Income Tax Appellate Tribunal - Chennai
Assistant Commissioner Of Income Tax vs First Leasing Company Of India Ltd. on 25 May, 2007
Equivalent citations: (2008)115TTJ(CHENNAI)802
ORDER
Shamim Yahya, Accountant Member
1. This appeal by the Revenue is directed against the order of Commissioner of Income Tax (Appeals) dated 10,9.2004 and pertains to assessment year 2001-02.
2. The first issue raised is that Commissioner of Income Tax (Appeals) erred in deleting the disallowance of depreciation claimed on sale and lease back transactions with Tamil Nadu Electricity Board amounting to Rs. 19,72,13,568/-.
2.1 The facts of the case are summarized as under:
During the present assessment year the assessee company, First Leasing Company of India Ltd. (for short FLCI) entered into 14 sale and lease back agreements with Tamil Nadu Electricity Board (for short TNEB). The assets claimed to have been purchased from TNEB and leased back to them were in the nature of meters, capacitor banks and outdoor circuit breakers. The total of such assets came to Rs. 39,44,27,143/-. These assets were eligible for 100% depreciation and since they were not used for more than 182 days, the assessee restricted the claim to 50% of the depreciation. Actually the lease agreement was executed on 31st March of the Accounting year. Against these lease agreements with TNEB, the assessee did not offer any income by way of lease rental because as per the lease agreement, the lease rentals are payable on half-yearly basis and first instalment was due on October 12th of next financial year. Therefore, according to the assessee no lease rental accrued till 31.3.2001. Hence, no income was recognized on the same.
2.2 In the assessment order, the Assessing Officer referred to a decision of the Special Bench of the Tribunal in the case of Mid East Port Folio Management Ltd. v. DCIT, ITAT, Mumbai 'C' Special Bench in I.T.A. No. 5616/Mum/1999 dated 14.8.2003 for assessment year 1995-96 and Hon'ble Karnataka High Court decision in the case of Avasarala Automation Ltd. v. JCIT (2003) 266 ITR 178 (Karn). The Assessing Officer elaborately discussed the findings in the Special Bench decision noted supra and analysed the facts of the present case with reference thereto and came to the conclusion that sale and lease back agreement entered into by the assessee with TNEB were not actually lease agreements but were mere finance agreements. Accordingly, depreciation claimed was disallowed.
2.3 Upon assessee's appeal, the learned Commissioner of Income Tax (Appeals) laconically accepted the assessee's statements that the Special Bench case was different on facts than the one in the present appeal. The learned Commissioner of Income Tax (Appeals) concluded that, The leasing companies, like that of the assessee, are flush with funds and they would like to 'buy' the depreciation and reduce their tax liability. They employ the best brains and prepare proper documentation without violating the provisions of any statute, even though the transactions look absurd and unbelievable to a common man. But this is the ground reality. Of course, an Assessing Officer can pierce through the veil and prove a transaction sham; but it needs enormous effort and due to lack of time and expertise, he is not able to do the same. In these circumstances, as an appellate authority, I can only consider whether the assessee has satisfied all the conditions for claiming depreciation. There is no doubt that the assessee has satisfied all the conditions.
(emphasis supplied by us) 2.4 We have heard the rival contentions and perused the relevant records. The learned Counsel of the assessee submitted that for claiming depreciation, one has to satisfy the provisions of Section 32 and in this case depreciation was allowable as per provisions of Section 32 of the Income Tax Act. He contended that the transaction of sale was genuine. He further argued that the motive of the assessee is quite irrelevant for the allowance of depreciation. He further claimed that sale and lease back transaction is a way of receiving finance in commercial world. The learned Counsel of the assessee further placed reliance upon the following case laws:
i) Newdeal Finance & Investment Ltd. v. Deputy Commissioner of Income Tax - ITAT, Chennai (2000) 74 ITD 469
ii) Polytex India v. ACIT - ITAT, Mumbai in ITA Nos. 5168/Bom/94 and Ors. vide order dated 18.12.2003
iii) CIT v. George Williamson (Assam) Ltd. - Gauhati High Court 265 ITR 226
iv) Oriental Leasing Co. v. DCIT - ITAT, Delhi (1996) 55 TTJ (Del) 294 in I.T.A. No. l590/Del/1992 for assessment year 1988-89 vide order dated 6.11.1992.
v) Union of India v. Azadi Bachao Andolan (2003) 132 Taxman 373 (SC).
vi) Ellenbarrie Industrial Gases Ltd. v. Joint Commissioner of Income Tax - ITAT, Calcutta Bench (2002) 76 TTJ (Cal)(TM) 841 in IT(SS)A No. 38/Cal/1999 vide order dated 20th November, 2001.
vii) Industrial Development Corporation of Orissa Ltd. v. CIT and Ors. 268 ITR 130.
2.5 The learned Departmental Representative, on the other hand, contended that this case was squarely covered by the decision of the Special Bench of this Tribunal as referred by the Assessing Officer. Further points raised by the Revenue in this regard read as under:
The learned Commissioner of Income Tax (Appeals) has failed to consider the decision relied upon by the Income Tax Appellate Tribunal, Special Bench, Mumbai in the case of ICICI Bank Ltd., wherein the Special Bench has laid down certain criteria to be examined which would determine whether a particular sale and lease back agreement is a genuine lease agreement or whether it is a mere finance agreement.
The learned Commissioner of Income Tax (Appeals) ought to have appreciated the action of the Assessing Officer in discussing the facts in this case with reference to the criteria as laid down by the Special Bench after which he arrived at a conclusion that this is a finance agreement.
It is submitted that the learned Commissioner of Income Tax (Appeals) has not rebutted any of the evidence laid down by the Assessing Officer but has agreed with the contentions of the assessee that the case laws relied upon by the Assessing Officer are distinguishable.
The learned Commissioner of Income Tax (Appeals) has failed to appreciate the fact that the Assessing Officer has not merely relied upon the case laws cited in the assessment order but has examined the facts in this case with reference to various criteria laid down by the Income Tax Appellate Tribunal with regard to sale and lease back transaction.
For the detailed discussions made in the assessment order, it is submitted that the Commissioner of Income Tax (Appeals) has failed to appreciate the fact that the Assessing Officer has proved that this transaction is a mere finance agreement and not a genuine sale and lease back agreement.
2.6 We have carefully considered and perused the submissions and case laws cited. First, we adjudicate the case in terms of plain provisions of Section 32(1) of the Income Tax Act. Section 32(1) lays down following aspects for eligibility to claim depreciation:
a) Depreciation is eligible on certain kinds of assets only.
b) Such an asset should be owned by the assessee.
c) It should be used for the purpose of business or profession.
2.7 Admittedly, in this case, there is no dispute that nomenclature of assets involved is eligible for depreciation. For the time being, in terms of the sale invoices raised by the TNEB they may be taken as owned by the assessee. Now the question arises whether they have been used for the purpose of business of the assessee. It is well settled that leasing company could be entitled to claim depreciation on assets leased out by them, provided the lease income is assessable as business income. As in such cases user of assets has to be seen not in the context of actual user of assets by the lessee but the commencement of lease and accruing of lease income to the assessee.
2.8 In this connection, we note that Hon'ble jurisdictional High Court in Commissioner of Income Tax v. Annamalai Finance Ltd. (2004) 275 ITR 451 has expounded that, where the business of the assessee consists of hiring out of machinery and income derived by the assessee from such hiring is business income, the assessee must be considered as having used the machinery for the purpose of its business.
2.9 Now, in the light of aforesaid exposition, we find that in this case no income has been offered by the assessee for the current assessment year, so it can be concluded that asset has not been used by the assessee in its business and so no depreciation is allowable.
2.10 It is further seen in this case that the lease agreement was entered into on 31.03.2001. As per the lease agreement Schedule, the lease period was seven years. The mode of payment of lease was half-yearly in arrears. Lease rent commencement date was October 12, 2001. In this manner, the subsequent due date for lease rentals was April 12, 2002 and so on up to April 12, 2008. Now, when the first half-yearly lease rental is due on April 12, 2001, it is but natural to assume that the operation of the lease for practical purposes of earning lease rental commenced from April 12, 2001 i.e. beyond the previous year. Now, in this case, because the agreement was entered into in 31.3.2001, the assessee had claimed 50% of the depreciation for the whole year due for the purported one day use for 31.3.2001. However, the assessee had not admitted any lease rental on the plea that no lease rental has been due. In our opinion, this has been done as reading and analysis of the Schedule of the lease agreement establishes that lease agreement had not become operational before April 12, 2001.
2.11 Even if the asset is not put to use by the lessee but the lessor had started earning lease rentals, courts have held that it is sufficient for the grant of depreciation to the lessor. Now, adjudged on this point of view, we find that no lease rentals have become due to the assessee in the present assessment year. Hence, it cannot be said that the said asset was put to use in the business of lease in the current assessment year and in this view of the matter also no depreciation is allowable to the assessee for the impugned assessment year.
2.12 Now, we come to the aspect that these are not genuine lease transactions. As regards the case laws cited of the Tribunal, we find when there is a Special Bench decision on this issue itself as in the case of Mid East Port Folio Management Ltd. v. DCIT (2003) 81 TO (Mum) (Special Bench decision) 37 : (2003) 87 ITD 537, then the present case has to be considered on the touchstone of the said Special Bench decision. This is being done in the subsequent paragraphs.
2.13 As regards the Hon'ble Gauhati High Court decision in the case of CIT v. George Williamson (Assam) Ltd., the same was based on the fact that first appellate authority and the Tribunal had held that the transaction was genuine and validly entered into. Hence, in our opinion, this is not applicable to the present case.
2.14 As regards the Hon'ble Orissa High Court decision in the case of Industrial Development Corporation of Orissa v. CIT and Ors. 268 ITR 130, it was based on the fact that there was no material or evidence discussed by the Commissioner in the order Under Section 263 of the Act that the intention of the assessee and the OSEB into entering into the said lease back agreement was not to transfer the ownership of machinery from OSEB to the assessee and was not to lease back the machinery by the assessee to OSEB. The Hon'ble High Court had further noted that the Tribunal in the impugned order had not relied on any material or evidence but had only confirmed the decision of the Commissioner that the sale and lease back agreement was a colourable device and not a genuine one and had refused to interfere with the decision of the Commissioner. Hence, in our opinion, this decision also is not applicable on the facts of the case.
2.15 As regards the Hon'ble Apex Court Division Bench decision in the case of Union of India v. Azadi Bachao Andolan (2003) 132 Taxman 373 (SC), we find that there is no dispute regarding the ratio emanating from that decision. The sum and substance of the exposition applicable to the present case is that decision in Mcdowells case cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored or that every transaction or arrangement which is perfectly permissible under Law which has the effect of reducing the tax burden of the assessee must be looked upon with disfavour. However, this decision nowhere expounds that colourable and sham devices adopted by the assessee should be completely ignored. As a matter of fact, the Apex Court has noted the following observations in the Mcdowell's case (which was a full bench of the Apex Court comprising five Hon'ble Judges):
Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain the belief that it is honourable to avoid the payment of tax by resorting to dubious methods. It is the obligation of every citizen to pay the taxes honestly without resorting to subterfuges.
2.16 In the case of CIT v. Durga Prasad More 82 ITR 540, the Hon'ble Apex Court held that a little probing may be sufficient to show that apparent was not the real. The taxing authorities are not required to put on blinkers while looking at the documents produced before them. They are entitled to look into the surrounding circumstances to find out the reality of the recitals made in those documents. Similarly, Hon'ble Apex Court in Sumati Dayal's case reiterated that assessing authorities should consider the surrounding circumstances also.
2.17 In the Special Bench decision in the case of Mid East Port Folio Management Ltd. v. Deputy Commissioner of Income Tax (2003) 81 TTJ (Mumbai) (Special Bench decision) 37:(2003) 87 ITD 537, following was expounded: (head notes only) Depreciation - Allowability - Sale and lease back transactions - Sale and lease back (SLB) transactions have been recognised commercially but judicial eye can certainly unearth a device or a smoke-screen created to conceal the real intention of the parties and for this purpose, can examine the genuineness of the particular transaction which is called in question -The enquiry is to find out the real intention of the parties and ascertain whether a simple loan transaction masquerades as an SLB transaction -Observations relating to the question of tax evasion or avoidance made in McDowell have to be followed as guiding principles which deciding whether there was tax evasion or not on the facts and circumstances of a given case - Explanation 4A to Section 43 (1) only seeks to thwart the move to inflate the value of the asset leased out in order solely to obtain the benefit of 100 per cent depreciation - It applies to an otherwise genuine transaction - If the SLB itself is not genuine, then there is no need to invoke the Explanation - Assesses companies are said to have purchased pollution control equipment and boilers from RSEB and GEB, respectively, both electricity boards, and leased them back to the vendors - There was no intention to effect a sale in truth and reality to the assessees - Agenda note prepared for the board of directors of RSEB refers to "notional" sale in contrast to the word "actual" - Resolution authorised the Board to notionally sell and take back the plant and machinery on lese - Further, it cannot be imagined that an electricity board would dispose of a part of its equipments by way of sale - It could never have been the intention of RSEB to allow the equipment to be severed and delivered to the assessee since that would have involved serious disruption in power supply - Entire transaction and the sequence of events were pre-ordained or pre-planned - Over-riding consideration appeared to be the prospect of getting 100 per cent depreciation - Fact that the assessee had agreed to the stipulation in a letter even when negotiations were on that it would transfer back the ownership right in the equipment to RSEB shows that there was no intention to convey any property to the assessee and the lease deed was a mere paper arrangement and a simple finance transaction was put under the garb of lease - Circumstances were similar in the case of GEB - Assessees were not therefore entitled to the 100 per cent depreciation allowance claimed in respect of the assets/equipment leased out to RSEB and GEB respectively.
2.18 Hon'ble Karnataka High Court in the case of Avasarala Automation Ltd. v. Joint Commissioner of Income Tax (2003) 266 ITR 178 has held as under:-(head notes only) The Assessing Officer is entitled to go into the genuineness or otherwise of a transaction for the purpose of determining whether any attempt is made by the assessee to avoid payment of tax, If an instrumentality of the State or the Department of the State, is one of the parties to the transaction, it may be one of the circumstances that may be taken into account by the Assessing Officer while considering the claim regarding the genuineness of the transaction, but it cannot be conclusive in nature.
An assessee who claims depreciation has to satisfy the Revenue that he is entitled for grant of depreciation on items claimed by it. The burden of proof is on the assessee.
The assessee had claimed that it had purchased machinery/equipment from the Andhra Pradesh State Electricity Board by virtue of an agreement of sale deed dated September 29, 1995, for a total consideration of Rs. 1,60,18,854/- and on the same day, by means of a separate lease deed, it had leased back the said machinery/equipment to the Board for a monthly rent of Rs. 2,19,498.35 for a period of 72 months commencing from September 29, 1995, till August 29, 2001. The assessee claimed 100 per cent depreciation in respect of the said leased machinery as the machinery purchased according to the assessee was pollution control equipment. The Assessing Officer held that the transaction was not genuine and rejected the claim of the assessee. The Tribunal took into account the following facts : (i) that the documents in question were not registered; (ii) that the machinery/equipment was not identified; (iii) that the written down value as per Section 43(1) of the Act in support of the machinery/equipment could not be ascertained; (iv) that the market value of the asset without valuer assessment also could not be ascertained; (v) that there was no actual delivery or handing over of possession of the machinery/equipment by the Board to the assessee on completion of the sale of the said machinery/equipment; and (vi) that there was also no redelivery or handing over of possession of the machinery/equipment by the assessee to the Board; (vii) that the machinery/equipment was embedded or attached to the earth. It upheld the order of the Assessing Officer. On further appeal to the High Court:
Held, dismissing the appeal, that the facts showed that while the Board was interested in securing financial assistance by way of loan and for the said purpose the machinery/equipment was offered as a security by creating the documents in question to assure repayment of the loan advanced, the assessee found it convenient to enter into such a transaction as a device adopted to avoid payment of tax.
2.19 In this case, we find that Assessing Officer has very elaborately discussed the features of the present case with respect to that of the Special Bench decision and accordingly noted that the order of the Special Bench is applicable on the facts of the case.
2.20 Some important features noted in this regard regarding these lease agreements are as follows which go on to establish that this is not a genuine lease transaction:
The assets claimed to have been sold were already installed at the sites of TNEB at various places in Tamil Nadu. Hence there had been no physical delivery of the assets, neither at the time of sale by TNEB to the assessee nor at the time of lease by assessee to TNEB.
In clause 8 of this agreement, it is stated that lease rentals are worked out after taking into consideration the benefits of depreciation available to the lessor. Not only this, but clause 8 goes to state that if for any reason, the depreciation (described in Schedule II to the lease agreement @ 100% p.a.) is increased or decreased or if the lessor is disallowed its claim of depreciation whether wholly or partly in any year during the period of lease, the lessor can unilaterally at its sole discretion increase the lease rentals to the extent of loss or benefit from disallowance of depreciation.
Clause 11 mandates that the entire risk or loss or damage to the machinery from whatever the cost shall lie against the lessee and the lessor is indemnified against such loss or damage.
Clause 15(a) states that the essential function of the lessor is to purchase the machinery selected by the lessee from the supplier designated by the lessee. This however, has not happened in the present case. In fact, TNEB has purchased the meters, circuit breakers, capacitor banks from the various suppliers and has already installed the same at various locations in Tamil Nadu. These assets are therefore already operational at the point of alleged sale to FLCI. Hence some clauses have been incorporated just to give the agreement a facade of lease transaction.
Clause 15(f) states that no warranty or fitness etc. shall apply to the lessor.
Clause 15(h) also states that there is no liability on the lessor in regard to conditions, warranties or representations relating to the condition of the machinery.
Clause 19 gives a renewal option whereby the lessee has the option to renew the lease at the rate of Rs. 1 per annum for a secondary period of 20 years. This is the clear indicator that the ridiculously low value fixed by the FLCI for renewal of the lease is nothing but the determination of the residual value of the asset at the expiry of the current lease. Moreover, it also indicates the intention of lessor neither to recover nor to re-possess the asset. This, therefore appears to be conditional sale. It is also inconceivable that an asset worth Rs. 3,14,47,107/- (the amount of lease finance) is worth only Rs. 1 and after 7 years (the term of this lease agreement).
Clause 32 defines on lessor's financial commitment, but it restricts the same to a figure of Rs. 3,14,47,401/-. In this particular lease agreement, it is the total cost of the assets purchased by FLCI and leased back. There is no further liability of whatsoever nature relating to the machinery cost, its movement, taxes on the transaction and any other charges. All these are to be borne by the lessee.
Clause 38 talks about the sales tax liability. By this clause, notwithstanding the fact that sales tax having been not charged initially, the lessor is indemnified against the liability of sales tax and the lessee agrees to pay the amount of sales tax if found payable at any later point of time. This once again reduced to writing in the sale agreement corresponding to this lease agreement wherein it is clearly held that the Sales tax on the sale of assets by TNEB to FLCI would be borne by TNEB.
2.21 Another feature noted by the Assessing Officer is regarding the notings in the Board Meeting which is as follows:
TNEB has also ratified the transaction with FLCI in its Board Meeting on 19.05.2001. The wordings of the TNEB Board Meeting are interesting. It once again mentions that the assets are eligible for 100% depreciation under the Income Tax Act and that the TNEB has approved the proposal of availing lease finance of Rs. 30 crores from FLCI. It also approves the security of irrevocable standing instruction to the bankers and furnishing of sovereign guarantee for future lease rentals. This clearly goes to show that something similar to escrow account has been provided to FLCI as guaranteed by the transaction.
2.22 The items involved in these sales and lease back transactions were acquired as far back as March, 2000 by TNEB but they were sold and leased back at the cost mentioned in the original invoices or purchased by TNEB. It is further noted that these assets were never specifically identified and on a query from the Bench, the learned Counsel submitted that it not humanly possible to identify individually all the assets involved in this case.
2.23 Thus, from the above, it is clear that this is not a genuine lease transaction. It has been given only the garb of lease transaction. There was no intention to effect the sale in truth and reality to the assessee, the machinery/equipment were never individually identified, the written down value in support could not be ascertained, that the market value of the assets without valuer assessment also could not be ascertained. The sales tax liability if at all arising were to be borne by the lessee. There was no actual delivery or handing over of possession of machinery/equipment by the Board to the assessee on completion of sale and there was also no re-delivery or handing over of possession of the machinery/equipment by assessee to the Board. In any eventuality there was no scope for the assets coming back to the lessor. Hence, on the basis of above said discussions, in our opinion, this case is squarely covered by the ratio emanating from the Special Bench decision and Hon'ble Karnataka High Court decision cited supra. Giving a purely finance transaction, the garb of sale and lease back transaction to claim depreciation, is clearly a colourable device and subterfuge and hence, no depreciation can be allowed in this case.
3. The second issue raised is that Commissioner of Income Tax (Appeals) has erred in deleting the disallowance in depreciation with reference to assets, where lease agreements have expired amounting to Rs. 51,46,787/-.
3.1 On this issue the Assessing Officer noted that in respect of four lessees, the lease period was over and as per the provisions of the lease agreement, assessee has to take back the leased assets and in the case of all these four parties the assessee has not taken back the assets but has claimed depreciation. As per the lease agreement, if the leased assets are not returned to the lessor, it cannot be presumed that the lessee shall be deemed to be the monthly tenant of the equipment at the same rental as accrued in the original lease agreement. The assessee did not credit the monthly rent on accrual basis but claimed the depreciation on these assets. The Assessing Officer held that there was no valid lease agreement once the lease period is over and the asset is not returned to the lessor. Hence, he held that these assets ceased to be leased assets and, therefore, no depreciation can be allowed.
3.2 Before the learned Commissioner of income lax (Appeals) it was submitted that as long as assets form part of block of assets and the assessee carries on business of leasing, the depreciation cannot be denied. The learned Commissioner of Income Tax (Appeals) accepted the contention and held that these equipments continue to be with the lessee and therefore it had to be presumed that equipments were used in the business of the assessee. Accordingly, the learned Commissioner of Income Tax (Appeals) allowed the assessee's appeal on this issue also.
3.3 We have heard the rival contentions and perused the relevant records. The learned Departmental Representative submitted that the assessee not only failed to credit the monthly rental in this regard but also failed to recognise the liquidated damages as stipulated in the lease agreement in case of failure of the lessee to return the assets and while assessee is not recognizing any income on these assets, it is claiming allowance of depreciation. The learned Departmental Representative claimed that this will only cause double jeopardy to the Revenue.
3.4 The learned Counsel of the assessee on this issue placed reliance upon following case laws:
1) CIT Tamil Nadu-I v. Vayithri Plantations Ltd.-Madras 128 ITR 675
2) Capital Bus Service (P) Ltd. v. CIT-New Delhi 123 ITR 404
3) Forest Industries Travancore Ltd. v. CIT-Kerala
4) CIT, Haryana & Chandigarh v. O.P. Khanna & Sons 140 ITR 558
5) CIT v. Kanoria General Dealers (P) Ltd.-Calcutta 159 ITR 524 3.5 We have carefully perused the above submissions. These case laws relied upon by the assessee are not applicable on the facts of this case.
In CIT Tamil Nadu-I v. Vayithri Plantations Ltd.-Madras, the decision was that machinery installed but not actually used due to labour unrest, should be considered as used in business.
In Capital Bus Service (P) Ltd. v. CIT-New Delhi, the decision was that buses kept ready for running on contract basis on temporary fee to be considered used for business of the assessee.
In Forest Industries Travancore Ltd. v. CIT-Kerala , it was held that machinery could not be held to have been used for the purpose of the business during assessment year even passively.
In CIT, Haryana & Chandigarh v. O.P. Khanna & Sons, depreciation allowable - steps taken to get the building into gear for running business.
In CIT v. Kanoria General Dealers (P) Ltd. - Calcutta, it was held that when business is set up and ready to commence commercial production, depreciation is allowable.
3.6 In our opinion, in the case at hand, the decision of the Hon'ble jurisdictional High Court in the case of Annamalai Finance cited supra would again be relevant in the context of use of assets for claiming depreciation in these transactions. In this case it was expounded by the Court that when the business of the assessee consists of hiring of machinery and income derived by the assessee from such hiring is business income, the assessee must be considered as having used the machinery for the purpose of his business. In this case, we note that the lease period is over. Hence, there is no lease agreement. As such, the assets cannot be said to have been used for leasing business. Moreover, the assessee is not recognizing any lease rental. Even the monthly rental and the liquidated damages envisaged in such situation are not being recognised and the lessee is not returning the asset. In such a situation, it cannot be said that the assets are being used by the assessee in its leasing business. Hence depreciation is not allowable.
3.7 In our opinion, the learned Departmental Representative is correct that in such a situation where no income is being recognised by the assessee, further allowance of depreciation with respect of those assets will cause double jeopardy to the Revenue which cannot be sustained. Moreover, claiming depreciation Under Section 32(1) is not a valid recourse for such a case where the assets have gone out of possession of the assessee. Hence, we set aside the order of the learned Commissioner of Income Tax (Appeals) and decide the issue in favour of the Revenue.
In the result, this appeal by the Revenue is allowed.