ORDER 

Per Prashant M Maharishi, Accountant Member

1. This is are the two appeals for two assessment years involving common grounds, argued together by both the parties, therefore, and disposed of by this common order.

ITA number 1200/Del/2011 for assessment year 1999- 2000

2. This appeal is filed by IFCI Limited (‗the Appellant‘ ―Assessee) for assessment year 1999 -2000 against the common order of The Commissioner of Income Tax Appeals- XI, New Delhi ( Ld. CIT(A)) dated 30.12.2010 for assessment year 1999 – 2000 and 2000 – 2001.

3. Assessee has preferred following grounds of appeal:-

i. That the Commissioner of income tax (appeals) erred on facts and in law in upholding the action of the assessing officer in disallowing the deduction of ₹ 259,839,987/– claimed by the appellant on account of depreciation on plant and machinery given on lease to various parties.

ii. That the Commissioner of income tax (appeals) erred on facts and in law in not appreciating that the order passed by the assessing officer is without jurisdiction and bad in law in as much as the assessing officer have not followed the binding instructions of the honourable ITAT.

iii. That the Commissioner of income tax (appeals) erred on facts and in law in not appreciating that honourable ITAT restored back the matter to the file of the assessing officer for a limited purpose of examining whether the lease income earned by the appellant was treated as business income

iv. That the Commissioner of income tax (appeals) erred on facts and in law in not appreciating that, the assessing officer himself has treated the activity of leasing of machinery as business carried on by the appellant and rental income there from as business income. 

v. That the Commissioner of income tax (appeals) erred on facts and in law in not appreciating that ownership of the assets given on lease remains vested with the appellant during the tenancy of lease agreement and no right broke option to purchase the leased assets is given to the lease in the lease agreement.

4. The Appellant is a public limited company engaged in the business of providing financial assistance. It assists enterprises in different modes including long term, short term loans; subscribing to, underwriting shares, debentures etc.; investing in securities and also through business of leasing and hire purchase finance by acquiring to provide on lease or to provide on hire purchase all types of industrial office plant and other assets required by various businesses.

5. The Appellant had filed a return declaring loss of Rs. 582,98,69,770/- which was later revised to loss of Rs. 610,69,00,770/-. Notice was issued under Section 143(2) of the Income Tax Act, 1961, (‗The Act‘) for the assessment year (AY 1999-2000) under consideration the Appellant offered income from operations including lease rentals to tax. The leased assets, namely, plant and machinery have been shown separately in the balance sheet and depreciation thereon of INR 25,98,39,387/- had been claimed. The Assessing Officer (Ld.AO‘) passed assessment order dated 28.03.2002 under Section 143(3) of The Act assessing the income at loss of Rs. 584,33,29,556/- disallowing the depreciation on leased assets claimed by the Appellant. The Ld.AO was of the view that the transaction was a finance transaction and stating that the depreciation had been disallowed in earlier years, the depreciation of the Appellant was disallowed for AY 1999-2000.

6. On Appeal, The Ld. CIT(A) had however allowed the deduction vide order dated 12.6.2002 following the decision of the Supreme Court in Shaan Finance (P) Ltd 231 ITR 308 (SC)and the orders in earlier assessment years.

7. On appeal by the department (respondents) the Hon‘ble Income Tax Appellate Tribunal in its order dated 08.03.2006 had remanded the matter to the Ld.AO stating that the order of coordinate bench of ITAT for assessment years wherein the ITAT had decided the issue in favour of the assessee following the decision of Supreme Court in S