIT vs. Shaan Finance (P) Ltd. (1998) 146 CTR (SC) 110 : (1998) 231 ITR 308 (SC) upheld the finding of the CIT(A) as regards allowability of depreciation. In so far as rate of depreciation at 40 per cent is concerned, the Tribunal held that the same did not call for any interference.
Heard Mr. T.U. Bhatt, learned standing counsel for the appellant-Revenue and Mr. S.N. Soparkar, learned senior counsel appearing on behalf of the respondent.
The principal contention raised on behalf of the Revenue was that the use contemplated by s. 32 of the IT Act, 1961 (for short ‘the Act’), was actual user and only then allowance which would be in the nature of the deduction for wear and tear could be granted to the assessee. In relation to the decision in the case of Shaan Finance (P) Ltd. (supra) the submission was that the same pertains to allowability of investment allowance under s. 32A of the Act, and the said section employed a language different from the provision of s. 32 of the Act. It was submitted by Mr. Bhatt that s. 32A of the Act talked about machinery or plant owned by the assessee and wholly used for the purpose of the business carried on by him while s. 32 of the Act talked about the asset specified in the said section as being owned by the assessee and used for the purpose of the business. Thus, according to Mr. Bhatt, the difference was that for the purpose of investment allowance the asset had to be used for the purpose of business carried on by him and this later portion was absent in s. 32 of the Act. Mr. Bhatt also placed reliance upon the concept of user as being a necessary element before depreciation could be allowed as a deduction. There is no dispute as to basic fact that the assessee before us is carrying on business of leasing of assets. That the asset in question, viz., the boiler, had been leased out by the assessee. It is further an admitted position that income from the business of leasing has been subjected to tax for the assessment year under consideration. In the circumstances, the ratio of the decision in case of Shaan Finance (P) Ltd. (supra) would squarely apply because once a leasing or finance company, which owns machinery and leases it to third party is found to have satisfied the other requirements of the provision, it would be entitled to the deduction of depreciation in respect of such machinery or plant. It is further held by the apex Court that where the business of the assessee consists of hiring out machinery and/or where the income derived by the assessee from the hiring of such machinery is business income, the assessee must be considered as having used the machinery for the purpose of its business.
In the light of the aforesaid settled position of law and the findings recorded by the Tribunal, we do not find that any substantial question of law within the meaning of s. 260A of the Act can be said to arise out of the order of the Tribunal.
The appeal is accordingly dismissed.
[Citation : 268 ITR 395]
