IMPORTANT POINT
In terms of section 245 of IT Act Tribunal can neither take back the benefit granted to the assessee by the AO nor enhance the assessment.

Judgment :-

S.H. Kapadia, J.

Leave granted.

2. This civil appeal filed by the assessee is directed against judgment and order dated 22.9.2006 in ITA No. 164/04 by the Delhi High Court. By the impugned judgment, confirming the decision of the Tribunal, the High Court has held that the appellant (assessee) is not entitled to claim depreciation under Section 32(1)(ii) of the Income-tax Act, 1961 ("1961 Act" for short) in respect of two separate transactions dated 15.2.1991 and 15.3.1991. The impugned judgment has been rendered in respect of Assessment Year 1991-92 (corresponding to the previous year ending 31.3.1991).

(A) Facts Regarding Lease dated 15.2.1991 (Transaction No. I):

3. Before coming to the facts, the following is the relationship between the parties:

-M/s Glass & Ceramic Decorators was the manufacturer of soft drink bottles.

- Assessee was the `lessor.

- M/s Coolade Beverages Pvt. Ltd. was the `lessee.

4. During the relevant assessment year, the assessee carried on the business of trading in lamination machines & binding and punching machines. In addition, it was also engaged in the leasing business. During the year in question, the assessee had bought 5,46,000 soft drink bottles from M/s Glass & Ceramic Decorators worth Rs. 19,54,953/-. The bottles were directly supplied to M/s Coolade Beverages Pvt. Ltd. ("M/s Coolade" for short) in terms of Lease dated 15.2.1991. Vide Assessment Order dated 28.3.1994, the AO found that M/s Coolade had received only 42,000 bottles out of the total of 5,46,000 bottles receivable by them from the assessee and that the remaining bottles stood received after 31.3.1991, i.e., between the period 3.4.1991 and 18.4.1991 and consequently, the AO restricted the depreciation only to 42,000 bottles and consequently disallowed the depreciation of Rs. 18,04,572/-. It may be mentioned that in Appeal the CIT(A) after formulating the "User Test" remanded the matter to the AO who on remand held that all 5,46,000 bottles stood paid for and dispatched before 31.3.1991 and, therefore, the assessee was entitled to 100% depreciation on all 5,46,000 bottles. This finding was given when the Appeal(s) was pending before the ITAT. However, till date the findings of the AO (on remand) has not been challenged. To complete the chronology of events, when the Appeal (s) came before the Tribunal, it was held that since the lease was not renewed and since the bottles were not returned on expiry the transaction in question was only a financial arrangement and not a Lease, hence, ITAT dis-allowed the depreciation claim of the assessee which finding stood confirmed by the impugned judgment, hence this Civil Appeal.

5. At this stage, it may be noted that out of the total claim for depreciation of Rs. 1,80,30,489/-(in respect of both the transactions), as claimed by the assessee, the AO disallowed depreciation of Rs. 18,04,572/- in respect of the First Transaction and depreciation of Rs. 30,17,122 under the Second Transaction. In all, she disallowed depreciation of Rs. 48,21,694/-in the first round. In other words, the AO allowed depreciation in respect of both the transactions amounting to Rs. 1,32,08,795 as against the claim of Rs. 1,80,30,489/-.

.Findings:

6. In the case of Hukumchand Mills Ltd. v. CIT reported in (1967) 63 ITR 232 this Court has held that under Section 33(4) of the Income-tax Act, 1922 (equivalent to Section 254(1) of the 1961 Act), the Tribunal was not authorized to take back the benefit granted to the assessee by the AO. The Tribunal has no power to enhance the assessment. Applying the ratio of the said judgment to the

.present case, we are of the view that, in this case, the AO had granted depreciation in respect of 42,000 bottles out of the total number of bottles (5,46,000), by reason of the impugned judgment. That benefit is sought to be taken away by the Department, which is not permissible in law. This is the infirmity in the impugned judgment of the High Court and the Tribunal.

7. There is