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“depreciation on leased assets”

DepreciationSection 32Section 3267 judgments

The decision most relied on for depreciation on leased assets is ICDS Ltd. v. CIT (350 ITR 527), cited in 280 judgments on BharatTax.

Leading authorities on depreciation on leased assets

ICDS Ltd. v. CIT
350 ITR 527 · 2013 · Supreme Court
280
citing judgments

An assessee engaged in the business of hire purchase or leasing, being the lessor, is entitled to claim depreciation on assets leased out, even if the assets are registered in the name of the lessee and used by the lessee.

CIT v. Madras Auto Service (P) Ltd.
233 ITR 468 · 1998 · Supreme Court
246
citing judgments

Expenditure providing an enduring advantage, such as upfront lease rent for land, is revenue expenditure if no capital asset is acquired or generated, allowing for deduction under Section 37, even when capitalized in the books of account.

Rajshree Roadways v. Union of India
263 ITR 206 · 2003 · High Court
39
citing judgments

Lease rent paid by a lessee for assets they do not own and cannot alienate is considered revenue expenditure. The owner (lessor) is entitled to claim depreciation on such leased assets.

Krung Thai Bank v. JDIT
45 DTR 218 · 2010 · Reported
29
citing judgments

The case is cited for the principle that income from leasing of assets, if the lease is a finance lease, the depreciation allowance should be computed on the leased asset, not on the lease income.

CIT v. A.M. Constructions
259 ITR 69 · 2003 · High Court
26
citing judgments

The leasing company is considered the owner of an asset in a lease agreement and is therefore entitled to claim depreciation, including at a higher rate if the asset is hired out.

238 ITR 775 (AP); CIT v. Bansal Credits Ltd.
285 ITR 142 · 2006 · High Court
24
citing judgments

The leasing company is considered the owner of an asset under a lease agreement and is therefore entitled to claim depreciation, including at a higher rate for assets hired out. The court does not consider it necessary to delve into disputes about invoice issuance names when the lease agreement and related factors satisfy the ownership criteria.

CIT v. Appollo Finvest (I) Ltd.
382 ITR 33 · 2016 · High Court
19
citing judgments

Depreciation is allowable for assets if the assessee is the owner and uses the assets for business purposes, irrespective of whether the transaction is hire purchase or leasing.

Manipal Finance Corporation Limited v. ACTT Circle-1 Udupi
49 Taxmann.com 353 · 2014 · High Court
19
citing judgments

This case discusses the allowability of depreciation on leased assets in finance leases, a matter that has been addressed by the Supreme Court in ICDS Ltd vs CIT.

Judgments citing depreciation on leased assets

Bajaj Holdings & Investment Ltd ( Formerly Bajaj Auto Ltd), Mumbai vs. ACIT Ltu, Mumbai

ITA 5299/MUM/2010[2006-07]Status: DisposedITAT Mumbai17 Feb 2025AY 2006-07
Section 143(3)

raised by the Revenue is dismissed. Ground No. 2 15. Ground No. 2 raised by the Revenue, which pertains to allowability of depreciation on leased assets amounting to INR.20,21,264/- written off during the relevant previous year, reads as under: “2. On the facts and circumstances of the case ... Year 1996-97 for lease of new textile machineries amounting to INR.6,99,22,335/-. The Assessee earned lease rental income and claimed depreciation on leased assets. However, the Assessing Officer held the aforesaid transaction with JCT Limited was a finance loan transaction clothed in the form of the lease

Bajaj Holdings & Investments Ltd ( Formerly Known As Bajaj Auto Ltd), Mumbai vs. Addl CIT RG 3(1), Mumbai

The appeals are partly allowed

ITA 6838/MUM/2008[2004-2005]Status: DisposedITAT Mumbai17 Feb 2025AY 2004-2005

Bench: SHRI OM PRAKASH KANT, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY (Judicial Member)

For Appellant: Ms. Vasanti PatelFor Respondent: Shri Ankush Kapoor
Section 143(3)

raised by the Revenue is dismissed. Ground No. 2 15. Ground No. 2 raised by the Revenue, which pertains to allowability of depreciation on leased assets amounting to INR.20,21,264/- written off during the relevant previous year, reads as under: “2. On the facts and circumstances of the case ... Year 1996-97 for lease of new textile machineries amounting to INR.6,99,22,335/-. The Assessee earned lease rental income and claimed depreciation on leased assets. However, the Assessing Officer held the aforesaid transaction with JCT Limited was a finance loan transaction clothed in the form of the lease

DCIT-2(3)(1), Mumbai vs. Ntt Global Data Centers Cloud Infrastructure India Pvt Ltd, Mumbai

In the result, the appeal by the Revenue is dismissed

ITA 4102/MUM/2023[2015-16]Status: DisposedITAT Mumbai04 Feb 2025AY 2015-16

Bench: Shri Br Baskaranshri Sandeep Singh Karhailassessment Year : 2015-16

For Appellant: Shri Tarang Mehta, AdvFor Respondent: Ms. Monika H. Pande, Sr. DR
Section 250

been interpreted by the Supreme Court in I.C.D.S. Ltd. supra and it has been held that the assessee is entitled to benefit of depreciation on leased assets under Section 32 of the Act. Thus, the questions of law involved in the appeal are no longer res integra and are squarely ... Court in the case of M/s ICDS Ltd., (supra) and it has been held that the assessee is entitled to the benefit of depreciation on leased assets under Section 32 of the Act of 1961 and therefore, the substantial question of law involved in the present appeal is no longer

Deputy Commissioner of Income Tax, Circle-2(1)(1), Bengaluru vs. Canara Bank, Bengaluru

ITA 222/BANG/2024[2017-18]Status: DisposedITAT Bangalore17 Jan 2025AY 2017-18

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Respondent: Sri Abrarana &Anantham, A.Rs
Section 115JSection 14ASection 250Section 36(1)

Penalty under Explanation to Section 37(1) 2,03,00,000 6. Disallowance u/s 14A 11,41,31,065 7. Depreciation on Leased Assets 1,02,865 8. Long Term Capital Gain on Sale of Shares of CanFin Home Ltd 703,92,01,889 9. Disallowance of Provision

Canara Bank, Bengaluru vs. The Deputy Commissioner of Income Tax, Circle-2(1)(1), Bangalore, Bengaluru

ITA 1154/BANG/2023[2018-19]Status: DisposedITAT Bangalore17 Jan 2025AY 2018-19

Bench: Shri Waseem Ahmed & Shri Keshav Dubey

For Appellant: Sri Abarana &Anantham, A.RsFor Respondent: Ms. Neera Malhotra, D.R
Section 115JSection 14ASection 250Section 38(1)

Note Counting Machine & Weighing Machine 2,03,00,000 5. Penalty for non-Deduction to Section 37(1) 6. Disallowance u/s 14A 7. Depreciation on Leased Assets 8. Long Term Capital Gain on Sale of shares of CanFin Home Ltd. 9. Disallowance of Provision for Bad & Doubtful Debt

D.C.I.T., Circle 3(1), Mumbai vs. Icici Bank Ltd., Mumbai

In the result, appeal of the revenue in I

ITA 5792/MUM/2013[2006-07]Status: DisposedITAT Mumbai25 Oct 2024AY 2006-07

Bench: Shri Narendra Kumar Billaiya, Hon’Ble & Shri Raj Kumar Chauhan, Hon’Ble

For Appellant: Ms. Arati Vissanji, A/RFor Respondent: Mr. P.C. Chhotoray, Spl. Counsel, [D/R]
Section 10Section 115JSection 14Section 143(3)Section 14A

These grounds raised by the revenue are accordingly dismissed. 15. Ground Nos. 5 & 6 relate to the claim of depreciation on leased assets. 16. While scrutinising the return of income, the AO noticed that the assessee has claimed depreciation amounting to Rs. 3,74,51,40,333/- which comprises ... assessee reiterated its claim of depreciation. After considering the facts and submissions, the ld. CIT(A) observed that the AO has disallowed depreciation on leased assets relying upon the view taken in earlier AYs. The ld. CIT(A) found that the Tribunal in assessee’s own case has allowed

Icici Bank Ltd, Mumbai vs. DCIT RG 3(1), Mumbai

In the result, appeal of the revenue in I

ITA 5396/MUM/2013[2006-07]Status: DisposedITAT Mumbai25 Oct 2024AY 2006-07

Bench: Shri Narendra Kumar Billaiya, Hon’Ble & Shri Raj Kumar Chauhan, Hon’Ble

For Appellant: Ms. Arati Vissanji, A/RFor Respondent: Mr. P.C. Chhotoray, Spl. Counsel, [D/R]
Section 10Section 115JSection 14Section 143(3)Section 14A

These grounds raised by the revenue are accordingly dismissed. 15. Ground Nos. 5 & 6 relate to the claim of depreciation on leased assets. 16. While scrutinising the return of income, the AO noticed that the assessee has claimed depreciation amounting to Rs. 3,74,51,40,333/- which comprises ... assessee reiterated its claim of depreciation. After considering the facts and submissions, the ld. CIT(A) observed that the AO has disallowed depreciation on leased assets relying upon the view taken in earlier AYs. The ld. CIT(A) found that the Tribunal in assessee’s own case has allowed

Deputy Comisssioner of Income Tax Circle 3(4), Mumbai vs. Idbi Bank Ltd, Mumbai

In the result, the appeal is dismissed

ITA 3430/MUM/2023[2012-13]Status: DisposedITAT Mumbai06 Sept 2024AY 2012-13

Bench: SHRI BR BASKARAN (Accountant Member), SHRI SUNIL KUMAR SINGH (Judicial Member)

Section 115JSection 143(3)Section 154Section 250Section 263Section 40

Bank Ltd. disallowed expenses amounting to Rs. 58,25,41,577/- u/s. 40(a)(ia) and Rs. 1,04,245/- on account of depreciation on leased assets. Finally assessed the income at Rs. 32,69,67,68,775/- under normal provisions of the Act as the tax liability as against ... expenses u/s. 40(a)(ia) amounting to Rs 58,25,41,577/- and disallowance of Rs. 1,04,245/- on account of depreciation on leased assets, further directing the assessing officer to verify the claim of assessee for grant of tax paid. IDBI Bank Ltd. 5. Aggrieved by the impugned

State Bank of India, Mumbai vs. Principle Commissioner of Income Tax-2, Mumbai

ITA 1533/MUM/2023[2019-20]Status: DisposedITAT Mumbai28 Aug 2024AY 2019-20

Bench: Shri Prashant Maharishi, Am & Shri Pavan Kumar Gadale, Jm

For Appellant: Shri Ketan Ved &For Respondent: Shri Dr. Kishor Dhule, CIT DR
Section 143(3)Section 144BSection 263

2873/Mum/2019). Accordingly, the issue is well settled in favour of the Bank and hence outside the purview of section 263. 12. Disallowance of depreciation on leased assets of INR 1,01,09,650 12.1 The learned PCIT erred in directing the AO to disallow ... being depreciation on leased assets. 12.2 The learned PCIT erred in not appreciating that the Bank is the owner of the leased assets and has used the assets for the purposes of its business i.e., leasing and it is accordingly entitled to depreciation in respect of the same

The Dy CIT Cir 1(1), Mumbai vs. M/S. Housing Development Finance Corpn Ltd., Mumbai

ITA 724/MUM/2005[2001-2002]Status: DisposedITAT Mumbai05 Jul 2024AY 2001-2002

Bench: Shri Girish Agrawal & Shri Sunil Kumar Singh

Section 143(3)Section 36(1)Section 36(1)(viii)

contingencies as ex- penditure incurred for earning of income from long term housing fi- nance i.e., the eligible business. (ii) AO has allocated depreciation on leased assets solely to the income from leasing (iii) AO has allocated interest expenditure (other than foreign currency borrowings) to income from housing business

The Dy CIT Cir 1(1), Mumbai vs. M/S. Housing Development Finance Corpn Ltd, Mumbai

ITA 337/MUM/2005[2000-2001]Status: DisposedITAT Mumbai05 Jul 2024AY 2000-2001

Bench: Shri Girish Agrawal & Shri Sunil Kumar Singh

Section 143(3)Section 36(1)(viii)

contingencies as ex- penditure incurred for earning of income from long term housing fi- nance i.e., the eligible business. (ii) AO has allocated depreciation on leased assets solely to the income from leasing (iii) AO has allocated interest expenditure (other than foreign currency borrowings) to income from housing business

M/S. Housing Develop, Ment Finance Corpn. Ltd, Mumbai vs. The Addl CIT RG-1(1), Mumbai

ITA 287/MUM/2005[2001-2002]Status: DisposedITAT Mumbai05 Jul 2024AY 2001-2002

Bench: Shri Girish Agrawal & Shri Sunil Kumar Singh

Section 143(3)Section 36(1)Section 36(1)(viii)

contingencies as ex- penditure incurred for earning of income from long term housing fi- nance i.e., the eligible business. (ii) AO has allocated depreciation on leased assets solely to the income from leasing (iii) AO has allocated interest expenditure (other than foreign currency borrowings) to income from housing business

M/S. Housing Develop, Ment Finance Corpn. Ltd, Mumbai vs. The Addl CIT RG 1(1), Mumbai

ITA 286/MUM/2005[2000-2001]Status: DisposedITAT Mumbai05 Jul 2024AY 2000-2001

Bench: Shri Girish Agrawal & Shri Sunil Kumar Singh

For Appellant: Shri Nitesh Joshi, AdvocateFor Respondent: Smt. Sanyogita Nagpal, CIT, DR
Section 143(3)Section 36(1)(viii)

contingencies as ex- penditure incurred for earning of income from long term housing fi- nance i.e., the eligible business. (ii) AO has allocated depreciation on leased assets solely to the income from leasing (iii) AO has allocated interest expenditure (other than foreign currency borrowings) to income from housing business

DCIT Cir 1(1), Mumbai vs. M/S. Housing Development Finance Corpn. Ltd., Mumbai

ITA 7532/MUM/2004[1999-2000]Status: DisposedITAT Mumbai05 Jul 2024AY 1999-2000

Bench: Shri Girish Agrawal & Shri Sunil Kumar Singh

Section 143(3)Section 36Section 36(1)(viii)

contingencies as ex- penditure incurred for earning of income from long term housing fi- nance i.e., the eligible business. (ii) AO has allocated depreciation on leased assets solely to the income from leasing (iii) AO has allocated interest expenditure (other than foreign currency borrowings) to income from housing business

M/S. Housing Development Finance Corp. Ltd., Mumbai vs. DCIT Cir. 1(1), Mumbai

ITA 7447/MUM/2004[1999-2000]Status: DisposedITAT Mumbai05 Jul 2024AY 1999-2000

Bench: Shri Girish Agrawal & Shri Sunil Kumar Singh

Section 143(3)Section 36(1)(viii)

contingencies as ex- penditure incurred for earning of income from long term housing fi- nance i.e., the eligible business. (ii) AO has allocated depreciation on leased assets solely to the income from leasing (iii) AO has allocated interest expenditure (other than foreign currency borrowings) to income from housing business

National Dairy Development Board, Anand vs. The Asstt. Commissioner of Income Tax, Anand Circle, Anand

In the result, Ground No. 7 of the assessee’s appeal is allowed for statistical purposes

ITA 2994/AHD/2016[2011-12]Status: DisposedITAT Ahmedabad17 May 2024AY 2011-12

Bench: Shri Siddhartha Nautiyal & Shri Makarand V. Mahadeokar

For Appellant: Shri Yogesh Shah & Ms. Aparna Parlekr A.RsFor Respondent: Shri Sudhendu Das, CIT DR
Section 14ASection 36(1)(viii)Section 36(1)(xii)

asset, thus qualifying it as “finance lease”. Accordingly, the Assessing Officer disallowed an amount of Rs. 3,68,94,820/- being the proportionate depreciation on leased assets. 16. In appeal, CIT(A) partly allowed the appeal of the assessee, by following the order of his predecessor ... made the following observations:- “10. Vide the ground no. 7, the appellant has challenged the action of the AO of disallowing of depreciation on leased assets of Rs. 3,68,94,820/-. In this regard, it is seen from the assessment order that the AO found on verification

The Dy.Commissioner of Income Tax., Anand Circle, Anand vs. National Dairy Development Board, Anand

In the result, Ground No. 7 of the assessee’s appeal is allowed for statistical purposes

ITA 2954/AHD/2016[2011-12]Status: DisposedITAT Ahmedabad17 May 2024AY 2011-12

Bench: Shri Siddhartha Nautiyal & Shri Makarand V. Mahadeokar

For Appellant: Shri Yogesh Shah & Ms. Aparna Parlekr A.RsFor Respondent: Shri Sudhendu Das, CIT DR
Section 14ASection 36(1)(viii)Section 36(1)(xii)

asset, thus qualifying it as “finance lease”. Accordingly, the Assessing Officer disallowed an amount of Rs. 3,68,94,820/- being the proportionate depreciation on leased assets. 16. In appeal, CIT(A) partly allowed the appeal of the assessee, by following the order of his predecessor ... made the following observations:- “10. Vide the ground no. 7, the appellant has challenged the action of the AO of disallowing of depreciation on leased assets of Rs. 3,68,94,820/-. In this regard, it is seen from the assessment order that the AO found on verification

National Dairy Development Board, Anand vs. The ACIT., Anand Circle, Anand

In the result, Ground No. 7 of the assessee’s appeal is allowed for statistical purposes

ITA 2004/AHD/2014[2010-11]Status: DisposedITAT Ahmedabad17 May 2024AY 2010-11

Bench: Shri Siddhartha Nautiyal & Shri Makarand V. Mahadeokar

For Appellant: Shri Yogesh Shah & Ms. Aparna Parlekr A.RsFor Respondent: Shri Sudhendu Das, CIT DR
Section 14ASection 36(1)(viii)Section 36(1)(xii)

asset, thus qualifying it as “finance lease”. Accordingly, the Assessing Officer disallowed an amount of Rs. 3,68,94,820/- being the proportionate depreciation on leased assets. 16. In appeal, CIT(A) partly allowed the appeal of the assessee, by following the order of his predecessor ... made the following observations:- “10. Vide the ground no. 7, the appellant has challenged the action of the AO of disallowing of depreciation on leased assets of Rs. 3,68,94,820/-. In this regard, it is seen from the assessment order that the AO found on verification

The ACIT, Anand Circle, Anand vs. National Dairy Development Board, Anand

In the result, Ground No. 7 of the assessee’s appeal is allowed for statistical purposes

ITA 1873/AHD/2014[2010-11]Status: PendingITAT Ahmedabad17 May 2024AY 2010-11

Bench: Shri Siddhartha Nautiyal & Shri Makarand V. Mahadeokar

For Appellant: Shri Yogesh Shah & Ms. Aparna Parlekr A.RsFor Respondent: Shri Sudhendu Das, CIT DR
Section 14ASection 36(1)(viii)Section 36(1)(xii)

asset, thus qualifying it as “finance lease”. Accordingly, the Assessing Officer disallowed an amount of Rs. 3,68,94,820/- being the proportionate depreciation on leased assets. 16. In appeal, CIT(A) partly allowed the appeal of the assessee, by following the order of his predecessor ... made the following observations:- “10. Vide the ground no. 7, the appellant has challenged the action of the AO of disallowing of depreciation on leased assets of Rs. 3,68,94,820/-. In this regard, it is seen from the assessment order that the AO found on verification

Dy. Commissioner of Income Tax - Circle 3(3)(1), Mumbai vs. Reliance Corporate It Park Limited, Mumbai

The appeal stands dismissed

ITA 2819/MUM/2023[2015-16]Status: DisposedITAT Mumbai04 Apr 2024AY 2015-16

Bench: Justice (Retd.) C V Bhadang, Hon’Ble & Shri B R Baskaran, Hon’Ble

For Appellant: Ms Sanyogita Nagpal (CIT-DR)For Respondent: Shri Nimesh Vora & Ms. Moksha Mehta
Section 115JSection 32

Date of Pronouncement : 04.04.2024 O R D E R Per Justice (Retd.) C V Bhadang : Whether the respondent-assessee is entitled to claim depreciation on leased assets viz. Plant & Machinery under a “Finance Lease” is a question which falls for determination in this appeal. 2. The challenge in this appeal