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"1. The learned CIT(A) erred in confirming the disallowance of a sum of Rs.9,62,17,863 being 100% depreciation on Amine Treatment Plant leased to Mangalore Refineries & Petrochemicals Ltd.
2. The learned CIT(A) erred in confirming the disallowance of a sum of Rs.62,55,435 being 25% depreciation on Nitrogen Storage Unit leased to Mangalore Refineries & Petrochemicals Ltd.
3. The learned CIT(A) erred in holding that a. the assessee has entered into lease agreement with MRPL even before became the owner of the assets, which is definitely against the principles of sale and lease back transaction, where the sale precedes the lease or sale is anterior to lease.
P a g e |5 19 Appeals SBI Capital Market Ltd. Vs. ACIT,Range 4(3)(3) b. neither the asessee nor lessee i.e MRPL were in a position to identify assets in question at the time of the lease agreement. No asset can be leased without being identified or described in proper terms at the time of lease c. ............there was no intention of transfer of ownership.

6. Heard both the sides and perused the material on record. During the financial year relevant to the assessment year under consideration the assesse entered into a lease agreement for lease of Amine Treatment Plant. The transactions were in the nature of sale and lease back. The Amine Treatment Plant installed at Manglore in the plant of (MRPL) was mainly comprised off indigenous equipment and imported equipment. The total cost of the plant was valued by the chartered engineer at Rs.2391.87 lacs out of which equipment worth Rs.1924.36 lacs have P a g e | 10 19 Appeals SBI Capital Market Ltd. Vs. ACIT,Range 4(3)(3) been leased by the assesse to the MRPL. In the case of Amine Treatment Plant and equipment the rate of depreciation was 100% being an AIR pollution control equipment and such rate of depreciation on nitrogen storage unit was 25% since 50% of such depreciation has been claimed as the asset was acquired and used for a period of less than 180 days. Regarding genuineness of the lease transaction the assesse has furnished copies of following documents:

1);

Copy of Inspection Report for inspection carried out on 27.03.1996 (see page 57-59 and 74-76 of Paper-book-1);

Copy of capitalisation advise dated 29.03.1996 (see page 60 & 77 of Paper- book-1);

Copy of Insurance Policy (see page 110 to 113 of Paper-book-1); Copy of letter dated 09.12.1998 from MRPL to the AO in response to Notice issued u/s 131 of the Act (see pages 114 to 123 of Paper-book-1);"

The assessing officer has disallowed the claim of depreciation stating that the transactions were in the nature of sale and lease back. The A.O also stated that the assesse has only leased indigenous component to the MRPL not the imported components. The ld. CIT(A) has upheld the disallowance on the ground that the lease agreement was executed before the assesse became owner of the assets and neither the assesse nor MRPL was in a position to identify the assets at the time of lease. The ld. CIT(A) also stated that there was no intention of transfer of P a g e | 11 19 Appeals SBI Capital Market Ltd. Vs. ACIT,Range 4(3)(3) ownership as re-delivery of the equipment after termination of the lease period was not possible without disrupting the functioning of the unit.