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2011 DIGILAW 1110 (KAR)

Commissioner of Income Tax v. Wipro Finance Ltd.

2011-11-16

S.N.SATYANARAYANA, V.G.SABHAHIT

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JUDGMENT 1. This appeal is filed by the revenue being aggrieved by the order passed in ITA. No. 1059/ Bang/2003 dated 23.12.2005. The substantial question of law raised for consideration in this appeal, is as under: Whether the Tribunal was correct in holding that the assessee would be entitled to claim of depreciation in respect of leased assets? 2. We have heard the learned Counsel appearing for the appellants and the learned Counsel appearing for the respondent. 3. The learned Counsel appearing for the revenue submitted that there was a search and assessment was made for the block period on the basis of the material found during the search and after passing of the original order by the assessing officer, the same was challenged in appeal and thereafter, before the Tribunal and ultimately before this Court. The matter now stands pending before the Commissioner of Income Tax (Appeals) in view of the order passed by the Income Tax Appellate Tribunal dated 24.6.2009. Wherefore, the assessing officer had rightly rejected the claim made by the assessee for depreciation of the plant and machinery, which had been leased by the assessee. The appellate authority has ordered in appeal ITA. 10/CC/CIT(A) 1/2000-2001 that since the question regarding the block assessment is pending consideration, the claim for depreciation cannot be allowed at this stage. Being aggrieved by the order of the appellate authority the revenue had preferred appeal before the Income Tax Appellate Tribunal. The assessee also had preferred appeal before the Tribunal. The Tribunal at Bangalore A Bench by order dated 23.12.2005 held that the claim now made is for the year 1997-1998, which is beyond the block period. Wherefore, depreciation is claimed in the regular assessment and since the depreciation had been allowed in the earlier assessment year disallowance of the depreciation was erroneous Accordingly, dismissed the appeal filed by the revenue and allowed the appeal filed by the assessee and being aggrieved by the same this appeal is filed by the revenue. 4. Wherefore, depreciation is claimed in the regular assessment and since the depreciation had been allowed in the earlier assessment year disallowance of the depreciation was erroneous Accordingly, dismissed the appeal filed by the revenue and allowed the appeal filed by the assessee and being aggrieved by the same this appeal is filed by the revenue. 4. It is the contention of the learned Counsel appearing for the appellants that though the assessee may be entitled to depreciation in respect of the plant and machinery leased, but having regard to the provisions of Section 32 of the Income-tax Act the Written Down Value for the period, depreciation for which claimed, can be arrived at only after ascertaining the WDV at the end of the block period. Wherefore, the learned counsel submitted that the order passed by the appellate Tribunal should be set aside and remanded to the appellate authority. 5. The learned Counsel for the respondent submitted that the Tribunal has given a categorical finding that the claim for depreciation is for the assessment year 1997-98 which is beyond the block period which is pending before the Commissioner of Income-tax. Wherefore, the assessee was entitled to depreciation as sought for. 6. We have given careful consideration to the contentions of the learned Counsel appearing for the parties and scrutinised the material on record including the earlier order passed by this Court in ITA. No. 106 and 633/2004 and the order passed in respect of block assessment dated 29.1.1999 subject matter of which now is pending before the first appellate authority. The material on record discloses that the order passed by the Tribunal pertains to the assessment year 1998-99. It cannot be disputed that ownership is a bundle of joys and the assessee being the owner has leased the plant and machinery which would only confer the lease hold rights in favour of the lessee and wherefore, the owner can claim depreciation as admissible under the Act. However, depreciation can be granted as admissible only after ascertaining the WDV as on the previous year of assessment. However, depreciation can be granted as admissible only after ascertaining the WDV as on the previous year of assessment. Wherefore, the Tribunal could not have jumped into the conclusion that the depreciation which is now sought for is beyond the period of search as even according to the assessee the year of acquisition was 1997-98 and in the absence of any material to show the date of acquisition of the property and the fact that the said acquisition was made beyond the block period. Hence, the order of the Tribunal cannot be sustained. Having regard to the fact that the question of block assessment is pending before the first appellate authority, we deem it appropriate that the matter could be remanded to the first appellate authority after setting aside the order of the ITAT. The contention as to whether the acquisition of plant and machinery in respect of which depreciation is now claimed for the assessment year 1998-1999 is covered in the block assessment or should be in the regular assessment is kept open to be urged as the assessee has to produce the relevant material in that behalf. Accordingly, we pass the following: ORDER The appeal is allowed in part. The order passed in ITA No. 1059/Bang/2003 dated 23.12.2005 is set aside. The substantial question of law is answered by holding that the assessee would be entitled to claim depreciation in respect of leased assets. The question as to whether the leased assets were acquired and depreciation is claimed in respect of the block period or subsequent thereto, is kept open to be urged before the first appellate authority. If the first appellate authority comes to the conclusion on the basis of the material on record that would be produced by the assessee that the said acquisition is subsequent to the block assessment, the depreciation can be granted in regular assessment. Matter remanded.