Case Law Details
IndusInd Bank Ltd vs. ACIT (ITAT Mumbai Special Bench)
Learned AR also argued that the Board Circular talks of adopting an integrated approach in the case of leasing and in any case depreciation has to be allowed either to the lessor or to the lessee. It was argued that since the lessee had not claimed any depreciation, the lessor should be granted depreciation on the leased asset. We are in full agreement with the mandate of the Circular stipulating the grant of depreciation either to the lessor or to the lessee depending upon the nature of lease. However it is important to mention that the case under consideration is that of the finance lease in which the lessor-assessee, who claimed depreciation, is not the real owner of the asset in his own right. In such a situation the issue arises as to whether the lessor, who is not the real owner of the property, should be granted depreciation merely for the reason that the lessee had not claimed depreciation on the leased asset? In our considered opinion, the answer to this question can be given in negative and negative alone. The obvious reason is that it is only the right person entitled under law, who can get the benefit of depreciation allowance. Parties can not, in disregard to law, mutually decide as to who out of them will be allowed the depreciation and then offer such proposal to the AO for implementation. It is the duty of the AO to find out as to whether the assessee before him is entitled to depreciation allowance as per law or not. The mutual agreement between the parties is of no consequence. It is impermissible to allow depreciation to A when as per law it is only B who is so entitled to it. The fact that B has not claimed depreciation is inconsequential when the point for determination is the admissibility or otherwise of depreciation to A. The authority for this proposition can be found from none other than the Hon’ble Supreme Court in the case of ITO v. Ch. Atchaiah [(1996) 218 ITR 239 (SC)]. It has been categorically held in this case in the context of the Income Tax Officer that : “He can, and he must, tax the right person and the right person alone. By “right person”, we mean the person who is liable to be taxed, according to law, with respect to a particular income. The expression “wrong person” is obviously used as the opposite of the expression “right person”. Merely because a wrong person is taxed with respect to a particular income, the Assessing Officer is not precluded from taxing the right person with respect to that income.” The enunciation of law by the highest Court of the land makes it abundantly clear that only the right person should be taxed. To put it simply, if a deduction has not been allowed to a right person, it does not mean that the same deduction should be allowed to a wrong person. The judgment in the case of Mysore Minerals (supra) recognizes a person as an owner who is in possession of property in his own right exercising such dominion over the property as would enable others being excluded there from. In a lease transaction also there can be only one owner of the asset, that is, either the lessor or lessee and not both of them or either of them at their discretion. Whereas in the case of operating lease, it is the lessor who is the real owner of the asset, but in case of finance lease, it is the lessee who is to be regarded as the real owner of the asset. Ex consequenti only the lessor can claim depreciation in case of an operating lease and the lessee in a case of finance lease. There is no question of deciding between the lessor and the lessee, as to who should be conferred the benefit of depreciation allowance. Adverting to the facts of the instant case, it can be seen that it is a case of finance lease agreement. The only and the inescapable conclusion which in our considered opinion follows is that the real owner of the leased property is Indo Gulf Fertilizer & Chemical Corporation Limited and not the assessee. We, therefore, decline to grant any depreciation to the assessee-lessor. However the lessee, if so advised, may take recourse to the legal remedy if any, for the grant of depreciation.
ITAT HAS ALSO EXPLAINED DIFFERENCE BETWEEN “FINANCE LEASE” & “OPERATING LEASE”
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