SLP Dismissed Following Precedent Confirming Depreciation is Allowable to Lessor on Assets Given Under Lease
Issue
Whether the Special Leave Petition (SLP) filed by the Revenue should be dismissed following an earlier Supreme Court dismissal in the assessee’s own case, which confirmed that the lessor is entitled to depreciation on leased assets despite the Revenue’s claim that the transactions were purely financial.
Facts
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Profile: The assessee (Tata Motors Ltd.) entered into various lease transactions involving its corporate assets.
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Period: The dispute covers a block of assessment years from 1994-95 to 1997-98.
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Assessing Officer’s View: The Assessing Officer disallowed the depreciation claim under Section 32, alleging that the lease agreements were merely financing arrangements and not genuine operational leases.
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Tribunal & High Court Position: The Income Tax Appellate Tribunal (ITAT) and the High Court ruled in favor of the assessee. They relied on the landmark Supreme Court ruling in I.C.D.S. Ltd. v. CIT, which established that the owner/lessor of leased assets is entitled to depreciation.
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Prior Challenge: The Revenue had previously challenged the identical legal issue for other years in Commissioner of Income-tax – LTU v. Tata Motors Ltd. [2026], which the Supreme Court dismissed on the grounds of delay.
Decision
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Consistency Enforced: The Supreme Court observed that the core legal issue and the governing judgment had already been brought before it and dismissed in the connected matter of Tata Motors Ltd. [2026].
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SLP Dismissed: Adhering to the stance taken in the earlier order, the Supreme Court dismissed the Revenue’s current Special Leave Petition.
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Outcome: Decided in favor of the assessee.
Key Takeaways
Ownership Rules for Depreciation: For the purposes of Section 32, the lessor remains the legal owner of the equipment/assets in a lease transaction and is legally entitled to depreciation, provided the asset is used in the course of business (which includes leasing it out).
Precedential Continuity: The ruling reaffirms the principles settled in I.C.D.S. Ltd., establishing that the tax department cannot unilaterally recharacterize genuine lease transactions as mere financial loans to deny depreciation benefits.
Impact of Prior Dismissals: When an appeal on an identical issue involving the same assessee has already been dismissed by the apex court, subsequent SLPs on the same footprint are highly likely to face a similar dismissal to maintain judicial consistency.
SUPREME COURT OF INDIACommissioner of Income-tax (LTU)v.Sanjay Kumar and K. Vinod Chandran, JJ.SLP (CIVIL) Diary No. 23176 OF 2026MAY 4, 2026S. Dwarakanath, A.S.G., Sudarshan Lamba, AOR, Rajat Vaishnaw, Shubhranshu Padhi, Pushkar Sharma and Rajendra Singh Rana, Advs. for the Petitioner.ORDER1. Learned Additional Solicitor General appearing for the petitioner fairly states that the very same judgment, that is presently impugned, was subjected to challenge before this Court in SLP(C) Diary No. 16062/2026,titled “CIT, LTU v. Tata Motors Ltd. (SC).”, and the same was dismissed on the ground of delay on 10.04.2026.2. Following the aforestated order, the condone delay application and, in consequence, the special leave petitions are dismissed.