Issue:
Whether the assessee is entitled to depreciation under Section 32 of the Income Tax Act even when the assessee was not the owner of the property in question and was in possession thereof as a lessee during the year under consideration?
Brief Facts
In the present case the assessee claimed depreciation for AY 1994-95 urging that it had paid a sum of Rs. 3.16 crores. The AO rejected the claim as is evident from the preceding discussion and a reading of his order would reveal that he confined his scrutiny to the lease agreement of 16.04.1993. The AO’s order is forthright with the subsequent agreement of 17.04.1993 which was in fact shown in the course of the proceeding and the assessee had made submissions based on its effect. Nevertheless, the AO’s order is singularly silent on the effect of this document. The order was premised and almost entirely on the basis that the lease agreement conferred the rights of a lessee/ occupant and in the circumstances the benefit of depreciation for the sum of Rs. 3.16 crores could not have been derived. The CIT(A) too proceeded on a similar tangent. At the same time we also notice that the AO did consider the effect of the ruling of this Court in Hindustan Cold Storage (supra) which appears to have some background on what was then perceived to be the correct interpretation of Section 53A. The Tribunal, however, had the benefit of the ruling of the Supreme Court in Podar Cement (supra).
