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June 25, 2022

Lease Rental cannot be allowed on container recoreded in books as asset , but depreciation is allowed

by CA Shivam Jaiswal in Income Tax

Lease Rental cannot be allowed on container recoreded in books as asset , but depreciation is allowed

Facts and Issue of the case

The first issue arises for consideration in all the appeals is with regard to reopening of assessment. During the course of hearing, the Ld.counsel for the assessee very fairly submitted that he is not pressing this ground. Accordingly, the issue raised by the assessee for reopening of assessment under Section 147 of the Income-tax Act, 1961 is dismissed as not pressed. The only other issue remains to be adjudicated is in respect of lease rentals.

Shri V.S. Jayakumar, the Ld.counsel for the assessee, submitted that the assessee has taken containers on lease. In the books of account, the containers were taken as assets. The assessee also claimed depreciation on the containers in the income-tax computation. According to the Ld. counsel, the assessee added back the book depreciation and claimed containers lease rental as revenue expenditure. However, the Assessing Officer disallowed the claim of the assessee. The Assessing Officer allowed the depreciation. According to the Ld. counsel, the entire amount has to be allowed as revenue expenditure.

On the contrary, Shri B. Koteswara Rao, the Ld.Departmental Representative, submitted that the assessee has treated the containers as capital asset in the books. Since it was treated as capital asset, according to the Ld. D.R., the CIT(Appeals) disallowed the claim of the assessee towards payment of lease rental, however, he allowed the depreciation as claimed.

Observation by the court

The court had considered the rival submissions on either side and perused the relevant material available on record. The assessee claims that the containers were taken as lease. A copy of the agreement available at paper-book shows that it is a lease-cum- purchase of containers. It is not clear from the agreement whether it is a finance lease or operating lease. The fact remains that the assessee treated the containers as capital asset and alternatively claimed depreciation also. The alternative claim of depreciation was allowed by the Assessing Officer. Therefore, this Tribunal do not find any reason to interfere with the order of the lower authority and accordingly the same is confirmed.

Conclusion

The appeals of the assessee is dismissed by the court.

Tristar-Container-Services-Asia-Pvt.-Ltd.-Vs-ACIT-ITAT-Chennai

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