M/S CHANAKYA LEASING INVESTMENTS LTD. vs. THE COMMISSIONER OF INCOME TAX

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ITR/2/2001HC KeralaKLHC01019188200110 June 2008Author: HONOURABLE MR.JUSTICE V.K.MOHANAN,HONOURABLE MR.JUSTICE C.N.RAMACHANDRAN NAIR3 pages

AI SummaryDismissed

What did the High Court hold?

The High Court held that the assessee was not entitled to depreciation on the domestic articles. The Tribunal's finding of fact was that the assessee was only collecting the cost of goods purchased by various parties, along with interest, in installments. This arrangement was not considered a lease of the articles. Therefore, the assessee was rightly held to be not eligible for depreciation. The Court relied on the decision of the Karnataka High Court in GOWRI SHANKAR FINANCE LTD. V. COMMISSIONER OF INCOME-TAX (2001) ITR 713, which dealt with similar facts and held that no depreciation was available to the assessee in such a scenario. The question raised was answered against the assessee and in favour of the Revenue. No specific operative directions were issued other than answering the reference.

What were the facts?

This case involves a tax reference by M/s. Chanakya Leasing Investments Ltd. (the assessee) against the Commissioner of Income Tax, Trivandrum (the Revenue). The assessee claimed depreciation on domestic articles purchased by various parties with funds provided by the assessee. The assessee's contention was that the invoices for these articles were in its name, entitling it to depreciation. The Income Tax Appellate Tribunal (Tribunal) found that the assessee was merely collecting the cost of goods purchased by other parties, along with interest, in installments. The Tribunal concluded that this arrangement did not constitute leasing of the articles and therefore, the assessee was not eligible for depreciation.

What were the issues?

1. Whether the assessee is entitled to depreciation on domestic articles purchased by third parties with funds provided by the assessee, where invoices are in the assessee's name (Question of law). Assessee's Contention: The assessee argued that since the invoices for the domestic articles were in its name, it was the legal owner and thus entitled to claim depreciation on these assets. Revenue's Contention: The Revenue, supported by the Tribunal's finding, argued that the assessee was merely collecting the cost of goods purchased by other parties with interest, which did not amount to a lease agreement. Therefore, the assessee was not eligible for depreciation. The Revenue relied on the decision of the Karnataka High Court in GOWRI SHANKAR FINANCE LTD. V. COMMISSIONER OF INCOME-TAX (2001) ITR 713.

AI-generated summary — verify with the full judgment below

Cause title — parties, addresses and appearances

IN THE HIGH COURT OF KERALA AT ERNAKULAM PRESENT : THE HONOURABLE MR. JUSTICE C.N.RAMACHANDRAN NAIR & THE HONOURABLE MR. JUSTICE V.K.MOHANAN TUESDAY, THE 10TH JUNE 2008 / 20TH JYAISHTA 1930 ITR.No. 2 of 2001() ------------------- (ITA NO.134/COCH/93 IN RA NO.12/COCH/99 OF INCOME TAX APPELLATE TRIBUNAL, COCHIN BENCH) APPLICANT: ----------- M/S.CHANAKYA LEASING INVESTMENTS LTD., ALLEPPEY. BY ADV. SRI.S.ANANTHAKRISHNAN RESPONDENTS: ------------- THE COMMISSIONER OF INCOME TAX, TRIVANDRUM. BY ADV. SRI.P.K.R.MENON(SR.),SR.COUNSEL FOR IT SRI.N.K.SUBRAMANIAN THIS TAX REFERENCE HAVING BEEN FINALLY HEARD ON 10/06/2008, THE COURT ON THE SAME DAY DELIVERED THE FOLLOWING: C.N.RAMACHANDRAN NAIR & V.K.MOHANAN, JJ. .................................................................... I.T. Reference No.2 of 2001 .................................................................... Dated this the 10th day of June, 2008.

JUDGMENT Ramachandran Nair, J. The question raised is whether assessee is entitled to depreciation for domestic articles purchased by parties with the funds provided by the assessee. Assessee's case is that invoices are in the name of the assessee and consequently assessee is entitled to depreciation on the items the purchase of which was funded by the assessee. The Tribunal on facts found that assessee is only collecting cost of the goods purchased by various parties. The collection of cost in instalments with interest is not leasing of the articles and therefore, assessee was rightly held to be not eligible for depreciation by the Tribunal. Counsel for the Revenue has relied on decision of the Karnataka High Court in GOWRI SHANKAR FINANCE LTD. V. COMMISSIONER OF INCOME-TAX (2001) ITR 713 wherein the Karnataka High Court held on similar facts that no depreciation is available to assessee in such case. We, therefore, dispose of the Reference

2 case by answering the question raised against the assessee and in favour of the Revenue. A copy of this judgment under the seal of the High Court and signature of the Registrar shall be forwarded to the Income Tax Appellate Tribunal, Cochin Bench.

C.N.RAMACHANDRAN NAIR Judge V.K.MOHANAN Judge pms

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