BY BENCH ORDER These cross-appeals by assessee as well as Revenue which have been heard together are being disposed of by common order for sake of convenience. 2 . Ground No. 1 arising from appeal of assessee relates to disallowance of Rs. 2 lacs being payment on account of stamp duty to registrar for increase in authorized capital while ground No. 2 relates to disallowance of Rs. 68,096 under s. 35D of IT Act, 1961 (Act). These grounds have not been pressed before us and, therefore, same are being dismissed as "not pressed". 3 . Ground No. 3 in assessee s appeal as well as ground No. 1 in Revenue s appeal relate to claim of assessee for depreciation on leased assets. As per Revenue s appeal, assessee is not entitled to depreciation on leased assets while as per assessee s appeal, learned CIT(A) should have allowed depreciation on entire cost as against 50 per cent of cost allowed by learned CIT(A). Further, CIT(A) should have allowed depreciation @ 40 per cent instead of 25 per cent. 4 . Brief facts giving rise to these appeals on this issue are these. assessee had entered into agreement with M/s Sriram Investments Ltd. (in short "SIL") under which assessee leased 97 vehicles for invoice value aggregating Rs. 3,84,20,730. On this amount, assessee claimed depreciation @ 40 per cent since, according to assessee, vehicles were ultimately used for hiring purposes. In course of assessment proceedings, AO examined terms of lease deed and found that 50 per cent of invoice value was received as security deposit and rental value payable was fixed @ 2.2 per cent per month of invoice value for lease period of 36 months. In para 7 of his order, he has mentioned broad terms of agreement which are being reproduced for benefit of this order as under : (a) agreement of 18th Aug., 1993 is master lease agreement wherein lessor (the assessee) agrees to lease to lessee (M/s Sriram Investments Ltd.) vehicles of total value of Rs. 500 lacs. As and when delivery of individual vehicles is taken, by lessee, lessor shall execute supplementary schedules and upon execution of same, lessor shall disburse amount equivalent to invoice value (cl. 1). (b) lessor shall deposit 50 per cent of invoice value as security deposit at time of executing supplementary schedule (cl. 3). (c) lease is for period of 36 months and lease rental is 2.2 per cent per month of asset value (cl. 4 and supplementary schedule). (d) lessor has right to sub-lease vehicle to any prospective person (cl. 2). (e) lessee shall bear entire risk of any loss or damage, whether partial or total, to vehicles from any cause, natural or otherwise, whatsoever. obligations of lessee shall not be affected by any loss or damage of whatsoever nature to vehicles (cl. 11). (f) lessor is totally indemnified against all and any defect in vehicle apparent at time of inspection and delivery. lessee is to take all measures to see that vehicles are immediately roadworthy on delivery (cl. 6). (g) Lessee (wrongly mentioned by AO as "lessor") is to punctually and duly pay taxes, rates, license fee, surcharges, registration charges and other outgoings payable in respect of use and operation of vehicles (cl. 8d). (h) vehicles are to be insured by lessee in name of lessor and premium are to be paid by lessee (cl. 10b). (i) In case of loss or damage to vehicles, where insurance proceeds are not adequate to meet cost of such loss or damage, shortfall shall be borne and paid by lessee. In case of surplus same shall be appropriated by lessee (cl. 10.3b). (j) Termination of agreement i.e., in following events : (i) Failure to pay lease rentals; (ii) Failure to observe conditions specified in agreement; (iii) If rights and interests of lessor in leased vehicles is jeopardised; (iv) Winding up or ceasure or substantial takeover or amalgamation of lessee s business (cl. 12.1). (k) On termination of lease period, lessor has right to repossess vehicles (cl. 12.2). (l) lessor is not supplier or dealer of vehicles and that essential function of lessor in this lease transaction is to finance vehicles selected by lessee (cl. 9a)." AO also examined Shri V. Kumar of SIL under s. 131 of Act. In statement, as per AO, it was clearly stated that assessee had authorised them to identify suitable purchasers for leased assets and consequent to sale of leased assets and remit consideration arising thereon to assessee. In letter dt. 13th Feb., 1997, it was stated by assessee that no leased assets had been sold. However, AO observed that it had not been denied that it intends to sell assets on expiry of lease. Thus, assessee, according to him, will also receive consideration for sale of leased assets i.e., its residual value on expiry of lease period. It was also observed by him that assessee has no intention to re-acquire leased assets on expiry of leased period. Thus, it was observed that sale consideration on expiry of lease along with interest earned on security deposit in period of 36 months would be sufficient to cover refund of security deposit. At p. 7 of order, AO has given certain calculations for coming to conclusion that assessee was realising return of 26.28 per cent per annum. In view of facts stated above, AO formed opinion that agreement was in nature of hire-financing instead of letting out of assets on lease. Reliance was placed on decision of Tribunal, Mumbai Benches, in case of Center for Monitoring Indian Economy vs. Dy. CIT. order is dt. 29th April, 1996. 5. show-cause notice was issued by AO to assessee to explain why agreement be not treated as hire-financing agreement. assessee, vide letter dt. 23rd July, 1996, made detailed reply distinguishing its case from case relied upon by AO. This discussion appears at pp. 8 and 10 of order. AO was not convinced with reply of assessee. He analyzed t h e basic features of real lease transaction and finance transaction. Basic feature of real lease transactions were stated as under : "(a) Asset specification is important and intention of lessor is to re- acquire for future lease; (b) Lease period is short considering economic life of asset. (c) No single lease need bear entire price of asset after considering residual value of asset leased. payment for lease of asset for lease term is "price" of its services as distinct from cost of asset. (d) There is continuous flow of services from lessor to lessee during lease period. (e) lease is cancellable and hence right of disposal does exist in lease period." On other hand, basic feature of finance transactions were stated as under : "(a) Asset specification is unimportant and there is no intention to re- acquire leased asset. (b) Lease period is broadly fixed with reference to expected economic life of asset and expected residual value. (c) Payments in single lease transaction would cover cost of asset as well as interest (at reasonable rates) and hence lease rent is appropriately speaking not price for services but repayment of cost of asset including interest thereon. (d) No services are performed by lessor in relation to leased asset during lease period. (e) lease is non-cancellable except in certain specified conditions and hence right of disposal does not exist in lease period." Considering above features, it was observed by him that nomenclature given to agreement was not relevant but it is essence which is relevant in deciding issue. According to him, essence of transaction is hire financing arrangement. In coming to this conclusion, following reasons were given by him. "(a) There is no immediate nexus between user of vehicles and business of assessee which by assessee s own admission, is financing purchase of such vehicles; (b) assessee does not have any effective control over leased vehicles to extent that it does not have right to terminate lease. (c) assessee is not in business of letting assets on hire nor have vehicles been leased in course of business of letting. assessee is merely financier of vehicles let." Proceeding further, he examined net result of transactions over period of 36 months and found that assessee was benefited by not paying any t x on lease rentals and on contrary claimed net loss of Rs. 29,25,716, as is apparent from following chart : "Asst. Lease Net Depreciation yr. Rental Figure 1994- (-) 50,88,057 1,50,44,451 95 99,56,394 1995- 1,01,43,072 93,50,511 7,92,561 96 1996- 1,01,43,072 56,10,307 45,32,769 97 1997- 50,71,536 33,61,184 17,05,353 98 (-) 29,25,716" Accordingly, AO applied decision of Hon ble Supreme Court in case of McDowell & Co. Ltd. vs. CIT (1985) 47 CTR (SC) 126 : (1995) 154 ITR 148 (SC), wherein it was held that if colourable devise has been adopted by assessee to avoid tax, then such devise has to be ignored and assessee should be taxed on real income. Proceeding further, he also examined claim of assessee regarding 4 0 per cent rate on depreciation. It was found by him that neither there is any stipulation in lease agreement that vehicles would only be used in business on running them on hire nor there is any actual physical control of assessee over manner of utilization of vehicles. In view of same, he opined that in case depreciation is allowable, it should be allowed @ 25 per cent. 6 . matter was carried in appeal before learned CIT(A), before whom it was submitted as under : "(i) That case of appellant is not that of finance lease. company had purchased and had effected registration of vehicles in its own name. (ii) company had ensured in its lease agreement that ownership and control of vehicles vested with company with idea that lessee or sub-lessee could not claim depreciation thereof. (iii) working shown by AO, to demonstrate that lease instalments were only to recoup cost of assets as finance lease were incorrect." (iv) That conclusion of AO that total effect of collection would result into loss of Rs. 29.25 lacs was also incorrect calculation since correct calculation results in overall profit of Rs. 20.11 lacs. (v) That assessee has used vehicles for purpose of leasing business and thus there is direct nexus between use of vehicles of business of assessee." learned CIT (A) agreed with submissions of assessee to extent that (i) it was owner of assets leased out and (ii) such leased assets were used for purpose of business of leasing. He also opined that case of assessee cannot be termed as case of financial lease. Consequently, assessee was entitled to depreciation. However, he was also of view that assessee is entitled to depreciation with reference to 50 per cent of cost of asset inasmuch as 50 per cent of cost of assessee was directly or indirectly made by other persons within meaning of definition of "actual cost" under s. 43(1) of Act. In coming to this conclusion, he took into consideration facts (i) that 50 per cent of cost of assets was received by assessee by way of interest-free advance, (ii) evidence recorded showed that immediately on termination of lease, assessee had sold out all vehicles, (iii) though assessee claimed to have returned advances, it was found that even return of advance was subject to recovery of Rs. 96 lacs recoverable on termination of lease. In other words, return of deposit received in advance was more of nature of book entry and necessarily carried out only after adjustment. Thus, assessee had never paid even rupee more than 50 per cent of cost of acquisition of asset. Accordingly, assessee was entitled to depreciation to extent of 50 per cent of cost of assets. 7. Regarding rate of depreciation, learned CIT(A) observed that apart from certificate given by SIL, there was no other evidence to show that vehicles were actually run on hire. Further, SIL itself did not use trucks since same has been sub-leased to other parties. Consequently, it was held that assessee was entitled to depreciation only @ 25 per cent. Aggrieved by aforesaid order of learned CIT(A), both, assessee as well as Revenue are in appeal before Tribunal. 8. Both parties have been heard at length. learned Departmental Representative has vehemently challenged finding of learned CIT(A) submitting that lease of vehicles effected by assessee was by way of financial lease and, therefore, assessee cannot be said to be owner of assets so leased in view of recent judgment of apex Court in case of Asea Brown Boveri Ltd. vs. Industrial Finance Corpn. of India (2006) 154 Taxman 512 (SC) (in short "ABB s case"). He drew our attention to features of financial lease as pointed out by apex Court in above case at p. 519 of report which are being reproduced as under : 1. "The asset is use-specific and is selected for lease specifically. Usually, lessee is allowed to select it himself. 2. risks and rewards incident to ownership are passed on to lessee. lessor only remains legal owner of asset. 3. Therefore, lessee bears risk of obsolescence. 4. lessor is interested in his rentals and not in asset. He must get his principal back along with interest. Therefore, lease is non-cancellable by either party. 5. lease period usually coincides with economic life of asset and may be broken into primary and secondary period. 6. lessor enters into transaction only as financier. He does not bear costs of repairs, maintenance or operation. 7. lessor is typically financial institution and cannot render specialized service in connection with asset. 8. lease is usually full pay out, that is, single lease repays cost of asset together with interest." Since all these features were present in lease agreement before Hon ble Supreme Court, it was held by Court that lessor could not be said to be owner of leased vehicles and consequently said lessor could not take back assets on account of non-payment of lease rental by lessee. In such cases, lessor could only recover amount due from lessee. In view of this legal position, it has been contended by learned Departmental Representative that in case of financial lease, lessor cannot be said to be owner and consequently, depreciation cannot be allowed. Proceeding further, he drew our attention to various clauses of agreement to contend that all features of financial lease are present in present case. He also relied on decision of Tribunal in case of Dy. CIT vs. Housing Development & Finance Corpn. Ltd. (2006) 99 TTJ (Mumbai) 1188 : (2006) 98 ITD 319 (Mumbai), wherein it has been held that if transaction is really financial arrangement between parties, then depreciation cannot be allowed to so-called lessor. Further reliance is placed on decision of Special Bench in case of Mid East Portfolio Management Ltd. vs. Dy. CIT (2003) 81 TTJ (Mumbai)(SB)37 : (2003) 87 ITD 537 (Mumbai)(SB). 9 . On other hand, learned counsel for assessee has strongly relied on order of learned CIT(A) to extent it has held that assessee is owner of asset and used same for purpose of business. It is submitted by him that vehicles were purchased by assessee and same were also registered in name of assessee. He also pointed out that invoices were raised by sellers in name of assessee and payments were made by assessee. These facts are not in dispute and, therefore, it cannot be contended by Revenue that assessee was not owner of vehicles. He also submitted that lessees have not claimed any depreciation but had claimed deduction in respect of lease rentals. certificate from lessee i.e. Shri Ram Investment Ltd., is already on record. He also pointed out that lessee in its statement under s. 131 of Act has submitted that transaction was that of lease. Proceeding further, it has been submitted that judgment of Hon ble Supreme Court in case of McDowell & Co. (supra) was not applicable to facts of case as there was no colourable device. On other hand, it has been submitted that tax avoidance through bona fide transactions is permissible in law in view of later judgment of Hon ble Supreme Court in case of CWT vs. Arvind Narottam, (1988) 72 CTR (SC) 94 : (1988) 173 ITR 479 (SC). Proceeding further, it has been submitted by him that decision of Special Bench cannot be applied to facts of present case. He pointed out distinction between facts of both cases. He also submitted that assessee has paid lease tax in respect of lease effected by assessee. If transaction is lease by virtue of one enactment of State Government it cannot be said that it is not lease for income-tax purpose. He also distinguished case of Tribunal in case of HDFC by pointing out different facts. Regarding Supreme Court judgment in case of ABB s case, (supra) it has been submitted that said judgment was not rendered under IT Act. That judgment was rendered in different context i.e. in light of Trial of Offences Relating to Transactions in Securities Act, 1992 (TORT Act). Court was not concerned with issue regarding allowability of depreciation under s. 32 of Act. Hence that decision cannot be applied to present case. Lastly, he relied on CBDT Circular No. 2, dt. 9th Feb., 2001 [(2001) 165 CTR (St) 25] which classifies that depreciation cannot be allowed in respect of such lease. 10. Rival submissions of parties have been considered carefully. question for our consideration is whether assessee is entitled to depreciation under s. 32 of Act. There is no dispute to legal position that ownership of asset is condition precedent for allowing depreciation under s. 32. In case of CIT vs. Shaan Finance (P) Ltd. (1998) 146 CTR (SC) 110 : (1998) 231 ITR 308 (SC), Hon ble Supreme Court had held that where assessee is engaged in business of leasing, then lessor is entitled to depreciation/investment allowance. In that case, disallowance was made by tax authorities on ground that lessor could not be said to have used asset for purpose of manufacturing since it was lessee who used asset in process of manufacture. Hon ble Supreme Court held that since assessee was engaged in business of leasing, then asset could be said to be used by assessee for purpose of business and no adverse inference could be drawn merely because asset was used by lessee in process of manufacture. On basis of this judgment, depreciation/investment allowance is being allowed by various High Courts and Tribunal to lessor where assessee is found to be engaged in business of leasing. 11. However, sea change has taken place by delivery of judgment by Hon ble Supreme Court in case of ABB Ltd. vs. Industrial Finance Corpn. of India (supra) wherein it has been held that in case of finance lease, it is lessee who, for all practical purposes, owner of assets and not lessor. This legal position would have impact on question posed before us. Therefore, it would be appropriate to go through facts of that case and legal findings and scope of finance lease discussed in that order. 12. In case of ABB Ltd. (supra), appellant company took 56 cars on lease from Fair Growth Financial Services Ltd. (Fair Growth), for which, appellant deposited total security of Rs. 20,97,447 with lessor and total rent payable by appellant for 5 years period amounted to Rs. 85,35,379. total purchase price of these cars was Rs. 84,80,664. As per terms of lease finance agreement, appellant company was required to pay 25 per cent of purchase price of cars as security deposit carrying interest @ 5 per cent per annum. It is in pursuance of terms of this agreement that assessee had to deposit Rs. 20,97,447 as mentioned above and against balance amount, assessee was required to pay Rs. 85,35,379 as lease rental during period of 5 years. Fair Growth became notified party under sub-s. 2 of s. 3 of Special Court (TORT in Securities) Act, 1992, due to certain illegal transactions, and Industrial Finance Corp. of India (IFCI) became custodian of assets belonging to Fair Growth. appellant company continued to make payment to IFCI in place of Fair Growth as per lease finance agreement. amount of Rs. 30,96,948 was paid by appellant to Fair Growth till December, 1992 while amount of Rs. 44,61,273 was paid to t h e custodian, IFCI. appellant made communication to custodian clarifying that appellant would be entitled under agreement to amounts on account of security deposit and interest accrued thereon at time of buyback of purchase of leased assets. Accordingly, it forwarded cheque of Rs. 17,800 in favour and final settlement of dues under lease agreement. Special Court under s. 10 of Special Court (TORT in Securities) Act, 1992, passed order dt. 28th July, 1998 to handover possession of all 2 6 cars to custodian within one week from date of order since appellant had failed to make payment as per lease agreement. It appears from para 5 of judgment of Hon ble Supreme Court that assessee had taken plea before Special Court that it was case of lease finance but said plea had been rejected by Special Court on ground that in pleadings assessee had termed agreement as "lease agreement". matter was carried in appeal before Hon ble Supreme Court. 13. Hon ble Supreme Court posed question for adjudication as to whether agreement between parties was finance lease or not. Hon ble Supreme Court referred to; (i) Following dictionary meaning of "lease finance" according to Accounting and Finance by R. Brockington (Pitman Publishing, Universal Book Trader, 1996, at p. 136) : "A finance lease is one where lessee uses asset for substantially whole of its useful life and lease payments are calculated to cover full cost together with interest charges. It is thus disguised way of purchasing asset with help of loan. SSAP 23 required that assets held under finance lease be treated on balance sheet in same way, as if they had been purchased and loan had been taken out to enable this." (Emphasis, italicised in print, supplied) (ii) Following dictionary meaning of "lease finance" in Lease Financing & Hire Purchase by Dr. J.C. Verma (4th Edn., 1999 at p. 33) : "Financial lease is longer-term lease on fixed assets, it may not be cancelled by either party. It is source of long-term funds and serves as alternative of long-term debt financing. In financial lease, leasing company buys equipment and leases it out to use of person known as lessee. It is full payout lease involving obligatory payment by lessee to lessor that exceeds purchase price of leased property and finance cost. Financial lease has been defined by International Accounting Standards Committee as lease that transfers substantially all risks and rewards incident to ownership of asset. Title may or may not eventually be transferred. Lessor is only financier and is not interested in assets. This is reason that financial lease is known as full payout lease where contract is irrevocable for primary lease period and rentals payable during which period are supposed to be adequate to recover total investment in asset made by lessor." (iii) Following dictionary meaning of "lease finance" in Lease Financing & Hire Purchase by Vinod Kothari (Second Edn., 198, at pp. 6 and 7) : "A financial lease is contract involving payment over obligatory period of specified sums sufficient in total to amortise capital outlay of lessor and give some profit. operating lease is any other type of lease that is to say, where asset is not wholly amortised during non-cancellable period, if any, of lease and where lessor does not rely for his profit on rentals in non-cancellable period." After considering aforesaid definitions of lease finance, Hon ble Supreme Court observed that following are features of financial lease. "1. asset is use-specific and is selected for lease specifically. Usually, lessee is allowed to select it himself. 2. risks and rewards incident to ownership are passed on to lessee. lessor only remains legal owner of asset. 3. Therefore, lessee bears risk of obsolescence. 4. lessor is interested in his rentals and not in asset. He must get his principal back along with interest. Therefore lease is non-cancellable by either party. 5. lease period usually coincides with economic life of asset and may be broken into primary and secondary period. 6. lessor enters into transaction only as financier. He does not bear costs of repairs, maintenance or operation. 7. lessor is typically financial institution and cannot render specialized service in connection with asset. 8. lease is usually full payout, that is, single lease repays cost of asset together with interest." Finally, their Lordships expressed their opinion at p. 520 of report as under : "10. In our opinion, financial lease is transaction current in commercial world, primary purpose whereof is financing of purchase by financier. purchase of assets or equipments or machinery is by borrower. For all practical purposes, borrower becomes owner of property inasmuch as it is borrower who chooses property to be purchased, takes delivery, enjoys use of occupation of property, bears wear and tear, maintains and operates machinery/equipment, undertakes indemnity and agrees to bear risk of loss or damage, if any. He is one who gets property insured. He remains liable for payment of taxes and other charges and indemnity. He cannot recover from lessor, any of abovementioned expenses. period of lease extends over and covers entire life of property for which is may remain useful divided either into one term or divided into two terms with clause for renewal. In either case, lease is non-cancellable." 1 4 . Perusal of above observations clearly reveals that in case of financial lease, it is lessee who becomes owner of property. In view of this judgment, depreciation cannot be allowed to lessor in case of finance lease. 1 5 . In present case, we have gone through lease agreement between assessee (lessor) and SIL (lessee). In our opinion, all features of finance lease exist in said lease agreement, as is apparent from following : (i) Clause 9(a) shows that lessor is not supplier or dealer of vehicles and that essential function of lessor in lease transaction is to finance vehicles selected by lessee from designated vehicle dealers. It is further seen that lessor has partly financed as 50 per cent of invoice price is received from lessee as deposit which is not feature of normal lease. It has also been found by CIT(A) that on expiry of lease period, vehicles have been sold to lessees and deposit amount has been adjusted against residual sale value. Thus it is clear that financial arrangement was made in guise of lease agreement. (ii) lease rentals were fixed @ 2.2 per cent of invoice value p.m. which is nothing but interest. (iii) details of leased assets along with specimen invoice appearing at pp. 58 to 62 of paper book and forming part of lease agreement shows that vehicles were purchased at instance of sub-lessee since in invoice raised by Bafna Motors Ltd., lessor is shown as assessee while lessee is shown Mr. Sukha Singh Darshan Singh, instead of SIL. It appears that SIL worked merely as conduit for obtaining lumpsum finance from assessee; (iv) Clause 5 of agreement provides that it is lessee who shall be liable to pay all taxes, cesses and charges, etc., in respect of leased vehicles. In case, same are paid by lessor, same shall be reimbursed by lessee. (v) Clause 6 of agreement provides that lessor is totally indemnified against all and any defects in vehicles apparent at time of inspection and delivery. It further provides that lessee shall take all necessary measures to ensure that vehicle is roadworthy immediately upon delivery. (vi) Clause 8 provides that during subsistence of lease, lessee shall; (a) if so required under any law, have these presents registered at lessee s cost and expenses with relevant Government authorities; (b) punctually and duly paid or cause to be paid all rates, taxes, license fees, surcharge, registration charges and other outgoings payable in respect of use and operation of vehicles; (c) insure vehicles as provided hereafter. It is provided in cl. 10 that if lessee fails to insure or keep insured vehicles, it will be open to lessor to insure vehicles and in that event lessee shall reimburse same to lessor along with 2 per cent per month interest for period of delay. In event of any loss or damage to any vehicle, insurance money received under insurance policy in respect of such loss or damage shall be utilized for carrying out repairs so as to ensure that vehicle is restored to and brought into same condition. In case, insurance proceeds are not adequate to meet such loss or damage, then shortfall will be borne by lessee. Similarly, in case of total loss, if insurance proceeds are insufficient to cover loss, then lessee shall be responsible to pay such amount to lessor. (vii) Clause 11 further provides that lessee shall bear entire risk of any loss or damage whether partial or total from any cause entirely or otherwise whatsoever. (viii) lessor is only financial institution since it does not render any specialized service in connection with leased asset. Further, it does not bear cost of repair. (ix) conduct of assessee shows that it was not interested in taking back vehicles from lessee on expiry of lease period inasmuch as it has been found that lease vehicles were ultimately sold to lessee. 16. combined reading of above terms of lease agreement clearly reveals that all features of finance lease exist in agreement between parties Therefore, respectfully following judgment of Hon ble Supreme Court in ABB s case, (supra) it is held that assessee was not owner of leased vehicles as impugned agreement was agreement of financial lease and not normal lease. Consequently, assessee is not entitled to any depreciation. 1 7 . contention of learned counsel for assessee that aforesaid judgment of Hon ble Supreme Court is distinguishable on ground that it was rendered under different enactment, cannot be accepted. What is relevant is legal position in respect of particular transaction. Therefore, in our opinion, in case of finance lease lessor cannot be treated as owner under any enactment unless expressly provided otherwise. As far as other judgments of High Court and Tribunal are concerned, same stand distinguished inasmuch as judgment of Hon ble Supreme Court in case of ABB Ltd. (supra) was either not available at time when such decisions were given or not referred to or considered by High Court or Tribunal, as case may be. judgment of Hon ble Supreme Court is binding under Art. 141 of Constitution of India and, therefore, case is to be decided in accordance with same. 18. Before parting with this issue, we may mention that arguments were raised to effect that assessee adopted colourable device in order to reduce its tax liability. These arguments are not being dealt with by us since we have proceeded on assumption that agreements between parties were legal. issue whether there was colourable device or not has become academic and therefore need not be decided. 19. It may be clarified that even after judgment of Hon ble Supreme Court in ABB s case (supra) clear distinction has to be made between normal lease and financial lease. If agreement is financial lease, then consequences would be governed by decision of Hon ble Supreme Court in ABB s case (supra) but if it is case of normal lease, then consequences would be governed by earlier judgment of Hon ble Supreme Court in case of Shaan Finance (P) Ltd. (supra). 20. It may also be mentioned that learned counsel for assessee has argued to effect that learned CIT(A) was not justified in allowing depreciation to extent of 50 per cent only. He has also argued that rate of depreciation should have been 40 per cent instead of 25 per cent allowed by learned CIT(A). Since main issue has been decided by us against assessee, it is not necessary for us to adjudicate upon these issues since such issues have become academic only. 21. In view of above discussion, order of CIT(A) is set aside on this issue and consequently disallowance of depreciation made by AO is restored. grounds raised by assessee are therefore dismissed while ground raised by Revenue is allowed. 22. Ground No.4 which is last ground in assessee s appeal as well as ground No. 2 in Revenue s appeal, relates to disallowance of loss of Rs. 2,50,55,749 on sale of non-convertible portion (Part-B) of partly convertible debentures. relevant facts have been given in detail in assessment order in paras 8 to 8.2, which are being reproduced as under : "8. Summary of debentures under buyback scheme During year under consideration, M/s Chambal Fertilizers and Chemicals Ltd., C.F.C.L) made public issue of partly convertible debentures of Rs. 200 each. issue opened on 14th April, 1993 and earliest closure was 20th April, 1993. final closure of issue was on 26th April, 1993. issue was promoted to Zuari Agro Chemicals Ltd., Goa. following were some of features of said issue : (a) issue was of 2 parts; Part-A and Part-B, each part being of value of Rs. 100. Part-A was converted into 10 equity shares of Rs. 10 at par on allotment and Part-B of Rs. 100 per debenture was to be redeemed in three equal instalments at end of 7th, 8th and 9th year, from day of allotment. (b) According to prospectus, Rs. 132 was payable by applicant as application money out of which Rs. 50 would be appropriated towards Part-A and Rs. 84 towards Part-B. (c) CFCL had finalized scheme of buyback or Part-B of debentures with J.M. Financial and Investment Consultancy Services Ltd., on behalf of UTI under which Part-B of each debenture of face value Rs. 100 and paid-up on application, to extent of Rs. 84 may be offered for sale at net price of Rs. 50 to UTI. (d) applicant may make aforesaid offer by signing declaration to this effect at appropriate place in application form and upon such act, applicant shall be deemed to have authorized official of CFCL to execute transfer deed for Part-B of debenture that may be allotted to him. (e) In case debenture holder exercises option of sale of non- convertible portion of debenture (Part-B) to UTI, amount of Rs. 50 received on such sale would be received by CFCL on behalf of debenture holder and appropriated towards allotment money due to Part-A of debenture. Hence, no further amount would be payable by applicant towards Part-A of debenture. 8.1 said issue was underwritten by underwriters and sub-under- writers. 13,22,360 debentures devolved on 110 sub-underwriters, as issue was not fully subscribed. assessee company entered into arrangement with sub-underwriters, whereby it took over responsibility of subscribing to 13,22,380 debentures for which it received consideration of Rs. 14 per debenture from sub-underwriters. It thereafter made application to CFCL for such debentures and also by signing application form at appropriate place, gave authority to CFCL to transfer Part-B of such debentures to UTI at Rs. 50 each. In respect of Part-A of said debentures, shares were duly received by assessee. 8.2 In return of income, assessee has shown loss of Rs. 2,50,55,749 on sale of Part-B of aforesaid debentures as short-term capital loss. In working out cost of debenture assessee company has taken into account sum of Rs. 14 per debenture received by it as consideration from sub-underwriters, for taking over responsibility of subscribing to devolved debentures." After examining facts of case, AO did not dispute genuineness of loss but on facts, it was held that such loss was assessable as speculation business loss instead of short-term capital loss inasmuch as assessee could not bring on record evidence to prove factum of delivery of said debentures. 23. matter was carried in appeal before learned CIT(A), before whom it was contended that actual delivery had taken place but due to certain reasons, necessary evidence could not be produced before AO. said evidence was confronted before AO by learned CIT(A) and his comments were asked for but AO did not respond. Accordingly, learned CIT(A) admitted evidence under r. 46A of IT Rules, 1962. After examining such evidence, he found that debentures were actually allotted to assessee and assessee company has subsequently transferred them to UTI. In view of same, it was held that loss could not be treated as loss from speculation business. However, he was of view that entire exercise was to acquire shares and, therefore, amount in dispute should be added to cost of shares. Aggrieved by this part of order, assessee is in appeal before Tribunal. 24. After hearing both parties, we find that similar issue arose before Tribunal, Calcutta Bench, in case of Karamchand Thapar & Bros (Coal Sales) Ltd. vs. Dy. CIT (2003) 78 TTJ (Cal) 825 : (2002) 83 ITD 171 (Cal), wherein it was held that there was no scope for considering loss incurred by assessee in acquiring and disposing of Part-B portion of partly convertible debenture under consideration to be contributing to direct cost of acquiring Part-A portion. Accordingly, it was held that loss arising on sale of Part-B portion was allowable as loss. No contrary decision has been brought before us by learned Departmental Representative. Therefore, following same, issue is decided in favour of assessee. order of learned CIT(A) is, therefore, modified and consequently AO is directed to allow loss as business loss. 2 5 . only issue which remains for our consideration relates to disallowance of Rs. 19,02,171 in respect of repairs and maintenance, arising from ground No. 3 of Revenue s appeal. This issue has been discussed by AO in para 10 at p. 28 of assessment order. After examining details, AO was of view that expenditure was capital in nature and, therefore, in view of Expln. 1 to s. 32 of Act, such expenditure is to be treated for allowing depreciation. Accordingly, claim of assessee for deduction as revenue expenditure was disallowed but depreciation thereon was allowed by AO. On appeal, claim of assessee has been allowed by learned CIT(A) by holding expenditure as revenue in nature. Aggrieved by same, Revenue is in appeal before Tribunal. 2 6 . After hearing both parties, we find that learned CIT(A) has passed sketchy order without giving any reason in support of his conclusion. He has also not discussed anything about Expln. 1 to s. 32 of Act which provides that where business of assessee is carried on in building not owned by him and any capital expenditure incurred for purpose of business on construction of any structure or do any work in/or relation to and by way of renovation or extension of or improvement to building, then provisions of s. 32 shall apply as if said structure or work is building owned by assessee. When AO had invoked such provisions, it was duty of learned CIT(A) to have adjudicated matter in light of above provisions. In view of same, we set aside order of learned CIT(A) on this issue and restore matter to his file for fresh adjudication after examining evidence on record or as may be filed by assessee before him. 27. In result, both appeals stand partly allowed. *** J.M. SHARES & STOCK BROKERS v. DEPUTY COMMISSIONER OF INCOME TAX