Law:

Section:

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment year 1996-97 - Assessee claimed 100 per cent depreciation on equipment purchased by it from Haryana State Electricity Board ('HSEB'), which was already installed at HSEB's Thermal Power Station and immediately after purchase was leased back to HSEB - Assessing Officer disallowed assessee's claim on ground that transaction was not a case of purchase and lease back of equipment, but was a pure financial and loan transaction - On appeal Commissioner (Appeals) as well as Tribunal held that a genuine transaction of purchase and lease back had taken place and as assessee was carrying on business of leasing also apart from other businesses, it was entitled to claim of depreciation - Whether when sale deed made it clear that property in said equipment had passed on to assessee and HSEB had conveyed and transferred its title, interest, rights and privileges in equipments sold completely and irrevocably in favour of assessee, assessee would be entitled to claim depreciation on said equipment and what was intention of HSEB in going in for transaction in question could not be transposed on to assessee - Held, yes FACTS By a sale deed executed on 28-9-1995, the HSEB, a statutory corporation constituted under section 5 of the Electricity (Supply) Act, 1948, sold the equipments installed at its Thermal Power Station to the assessee for certain consideration. On 29-9-1995, the assessee entered into an agreement with HSEB, whereby the entire said equipment was leased back to HSEB for a period of 72 months with effect from 29-9-1995. A part of consideration was paid by the assessee to HSEB by cheques and balance was retained by it as interest free security deposit for the leased equipments. The assessee claimed 100 per cent depreciation on the said equipments. The Assessing Officer disallowed the assessee's claim holding that the transaction was not a case of purchase and lease back of equipment, but was a pure financial and loan transaction. The Commissioner (Appeals) allowed the assessee's appeal holding that a genuine transaction of purchase and lease back had taken place and as the…

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