COMMISSIONER OF INCOME TAX Vs. GANAPATI FINANCE LTD

JUDGEMENT

(1.) THIS is an appeal by the CIT under section 260A of the Income Tax Act, 1961 and the following substantial questions of law were framed on 30.7.2007: -

(2.) THE appeal relates to the assessment year 1995-96. The respondent-assessee is a company engaged in financing business. In the return of income filed by it, it claimed the above two sums being claims for depreciation on the leased out assets described in the questions. Apparently its claim was that these assets were owned by it and were leased out in the course of its business and therefore the twin conditions of ownership and use for the purposes of the business laid down in section 32 were fulfilled. Documentary evidence was adduced to show that the LPG cylinders were purchased from M/s. Aravalli Cylinders Pvt. Ltd ("Aravalli") and leased to M/s. Janta Gases Pvt Ltd ("Janta"). Evidence was also adduced to show similarly that the air jet spindle assembly and positar disc were purchased from M/s. Rajaji Electronics Pvt. Ltd ("Rajaji") and leased to M/s. Maruti Syntex (India) Ltd. ("Maruti").

(3.) THE claim of depreciation having been disallowed by the AO, the assessee filed an appeal to the CIT (A). He accepted the contentions of the assessee and held that there was no tax avoidance measure or subterfuge adopted by the assessee, and that the adverse statements recorded by the AO were not put to the assessee for cross- examination, that there was nothing to disbelieve the authenticity and genuineness of the documentary evidence in support of the claim for depreciation and thus allowed the appeal.