Commissioner of Income Tax, Delhi vs Indocount Finance Ltd.

The Revenue is aggrieved by an order dated 12th May, 2006 passed by the Income Tax Appellate Tribunal, Delhi Bench ''A'', New Delhi (''the Tribunal'') in ITA No. 1344/Del/1999 relevant for the Assessment Year 1995-1996. According to the Assessee, it had leased out some oak wood barrels, moulds and dies each costing less than Rs. 5000 to two parties namely Khoday Distilleries Ltd. and M/s Supriya Pharmaceuticals Ltd. According to the Assessee, the transaction was a lease transaction and therefore, the Assessee was entitled to 100% depreciation in respect of the leased assets. According to the Assessing Officer (AO), however, the transaction was in a finance transaction and therefore, the Assessee was not entitled to depreciation in the sum of Rs. 89,93,400/ as claimed. Accordingly, the AO added the amount to the income of the Assessee. Likewise, in respect of plant and machinery leased out by the Assessee, the AO disallowed the claim of depreciation in the sum of Rs.9,92,307/- and directed its addition to the Assessee''s income. Both the Commissioner of income tax (Appeals) [CIT (A)''] and the Tribunal examined the documents and did not agree with view expressed by the AO on both items of additions. The concurrently directed deletion of, additions.

Learned counsel for the Revenue has taken up through various clauses of the standard equipment lease agreement executed between the Assessee and its lessees and in particular to clauses 6 and 7 thereof to urge that in fact ownership of the leased assets had been transferred to the lessee.

On going to the agreement particularly clauses 7(3), 7(4) and 11 thereof, we find that the assets had been handed over to lessee only for use by it for the period of lease. In fact the Assessee has been prohibited by the agreement to transfer, sell or otherwise dispose of equipment or do any other act that Infringe upon lessor''s ownership.

Learned counsel for the Assessee has brought to our notice that the Assessee had offered the lease rentals received for tax and this was in fact brought to tax by the AO. He has also mentioned that the lessees with which we are concerned, M/s Khoday Distilleries Ltd. and M/s Supriya Pharmaceutical Ltd had made no claim for depreciation on leased assets since they were not, owners thereof.

Considering the facts of the case and the nature of the transactions in question, we are of the opinion that no substantial question of law arises with regard to interpretation of the documents evidencing such transactions.

There is not merit in the appeal. Dismissed.