Depreciation on Leased Ethanol Buses cannot be Denied when Lease Income already Disclosed in P&L: ITAT Remands for Verification [Read Order]
The tribunal noted that if the income from a leased asset is earned and reported, the associated depreciation must be considered.
![Depreciation on Leased Ethanol Buses cannot be Denied when Lease Income already Disclosed in P&L: ITAT Remands for Verification [Read Order]](https://images.taxscan.in/h-upload/2025/12/20/2113432-depreciation-leased-ethanol-buses-denied-lease-income-disclosed-p-and-l-itat-remands-verification-taxscan.webp "Depreciation on Leased Ethanol Buses cannot be Denied when Lease Income already Disclosed in P&L: ITAT Remands for Verification [Read Order]")
The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) ruled that depreciation on Ethanol Green buses cannot be denied to an assessee who has already disclosed the corresponding lease income in their profit and loss account. Scania Commercial Vehicles India Private Limited (assessee) engaged in the business of dealing in heavy-duty trucks, buses, and coaches, filed a...
The Bangalore Bench of the Income Tax Appellate Tribunal (ITAT) ruled that depreciation on Ethanol Green buses cannot be denied to an assessee who has already disclosed the corresponding lease income in their profit and loss account.
Scania Commercial Vehicles India Private Limited (assessee) engaged in the business of dealing in heavy-duty trucks, buses, and coaches, filed a return showing a total loss for the assessment year 2018-19.
The assessee was awarded a contract by the Nagpur Municipal Corporation (NMC) for the operation and maintenance of Ethanol Green buses. To facilitate this, the assessee incorporated a Special Purpose Vehicle (SPV), M/s. SST Sustainable Transport Solutions Private Limited, as a wholly owned subsidiary.
The assessee supplied 58 Ethanol buses to this subsidiary under an operating lease and charged lease rent accordingly. The assessee claimed depreciation on these buses. The Assessing Officer (AO) disallowed the claim of ₹5,85,75,163.
The AO alleged the transaction lacked genuineness because the vehicles were purchased and put to use on the very last day of the year. The Dispute Resolution Panel (DRP) confirmed the disallowance without a detailed discussion of the evidence.
The counsel for the assessee clarified that as the manufacturer of the buses, the vehicles were removed from inventory and recorded as fixed assets via book entry at the end of the year. The counsel submitted evidence, including stock transfer invoices and details of 32 buses, showing the buses were put to use on various dates starting from August 2017 and that lease income was earned for that period.
Step by Step Guide of Preparing Company Balance Sheet and Profit & Loss Account Click Here
The two member bench comprising PrashantMaharishi (Vice President) and Keshav Dubey (Judicial Member) found it difficult to appreciate why depreciation should be denied when the assessee was earning and disclosing rental income from those same leased vehicles in its profit and loss account.
The bench noted that the invoices showed inventories were moved and recognized as fixed assets, and the buses were put to use on respective days. The tribunal observed that the DRP confirmed the disallowance without discussing the provided evidence.
The tribunal restored the ground to the file of the Assessing Officer with a direction to verify the actual dates the vehicles were put to use and the income offered.
Also Read:Income Tax Recovery During Pendency of ITAT Appeal Stayed: Gauhati HC Orders tribunal to Take up Interim Pleas Expeditiously [Read Order]
The tribunal instructed AO to decide on the rate of depreciation without questioning the genuineness of the transaction, given that the income was already disclosed. The Tribunal allowed this ground of appeal for statistical purposes
Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates
