- (1.) LEARNED counsel for both the parties conceded that this appeal is fully covered by decision of Division Bench of this Court delivered in D.B. Income Tax Appeal No.54/2007, CIT, Udaipur Vs. M/s. Banswara Syntex Ltd, decided on 15th January, 2013, therefore, for the same reasons, this appeal is liable to be dismissed. They also admitted that this judgment has further been followed in D.B. Income Tax Appeal No.54/2010, Commissioner of Income Tax, Udaipur vs. Banswara Syntex Ltd, decided on 12 th February, 2013.
(2.) THE operative portion of order dated 15th January, 2013 (supra) reads, as under :- "After having given thoughtful consideration to the rival submissions and having examined the record, we are clearly of the view that this appeal remains bereft of merit and deserves to be dismissed. The facts of the case make it clear that the respondent-assessee had taken the machinery on lease from Gujarat Lease and Finance Ltd. and ITC Classic Finance Ltd. It has not been the case of revenue that the lease transactions were not genuine or were sham. The CIT(A) in his appellate order has clearly noticed the salient features of the lease agreements whereby it was established beyond doubt that the ownership of the machinery concerned remained only with the lessor company and not with the assessee, who was the lessee for the purpose. The observations as made by the AO that the risks incident to the ownership of the assets stood "substantially" transferred to the lessee though "apparently" the title to the assets had not been transferred, in our view, had been of not viewing the case in its correct perspective. The CIT(A) has rightly observed that once the agreements were accepted as real and genuine, they were required to be accepted and there was no reason to treat the assessee as the owner of the machinery. For such nature agreements and their legal implication, the principles of law expounded and explained by the Hon'ble Supreme Court in CIT Vs. Shaan Finance (P.) Ltd.: (1998) 231 ITR 308 could be noticed, for being of direct application to the present case, as under:- "Neither of these cases deals with an agreement of hire of machinery in contradistinction to an agreement of hire purchase. When the machinery is given on hire by the owner to the hirer on payment of hire charges, the income derived by the owner is business income. The owner is also entitled to depreciation on the machinery so hired out. The hirer, on the other hand, who pays hire charges, is entitled to claim these as revenue expenditure. The hirer has not acquired any new asset. A transaction of hire is, therefore, of bailment of the machinery. There is no extinguishment of any right of the owner in the machinery. There is merely a licence given to the hirer to use, for a temporary period, the machinery so hired......" In the case of Rajshree Roadways (supra), this Court considered the matter where the lessee had the option of purchasing the trucks on payment of 1% of lease money at the end of the lease period but as regards the lease period, this Court found the lessor to be the owner of the trucks and the lessee having no right to transfer or alienate. Further, it had been agreed that the lessor would be entitled to claim depreciation as would be permissible under the Act, being the owner of the trucks.
(3.) IT was noticed that the depreciation had indeed been allowed to the lessor. In the given fact situation of the case of Rajshree Roadways (supra), this Court observed and held as under:- "It is true that there was a clause that the assessee had an option to purchase the trucks on payment of one per cent. of the lease money on termination of the lease period and the lessee can become the owner of the truck but we are concerned with the lease period and terms of the lease. As we have referred above, in the terms and conditions of the agreement, when Key Leasing and Finance Ltd., both the parties agreed that during the lease period, the lessor, Key Leasing and Finance Ltd., shall be the owner of the trucks and the lessee, i.e., the assessee, will have no right to transfer or alienate to other party in any form. Not only that the lessee as well as the lessor both have agreed that the depreciation which is permissible under the Income-tax Act, being the owner of the trucks, the lessor will have that right and benefit and it will get the benefit of depreciation on these trucks during this lease period, i.e., during the assessment years 1991-92, 1992-93 and 1993-94. It is also pertinent to note that the lessor has claimed this benefit and that has been allowed by the Department to the lessor, i.e., to the Key Leasing and Finance Ltd. Once under the same agreement when the lessor, Key Leasing and Finance Ltd., has been treated as the owner of these trucks and has been allowed the depreciation permissible under the provisions of the Income-tax Act, there is no justification to treat the assessee also as the owner of these trucks during this period. There cannot be two owners indisputedly of the same property. In our view, the Tribunal has committed an error in restoring the view of the Assessing Officer. Therefore, considering the terms and conditions of the lease agreement and the fact that depreciation on these trucks has been allowed to the lessor, Key Leasing and Finance Ltd., now there is no justification to deny the claim of the assessee that his lease rent should be allowed as revenue expenditure. In our view, the Commissioner of Income- tax (Appeals) has rightly allowed the claim of the assessee." ;