DCIT Vs Religare Finvest Ltd (ITAT Delhi)
The issue revolved around whether the lessor could claim depreciation on leased assets under a finance lease agreement.
The appellant, Religare Finvest Ltd, had claimed depreciation of Rs. 12,65,90,130/- on assets acquired under a finance lease. The Assessing Officer disallowed this claim, arguing that the depreciation should be allowed only to the owner of the assets. However, the ITAT Delhi upheld the appellant’s claim, citing relevant provisions of AS-19 and Circular No. 2/2001 issued by the CBDT.
According to AS-19 and the CBDT circular, the capitalization of assets acquired under a finance lease by the lessee does not affect the allowance of depreciation on those assets. The ownership of the asset is determined by the terms of the contract between the lessor and the lessee. Therefore, the lessor is entitled to claim depreciation on the leased assets, as affirmed by the Hon’ble Supreme Court in the case of ICDS Ltd. vs. CIT.
The ITAT Delhi directed the Assessing Officer to verify the finance lease agreement and allow the depreciation claim accordingly. This decision has significant implications for lessors in leasing transactions, clarifying their entitlement to claim depreciation on leased assets.
The ITAT Delhi’s ruling in the case of DCIT vs. Religare Finvest Ltd establishes that the lessor is entitled to claim depreciation on leased assets under a finance lease agreement. This decision aligns with AS-19, CBDT circulars, and the Supreme Court’s interpretation of the law.
FULL TEXT OF THE ORDER OF ITAT DELHI
This appeal by Revenue is directed against the order passed by the Learned Commissioner of Income Tax (Appeals)-7, New Delhi, dated 14.11.2018 and pertains to Assessment Year 2011-12. The Grounds of appeal are as under:-
“1. That on facts and under he circumstances of the case, he Ld. CIT(A) has erred in law and facts in giving the direction on the Addition of Rs. 12,65,90,130/- on account of excess claim of Depreciation.
2. On the facts and under the circumstances of the case, the Ld. CIT(A) has erred in law and facts in dialing to adjudicate the issue on the which addition was made by the AO and instead allowing the relief subject to verification of the finance Lease Agreement.
3. The appellant craves to be allowed to add any fresh grounds of appea l and / or delete or amend any of the grounds of appeal. ”
2. Brief facts of the case are that the appellant e–filed its return of income on 27.09.2011 for the Assessment Year 2011-12 declaring income of Rs. 2,10,99,76,285/-which was subsequently revised on 30.03.2013 declaring a income of Rs. 2,29,52,07,193/. The case was selected for scrutiny. Order u/s 143(3) was passed on 30.03.2014, Assessing the income at Rs. 2,36,11,07,150/-after making addition of Rs. 6,43,69,971/-u/s 14A read with Section 8D and addition of Rs. 15,29,982/- on account of SAR expenses. Subsequently, the AO noticed that the appellant claimed deprecation of Rs. 22,91,58,130/- in its computation of income. However, as per 3CD annexure of depreciation, it was noticed that depreciation was available amounting to Rs. 14,56,05,769/- (13,20,16,000 + 1,35,89,769),which has resulted into excess claim of depreciation amounting to Rs. 835.52 lakhs. Accordingly, notice u/s 148 was issued to the appellant after prior approval of Pr. CIT, Delhi-7. Order u/s 143(3)/147 was passed on 30.12.2017, Assessing the income at Rs. 2,48,76,97,280/- after disallowance of Rs. 12,65,90,130/- on account of excess claim of depreciation.
2.1 The aforesaid disallowance has been made by the Assessing Officer by making following computation.
“5. The assessee vide its reply dated 04.07.2016 has given the following bifurcation of the depreciation claimed by the assessee of Rs. 22,91,58,130/- it in its computation of income:
