ORDER
Rajpal Yadav, Judicial Member
1. The 1st Grievance of the assesses is that the learned CIT (A) has erred in granting Depreciation @ 20% instead of 40% on the vehicles used by the Assessee in the course of its business.
2.2. The Ld. Counsel for the Assessee, at the very outset, submitted that this issue earlier arose in AY 1997-98. The learned CIT (A) has granted Depreciation @ 20%. However, on appeal to the Tribunal, the the depreciation was granted to the ssessee @ 40%. He placed on record a copy or the Tribunal’s Order in AY 1997-98 in ITA No. 180/Mum/2002.
2.3. We find that the learned CIT (A) has granted depreciation to the assessee @ 20% by following the Order of the learned CIT (A) in AY 1997-98. The order of the learned CIT (A) in AY 1997-98 has been challenged before the Tribunal by the Asessee in ITA No. 180/Mum/2002 and the Tribunal allowed the Depreciation to the assessee @ 40% by following the decision in the case of DOT v. Telco Dealers Leasing & Finance Co. Ltd. In ITA No. 413/Mum/1996 for the AY 1992-93. Thus, in a way the issue is squarely covered in favour of the assessee by the decision of the Tribunal in assessee’s own case in AY 1997-98. However, at the time of hearing the Ld. Departmental Representative on the strength of the Hon’ble Supreme Court decision In the case of Asea Brown Boveri Limited v. Industrial Finance Corporation of India 254 Taxman 512 has tried to persuade us to take a different opinion. He pointed out that the lessee be treated as owner of the asset in case of finance lease and thus, the lessee would tie entitled to deprecation. He further submitted that even if the AO has granted depreciation to the assessee @ 20%, though wrongly, then such wrong should not be perpetuated by enhancing the rate to 40% on the principle of consistency. According to the Ld. Departmental Representative, ITAT cannot re-do the AO’s order and withdraw the depreciation because that has been granted by the AO himself. If depreciation Is not admissible to the assessee at all on the base of the Hon’ble Supreme Court judgment (supra) then at least 20% more on the basis of earlier order be not granted.
2.4. On other hand, the Ld. Counsel for the Assessee pointed out that this judgment is not applicable at all. It is given in altogether different context.
2.5. We have duty considered the rival contentions and gone through the judgment of the Hon’ble Supreme Court. The facts are quite distinguishable. The Hon’ble Supreme Court has nowhere lays down the proposition regarding grant of depreciation in that case. The facts in that case are that M/s. Asea Brown Boveri entered into a Lease & Finance Agreement with M/s. Fair Growth Financial Services Limited. According to the lease agreement, the lessee took 57 cars and deposited the security amount with the Lessor. It also paid lease rent as per the mutual agreement. The Lessor became a notified party under Sub-section (2) of Section 3 of Special Court (Trial of Offence relating to transactions and securities) Act, 1992. The lessee had paid almost total cost of the cars except nominal amount. However, the Special Court considered the finance lease agreement between the lessee and the Lessor as simple lease agreement and directed the lessee to hand over the cars to the custodian. In that context, the Hon’ble Supreme Court considered this issue and upheld the claim of the lessee that according to the mutual agreement it has already paid the price of the cars and to be allowed to continue with the possession of the cars as owner. In that context the Hon’ble Supreme Court has dealt with the issue. It nowhere considered the issue with the angle of the depreciation and the relationship of the lessee and the Lessor. It is settled proposition that the observations made in judgment are required to be read in the context in which they are made. It is not permissible to read them in isolation or out of context. A story sentence cannot be allowed to be be put into service to try a meaning which was never meant by the curt in the judgment. The dispute before the Hon’ble Supreme Court was about the facts of the ownership of the cars and in that context the Hon’ble Court has set aside the order of the Special Court. The Hon’ble Supreme Court has nowhere held that in all the cases of lease, the lessee would be treated as owner and impliedly could be entitled for depreciation. In the present case, no such of facts are emerging out from the record and disputed by the Assessing Officer. The AO has treated the assesses as owner of the assets being Lessor. Only the rate of depredation is in dispute. Therefore, reliance placed by the Ld. Departmental Representative is misplaced and fatuous attempt to persuade us to take a different stand from the earlier year.
3. In the result, the appeal of the assessee is allowed. The AO is directed to grant depreciation @ 40%.
Order pronounced in the Open Court on 26-7-2007.