CIT- CHANDIGARH vs. THE INVESTMENT TRUST OF INDIA LTD. CHEENAI

The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of Income Tax Appellate Tribunal, Chennai Bench-A in ITA No. 122 /Mds/99 dated 19.5.2006, for assessment year 1994-95, proposing to raise the following substantial question of law: “ Whether the Hon'ble ITAT is justified in law in allowing depreciation on an asset which is claimed to be purchased and leased back to the seller whereas the purchase and lease back transaction is on papers only just to avoid tax by adopting colourable device/dubious [2] methods.”

The assessee claimed depreciation on Biogas Generating System, which was leased out. The business of the assessee was to invest in the machinery and to earn income by leasing out of the same. The Assessing Officer rejected the claim on the ground that the machinery which was claimed to have been leased out never existed. This finding was reversed by the CIT(A) by holding that the delivery was proved to have taken place and claim for depreciation was permissible in view of the judgment of the Hon'ble Supreme Court in CIT v. Shann Finance Pvt. Limited, 231 ITR 308. The Tribunal affirmed the finding of CIT(A).

Only contention raised by learned counsel for revenue is that the assessee purchased and leased some machinery to the seller, which was only a paper transaction to avoid tax by adopting colourable device.

In view of the findings concurrently recorded by the CIT(A) as well as the Tribunal that the assets were delivered to the assessee and thereafter the assessee leased out the same, we are unable to hold that the question proposed can be held to be a substantial question of law.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE