I.S. Verma, Judicial Member. - This appeal by the revenue is against the order of the CIT (Appeals)-VIII, Ahmedabad dated 30-1-2003 passed for assessment year 1994-95 and the Cross Objection by the assessee thereof. The revenue has taken the following grounds in its appeal:-

(1)The Ld. CIT(A) has erred in Law and on facts in deleting the depreciation of Rs. 6,26,263. The Ld. CIT(A) failed to appreciate that the claim of depreciation is on leased assets and the lease transactions are in the nature of finance leases and not operating lease.

(2)On the facts and circumstances of the case, the learned CIT(A) ought to have upheld the order of the Assessing Officer.

2. For the sake of convenience, revenue’s appeal as well as Cross Objection is disposed of by this common/consolidated order.

3. Revenue’s Appeal (ITA No. 1427/Ahd/2003):-

3.1 The brief facts of only issue involved in revenue’s appeal which relates to allowance on depreciation to the assessee on assets covered by purchase and lease-back transactions and as have been revealed from the records are that the assessee, which is a Limited Company, is in the business of leasing of assets. The return for assessment year 1994-95 was furnished on 29-11-1994 declaring a total income of Rs. 1,19,93,544 which was inclusive of lease rent received from leasing out the machinery to M/s. Salem Textiles Ltd. situated at Bangalore.

3.2 The facts resulting in receipt of lease rent form M/s. Salem Textiles Ltd., Bangalore were that M/s. Salem Textiles Bangalore was initial owner of various machineries, but since it was in need of finances, it sold the following machineries to the assessee for a price of Rs. 50,10,100 on 20-1-1994 :-

3.3 The assessee gone away the same machineries back on lease to M/s. Salem Textiles, Bangalore as per lease deed No. GLFL/94 dated 20-1-1994 for payment of total lease rent of Rs. 79,65,900 payable in 60 monthly installments of Rs. 1,32,765 which as per Assessing Officer was consisting of principal amount of Rs. 83,500 and interest of Rs. 49,265.

4. The assessee’s assessment was completed under section 143(3) of the Act on an income of Rs. 26,51,04,480. Later on, the Assessing Officer having jurisdiction over M/s. Salem Textiles Ltd., Bangalore, while completing the assessment of M/s. Salem Textiles Ltd. came to the conclusion that the sale and lease back transactions entered into by M/s. Salem Textiles Ltd. with M/s. Gujarat Lease Financing Ltd. ("GLFL" - Appellant before us) was not a genuine transaction of lease, rather was simply a case of providing finance by GLFL to M/s. Salem Textiles Ltd., and this information was passed on to the Assessing Officer having jurisdiction over GLFL (Appellant before us).

3.5 On receipt of aforesaid information, the assessments of the appellant for assessment year 1994-95 was re-opened under section 147 of the Act and, consequently, a notice under section 148 was issued on 5-7-2000 which was served on 12-7-2000.

3.6 During the course of re-assessment proceedings, the assessee fully co-operated with the revenue and furnished various details required by the Assessing Officer from time to time. However, the Assessing Officer, after taking into account various facts relating to the lease transactions entered into between the Appellant and M/s. Salem Textiles Ltd. and the findings of the Assessing Officer in the case of Salem Textiles Ltd. concluded that the transactions entered, into by the assessee by first purchasing the machinery owned by M/