CIT Vs Tata Motors Ltd. (Bombay High Court)
The present batch of appeals was filed by the Revenue before the Bombay High Court challenging a common order dated 12 June 2017 passed by the Income Tax Appellate Tribunal (ITAT), Mumbai, concerning assessment years 1994–95 to 1997–98. The principal issues raised were: (i) whether depreciation under Section 32 of the Income-tax Act, 1961 could be allowed on leased assets, and (ii) whether interest under Section 220(2) could be charged beyond the original assessment order.
The Assessing Officer had disallowed depreciation on leased assets on the ground that the assessee did not satisfy the twin requirements of ownership and use for business purposes. This view was upheld by the Commissioner of Income Tax (Appeals). Upon remand, the Assessing Officer again disallowed depreciation and additionally levied interest under Section 220(2). The Tribunal, however, allowed the assessee’s appeal, deleting both the disallowance of depreciation and the interest.
The High Court examined whether the Tribunal was correct in allowing depreciation on leased assets. It noted that the facts were undisputed: the assessee had entered into lease transactions, placed lease agreements on record, and consistently contended that the transactions were genuine business activities and not merely financial arrangements.
