Case Law Details
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.
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