100% depreciation is allowable on the sale and leaseback transaction. It cannot be said that the transaction is not genuine merely based on the fact that an assessee gets a commercial advantage because of the factoring in of a tax benefit, as held by DelHC in CIT v Cosmo Films Limited — In favour of: The assessee; ITA No 1404/2008.
The real intention of the parties in entering into the sale and leaseback agreement has to be gathered from the words in the said agreement in a tangible and in an objective manner and not upon a hypothetical assessment of the supposed motive of the assessee to avoid tax. The intention gathered from the documents on record showed that the ownership and title of the said equipment had been transferred to the assessee, and that after the said transfer, the lease was entered into and the said equipment was leased back to the HSEB. It has not at all been established on the basis of the evidence on record that the transaction was a colourable device entered into by and between the HSEB and the respondent-assessee. The fact was that the transaction was entered into by the HSEB in order to raise finances for its day-to-day needs and that the HSEB had decided to tap the system of sale and leaseback assets as a mode of raising finance at a lower cost. But this does not bind the assessee. What the intention of the HSEB was in going in for the transaction in question cannot be transposed onto the assessee.
It cannot be said that the transaction is not genuine merely because an assessee gets a commercial advantage because of the factoring in of a tax benefit. There is no finding to indicate that the transaction was not genuine. The assessee is entitled to depreciation.
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