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5. The facts in nutshell on this issue borne out from the record are that in the year under consideration, assessee had purchased soft drink bottles from M/s. Glass and ceramics Decorators, Bombay worth Rs. 19,54,953 by means of 30 invoices during the period w.e.f. 28.3.1991 to 30.3.1991. The bottles were to be directly supplied to Ms. Coolade as per agreement dated 15.2.1991. The AO noted that these bottles were reported from Bombay to Sahibabad by goods train and also Transport Corporation of India. Summons u/s 131 were also issued to M/s. Coolade for filling the copy of the franchise from M/s. Parle (Exports) Pvt. Ltd., the date of receipt of the bottled along with substantiating evidence.

6. M/s. Coolade filed the statement of bottles received from M/s. Glass & Ceramics decorators, copy of register of empty bottles, photocopy of franchise with Parle (Exports) India Ltd. From these details it was noticed by the AO that out of total of 5,46,000 bottles receivable from the assessee. M/s. Coolade had received only 42,000 bottles and remaining were received between 3.4.91 to 18.4.91. The assessee was asked to explain by claim of depreciation should not be disallowed in respect of bottles which were not put to use in the relevant previous year. The assessee contended that for claiming precaution u.s 32, it was not necessary for the lessor that the goods should be put to use the lessee in its business. The requirement of law is only that the goods should be for the assessee's business i.e. the lessor's business and not for the lessee's business. Was further pointed out the lessor could not be at the mercy of the lessee, waiting for the letter to use the assets in its business in order to claim depreciation. It was further contended that soft drink bottles were in existence before the end of the previous year and only because part of these bottles were transported after the end of the previous year, depreciation could not be disallowed in respect of the bottles which were transported later. The AO was not satisfied with the explanation of the assessee and she accordingly restricted the depreciation in respect of 42,000 bottles which were received and put to use before 31.3.91 and disallowed the depreciation of Rs. 1804572/-. The assessee preferred an appeal before the CIT(A) which the submission that the assessee has entered into an agreement on 15.2.91 with M/s. Coolade for lease of empty glass bottles of the aggregate value of Rs. 25.87.200 and in terms of lease agreement assessee had purchase 5,88,000 bottles of the value of Rs. 19,54,953 from M/s. Glass Ceramics Decorators of Bombay. The above manufacturer had dispatched the said bottles directly to M/s. Coolade in different lots and the transportation charges were to be borne by the lessee. It was further contended that he lease agreement commenced w.e.f. 28.2.91 and monthly rental amounting to Rs. 65,708 was received in advance on 15.3.1991. Sine the bottled were put to use in the assessee's business of leasing and the assessee had received lease rental thereon, the assessee was entitled to claim depreciation in respect of the cost of the bottles under the provisions of Section 32(1)(ii) of the IT Act. The CIT(A) re-examined the issue and he opined that in order to use the bottles for the business of the lessor, it has to become the first owner of the assets in question. The crucial question is that at what point of time the assessee in the case of assets involved i.e. bottles which were directly dispatched by the manufacturer to the lessee, can be said to have become the owner of the assets. In this case, the assessee purchased the bottles from M/s. Glass & Ceramics Decorators of Bombay and the assessee cannot be said to have become the owner of these bottles till these bottles have parted the ownership of M/s. Glass & Ceramics Decorators of Bombay the previous owner. Therefore, the assessee can only be said to have become the owner if these bottles in the relevant year were dispatched by M/s. Glass & Ceramics Decorators of Bombay before 31.3.91. He accordingly, directed the AO to call for evidence and make necessary inquiry in order to ascertain how many bottles excluding 42,000 bottles which were admittedly received by the lessee before 31.3.93 were dispatched before 31.3.91 and the assessee would be entitled to depreciation in respect of those bottles which were dispatched by the previous owner upto 31.3.91.

9. Having considered the rival submissions and from a careful perusal of record, we find that the assessee has entered into an equipment lease agreement with M/s. Coolade and M/s. Parle (Exports) Pvt. Ltd. for supply of bottles which would be delivered by the supplier directly at the place of the lessor. It was also agreed that although M/s. Coolade and M/s. Parle (Exports) Pvt. Ltd. are for the purpose of this agreement joint hirer, all the liabilities and obligations at the first instance are of M/s. Coolade who would be deemed to be the principal hirer and in case of default or non-performance, all terms and conditional could mutatis matandi be applied to M/s. parle (Exports) Pvt. Ltd. According to its Schedule 1 and Schedule 1B , the bottles costing at Rs. 19,54,953 were to be leased out w.e.f. 1st March 1991 at a monthly rent of Rs. 65,708,15 which is ore than the interest @40% per year on the investment made in the purchase of bottles i.e. Rs. 19,54,953. It is also evident from schedule 1B that the assessee has agreed to receive a sum of Rs. 23,65,493.10 within a period of three years against in investment made in purchase of bottles i.e. Rs. 19,54,953. From a careful perusal of these date, we find force in the contention of the DR that it is not a simple case of leasing of equipment i.e. the bottles, to the lesser but is is rather a case of finance made available by the lessor to the lessee for purchasing these bottles. During the course of hearing, a specific query was raised from the Id. Counsel for the assessee that according to this specified clause no. 16 and 27 o this lease agreement, the lease agreement, the lessee was required either to surrender the equipment to the lesser at such place as the lessor may specify, in goods repair, condition and working order or get the lease renewed for another period agreed between the parties, what happened with the equipments/bottles after the end of the lease period? Whether the lease was renewed or bottles were returned back to the lessor? Ld. Counsel for the assessee candidly accepted that after the lease period, the bottles were neither returned to the lessor not the lease was renewed. These bottles were retained by the lessee, as per the practice prevailing in the market. With this reply, it has become amply clear that after the end of the lease period, the lessee became the absolute owner of the bottles and whatever alleged rent on account of hiring o bottles was paid, it was not, in fact, a rent but was in installment towards the advanced/finance made available in purchase of the bottles, paid to the lessor. This proposition also gets support from the fact that the assessee has made the investment in purchase of bottles at Rs. 19,54,953 and received a total sum of Rs. 23,65,493.10 within a period of three years from the so-called lessee. All these facts suggest that it is not a case of simple leasing of bottles by the assessee to the lessee but it is rather a case of finance made available by the assessee to the lessee for purchasing the bottles against certain rate of interest and thereafter in equal monthly instalments, it was repaid by the lessee to the lessor and after the end of the stipulated period, the lessee becomes and absolute owner of the equipments as it was not required to return back the equipments or to get the lease renewed although a specific clause to this effect was envisaged in the lease agreement to entitle the assessee to claim 100% depreciation on the bottles besides earning interest on its investment in bottles.