Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
 
 
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
 
 
 
 
Popular Search: VAT Audit :: due date for vat payment :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: list of goods taxed at 4% :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: form 3cd :: ACCOUNTING STANDARD :: VAT RATES :: TDS :: ARTICLES ON INPUT TAX CREDIT IN VAT :: TAX RATES - GOODS TAXABLE @ 4% :: Central Excise rule to resale the machines to a new company :: cpt
 
 
From the Courts »
 Ravneet Takhar Vs. Commissioner Of Income Tax Ix And Ors.
 Jaiprakash Associates Ltd. Vs. Commissioner Of Income Tax
 Formula One World Championship Limited Vs. Commissioner Of Income Tax, International Taxation-3 And Anr.
 Commissioner Of Income Tax International Taxation-3 Delhi Vs. Formula One World Championship Ltd. And Anr.
 Reliance Communications Ltd vs. DDIT (ITAT Mumbai)
  Sushila Devi vs. CIT (Delhi High Court)
 Ashok Prapann Sharma vs. CIT (Supreme Court)a
  Vatsala Shenoy vs. JCIT (Supreme Court)
  Vatsala Shenoy vs. JCIT (Supreme Court)
 M.K.Overseas Pvt. Ltd. Vs. Pr.Commissioner Of Income Tax-06
 Arshia Ahmed Qureshi Vs. Pr. Commissioner Of Income Tax-21

ICICI Ltd. ICICI Towers,BKC Bandra (E),Mumbai-400 051. Vs. Addl. CIT, Special Range-28 Aayakar Bhavan Mumbai-400 020
September, 10th 2015
                            ," "                                 
          INCOME TAX APPELLATE TRIBUNAL, MUMBAI- `D' BENCH.
                         . ,    , 
      Before S/Sh.D.Manmohan, Vice-President& Rajendra, Accountant Member
      /.ITA No.4109/Mum/2001,/Assessment Year-1996-97
        ICICI Ltd.                               Addl. CIT, Special Range-28
        ICICI Towers,BKC                   Vs.   Aayakar Bhavan
        Bandra (E),Mumbai-400 051.               Mumbai-400 020.
        PAN: AAACT 1398 K
                      / Assessee by : Ms. Aarti Vissanji (AR)
                   /Revenue by : Shri A.K. Srivastava-CIT-DR
                   / Date of Hearing                      : 19/08/2015
                  / Date of Pronouncement : 09/09/2015
                 , 1961   254(1)     
               Order u/s.254 (1) of the Income-tax Act 1961(Act)
Per Rajendra,AM       :
Challenging the order dated 28.3.2001 of the CIT(A)-VII, Mumbai the assessee has raised the
following grounds of appeal:
       [1] Being aggrieved by the order bearing No. CIT(A)-VII/JCSR -28/15/99-2000 dated
       February 6, 2001 issued by The Commissioner of Income-tax (Appeals) VII, Mumbai
       [hereinafter called the CIT(A}] issued under section 250 of the Income-tax Act, 1961
       [hereinafter called The Act] and communicated to the Appellant on April 20, 2001 the
       Appellant appeals against and on the following amongst other grounds which are without
       prejudice to each other.
       (A) Re: Disallowance of depreciation under section 37(4) for transit accommodation -
       Rs.6,64,883
       [2] On the facts and circumstances of the case and in law the CIT(A) erred in upholding the
       disallowance made by the Assessing Officer under section 37(4) of Rs.6,64,883 being
       expenditure incurred on depreciation and maintenance of guest house on the ground that the
       same has to be considered under that section.
       RE: disallowance of guest house expenses u/s.37(4) of Rs.6,64,883/-
       12. The facts, in respect of the above dispute, emerge that, as per the tax audit report, the
       expenditure incurred on depreciation and the maintenance of guest house amounted to
       Rs.6,64,883/-. As such, the Assessing Officer has disallowed the same on the basis of the
       observation made in the assessment order for earlier assessment years.
       13. I find that similar disallowance made in the past had been confirmed by me in the
       assessment year 94-95 as per the decision of the jurisdictional High Court in the case of
       Ocean Carriers Pvt. Ltd. 211 ITR 352 and also taking into account the decision in the case of
       b ........... since the facts and circumstances are identical, the disallowance of rs.6,64,883/- is,
       hereby confirmed.
       (B) Re Disallowance of Depreciation as per revised return - Rs.1,07,88,30,748
       RE: Disallowance of depreciation as per revised return ­Rs.1,07,88,30,748/-
       17.The facts of the case, in respect of the above dispute are that the Assessing Officer, found
       that as per the original return, the depreciation had been claimed at Rs.3,54,74,35,354/- .In
       course of the assessment proceedings, the appellant revised its computation of depreciation
       allowance and claimed it at Rs.4,62,62,66,102/-. It has been submitted before the Assessing
       Officer that certain additions were made by the Revenue in the preceding assessment years
       and these additions were confirmed/pending in appeal before the learned CIT(A)'s/ITAT.
       Although the additions made are still in dispute , the appellant had revised the statement on
       the basis of the addition made in the earlier years. The Assessing Officer did not accept the
       revised computation of depreciation on the ground that until and unless, the appellant
       company withdraws the appeal before the ITAT, no revisions can be allowed on this score.
       Accordingly, the revised claim of depreciation was not acceptable to the AO.
                                                                                ITA-4109/M/01-ICICI

18. Before me, it has been contended by the ld. Counsel that the AO failed to appreciate that
the depreciation claim was revised in conformity with the Written Down Value as per the
completed assessment in the previous years.
19.I find that similar point had been decided against the appellant company by the ld.
Commissioner of Income tax(Appeals) in appeal No.CIT(A)XXXIII/SR.28/97/98-99 dated
22/4/99.Similar issue had also been decided against the appellant company in the assessment
year 94-95 also. Since the facts and circumstances are identical, I decline to interfere on this
point during the year under consideration also.
[3] On the facts and circumstances of the case and in law the CIT(A) erred in not allowing
depreciation at Rs.4,62,62,66,102/- arrived at after modifying the "Opening Written Down
Value" as per depreciation allowed in earlier assessment years in accordance with completed
assessments.
(C) Re : Additions of write backs previously sought to be taxed - Rs. 76,87 ,54,375
20.I find that similar point had cropped up in the A.Y. 94-95 and also on the preceding
assessment year wherein the claim of the appellant had been rejected, keeping in view the
decision of the Bombay High Court in the case of Benett Coleman Ltd. (201 ITR 101). Since
the facts and circumstances are identical, the stand of the Revenue in making the
disallowance of Rs.76,87,54,375/- is, hereby, upheld. In other words, the contentions raised
by the ld. Counsel on this score are, hereby rejected.
[4] The CIT(A) erred in not deleting himself the additions on account of write backs
previously sought to be taxed amounting to Rs.7,91,40,337 on the ground that these amounts
written off in earlier years have been allowed by various Appellate Authorities.
[5] Without prejudice, the CIT(A) ought to have excluded the sum of Rs.16,17,97,000 as the
same had not been actually recovered during the year.
(D) Re: Disallowance of expenses incurred for earning dividend - Rs.50,29,662
21.I find that similar point of dispute had cropped up before me during the A.Y. 94-95 and as
per my order dated 14/2/2000, the disallowance made had been confirmed. Since the facts
and circumstances are identical, the disallowance of Rs.50,29,662/- on this score, is, hereby
confirmed. In other words, the contentions raised by the ld. Counsel, being devoid of merits
are hereby rejected.
[6] On the facts and circumstances of the case and in law, the CIT{A) erred in confirming
deduction under Section 80M at Rs.29,87,61,925 by adopting the figure of Rs.50,29,662 as
expenditure incurred by the Appellant for earning dividend, viz. @ 1 % of the gross dividend
income of the year.
(E) Re : Deduction under Section 36( 1 )(viii) 26.In this ground of appeal, it has been contended that the AO has erred on facts and circumstances of the case and also in law in restricting the deduction u/s. 36(1)(viii) of the Act at Rs.85,00,00,000/- being the amount appropriated in accounts. 27. I find that the similar point of dispute had cropped up in the A.Y. 94-95 and as per my order referred to above, I had sustained the stand of the Revenue following the order of my learned predecessor on this very point. As such, not interference is called for in respect of this ground of appeal. [7] The CIT(A) ought to have allowed the full deduction available at 40% of the total income, as laid down under Section 36(1)(viii), after considering the excess amounts carried by the Appellant to the Special Reserve Account in the preceding assessment years as well as the succeeding assessment years. (F) Re : Non Addition of book depreciation on assets leased during the year 28.I find that similar ground of appeal had been adjudicated in the past and had been decided against the appellant company during the A.Y. 94-95 and 95-96. Since the facts and circumstances for the year under consideration are identical, this ground of appeal merits rejection.Acordingly, this ground of appeal is dismissed. [8] On the facts and circumstances of the case and in law, the CIT(A) erred in not directing the Assessing Officer to exclude the book depreciation on assets leased during the year as tax depreciation under section 32 of the Act on them was disallowed by the Assessing Officer on the ground they were loan transactions. (G) Re: Disallowance of depreciation on assets leased to RSEB - Rs.31,50,00,000 2 ITA-4109/M/01-ICICI 29. The facts of the case, in respect of the above dispute, stand out that during the year under consideration, the appellant company had leased an asset i.e. Specialised High efficiency Boiler to Rajasthan State Electricity Board (RSEB) and had claimed depreciation to the tune of Rs.31,50,00,000/-. The Assessing Officer, as per detailed reasonings given in the assessment order for the assessment year 95-96 and for the reasons mentioned on page-7 onwards of the assessment order, has disallowed the said claim of depreciation after coming to the considered conclusion that the entire transaction was out and out finance transaction instead of genuine leasing transaction. 30. before me, it has been contended that the AO failed to appreciate the factual as well as legal position objectively and dispassionately. It has been contended by the ld. Representatives that the appellant company had genuinely entered into lease transaction and as such, the depreciation disallowed merited allowance. The ld. Representaties have also drawn my attention to a recent Circular date 9.2.2001 and has urged that the disallowance of depreciation merited deletion. 31. I have given careful and anxious consideration to the submission made by the ld. Counsel and I find that in the backdrop of the similar set of circumstances, my ld. Predecessor in appeal no.CIT(A)XVI/SR.36/34/96-97 vide order dated 26/2/97 had sustained the findings and conclusion reached by the AO for the A.Y. 93-94.It was categorically held by my ld. Predecessor in the A.y.93-94 as per order referred to above that the entire transaction rested in the realm of finance transaction. I further find that similar disallowance of depreciation had been confirmed by CIT(A) XXXIII also for the A.Y. 95-96 and even for A.Y. 94-95, similar disallowance of depreciation had been confirmed by the first appellate authority. Since the facts and circumstances are identical, I find no justification for taking a different stand during the year in question. Even the Board's circular as referred to above, will not be of much held to the appellant company in view of the detailed findings given by Assessing Officer in his assessment order and also taking into account the findings given by the first appellate authorities. It has clearly been established by the revenue as well as the first appellant authority that the entire transactions rested in the realm of finance transaction. As such, the disallowance of depreciation as referred to above, is, hereby upheld. In other words, this ground of appeal is rejected, being devoid of merits. [9] On the facts and circumstances of the case and in law, the CIT(A) erred in upholding the disallowance of depreciation claimed by the Appellant in respect of assets leased to Rajasthan State Electricity Board (RSEB) amounting to Rs.31,50,00,000. (H) Re: Disallowance of Depreciation claimed on assets leased during the year - Rs. 2,57,88,11,541 32. I find that similar point of dispute had been confirmed by the first appellate authority in all the preceding assessment years. Since the facts and circumstances are identical, this ground of appeal being devoid of merits, is, hereby, rejected. [10] The CIT(A) erred upholding the disallowance of the total depreciation on all those assets which were purchased and leased during the previous year after excluding the principle component of the lease rentals. [11] The order of the CIT(A) should be suitably modified by granting the aforesaid proper and consequential reliefs to the Appellant. [12] The Appellant craves leave and reserves its right to vary, amend, alter and/or add to the grounds of appeal and to produce such oral and documentary evidence and file such compilation of documents as may be necessary at the time of hearing of the appeal. During the course of hearing before us,the Authorised Representative(AR) of the assessee stated that assessee-company was not interested in pursuing Ground B, E and F.Hence, these three grounds stand dismissed as not pressed. Assessee-company,engaged in the business of project financing comprising of foreign currency loan,Rupee loan, leasing etc.,filed its return of income on 30.11.1996,declaring total income of Rs.5.59 crores.During the assessment proceedings,a revised working was filed on 07.10.1998,declaring a loss of Rs.1,93, 85,59,880/-.The AO completed the assessment u/s. 143(3)of the Act,on 19.03.99,determining the income of the assessee at Rs.1,93,68,46,050/-. 3 ITA-4109/M/01-ICICI 2.Ground A deals with disallowance of depreciation u/s.37(4) for the transit accommodation amounting to Rs.6,64,880/-.During the course of hearing before us,the AR fairly conceded that issue stands covered against the assessee as per the order of the Tribunal delivered for the AY 1995-96. We find that in the case of Britannia Industries Ltd.(278ITR546)the Hon'ble Supreme Court has held as under : "While the expression "premises and buildings" in sections 30 and 32 of the Income-tax Act, 1961, and the expression "residential accommodation including any accommodation in the nature of guest house" in sub-sections (3), (4) and (5) of section 37 can be similarly interpreted, a distinction has been sought to be introduced for the purpose of section 37 by specifying the nature of the building to be a guest house. The intention of the Legislature is clear and unambiguous : the intention was to exclude from deduction the expenses towards rents, repairs and also maintenance of premises/accommodation used for the purpose of a guest house of the nature indicated in sub-section (4) of section 37. If the Legislature had intended that deduction would be allowable in respect of all types of buildings/accommodation used for the purpose of the business or profession, then the Legislature would not have felt the need to amend the provisions of section 37 so as to make a definite distinction with regard to buildings used as guest houses as defined in section 37(5) and the provisions of sections 31 and 32 would have been sufficient for that purpose." Respectfully,following the above,we decide Ground A against the assessee. 3.Ground C is about additions of write backs previously sought to be taxed amounting to Rs.76.87crores.During the assessment proceedings,the AO found that the assessee had claimed deduction of write-back of bad debts of Rs.76,87,54,375/-.Before him it was stated that though the debts were written back in the books of account the recovery had not become final it was being contested in further legal proceedings, that out the of the said amount an amount of Rs.16.17 crores was never recovered the same was debited to P&L A/c. by way of write back of debts.Referring to section 41(4) of the Act it was stated that amount of Rs.16, 17,97,000/-was not includible having not actually been received.However, the AO did not accept the claim made by the assessee and held that in the earlier year identical claim was rejected and it was held that same was to be treated as an item to be taxed by the AO and/or appellate authorities.The AO held that the claim made by the assessee that the amount of Rs.16.17 crores should be excluded was also not acceptable. 3.1.Aggrieved by the order of the AO the assessee preferred an appeal before the First Appellate Authority (FAA). Before him,it was stated that the AO should have excluded a sum of Rs.16.17crores from the taxable income as the same had not been actually recovered during the year under appeal.After considering the assessment order and the submission of the assessee,the FAA held that identical issue was rejected for the year 1994-95.Referring to the decision of Machine Tool Corporation of India Ltd. (201 ITR 101), the FAA upheld the action of the AO. 3.2.Before us the AR stated that issue stands covered in favour of the assessee by the order of the Tribunal for the AY.1997-98.She referred to the judgment of United Provinces Electricity SupplyCo.(110Taxmann134).Departmental Representative(DR)left the issue to the discretion of the Bench. 3.3.We have heard the rival submissions and perused the material on record. We find that while deciding the identical issue for the AY.1987-88(ITA/8958/Bom/90,dated.16.05.2001) the Tribunal has dealt the issue as under : "We find that for the AY.1986-87 also similar issue came up before the CIT(A) and he had set aside the matter to the file of the AO with similar direction. When the matter came before the Tribunal, the Tribunal, vide its order in ITA No.1224/Bom/90, sustained the direction of the CIT(A).However, for the year under consideration,at the time of hearing before us, the learned counsel for the assessee made an additional argument that since the amount is not 4 ITA-4109/M/01-ICICI actually received by the assessee,it cannot be charged as profit u/s. 41. In support of this contention, she relied upon the decision of Hon'ble Apex Court in the case of United Provinces Electric supply Co.(supra).However, as this claim was not made before the Assessing Officer, he had not examine this aspect, i.e., whether the money is actually received by the assessee.As the matter has already been set aside by the CIT(A) back to the file of Assessing Officer, in our opinion the assessee should raise this plea before the AO . We accordingly, while upholding the setting aside of this matter back to the file of AO, direct him to examine the assessee's claim in the light of the decision of Hon'ble Apex Court in the case of United Province Electric Supply Co.(supra). He will also allow opportunity of being heard to the assessee . Respectfully following the above,we direct the AO to decide the issue following the decision of the Hon'ble Supreme Court delivered in the case of United Provinces Electricity Supply Co.(supra).Ground no.C is decided in favour of the assessee,in part. 4.Ground D deals with disallowance of expenses incurred for earning dividend amounting to Rs.50.92 lacs. During the assessment proceedings the AO found that the assessee had claimed deduction u/s. 80M amounting to Rs.50,29,66,205/- on the gross dividend which meant that the assessee had not deducted any expenses attributable to earn the dividend income. Referring to the orders of the earlier years the AO held that 1% of the gross dividend had to be considered as a fair estimate of expenses for earning such dividend. Accordingly, a disallowance of Rs.50,29,662/- was made.In the appellate proceeding, the FAA confirmed the order of the AO,following the orders for the earlier years. 4.1.Before us,the AR stated that similar issue had arisen and was decided in favour of the assessee by the Tribunal while adjudicating the appeal for AY.1995-96(115ITD25).The DR stated that the Hon'ble Court had followed the judgment of Emerald Co.Ltd.(284ITR 586), that the subsequent decisions with regard to section 14A were not available at that time,that later developments should be considered. 4.2.We find that the Tribunal has dealt the issue,while deciding the appeal for the AY.1995- 96(supra)in following manner: "18.Ground No. 9-I is against disallowance of expenses while computing deduction under section 80M at Rs. 32,70,717. 19. The Assessing Officer held that deduction under section 80M is to be allowed on net dividend income after reducing estimated expenses for earning dividend i.e. at the rate of 1 per cent of gross dividend as per past years. The CIT(A) held that proportionate management expenses to be deducted from gross dividend as per Supreme Court decision in the case of United General Trust Ltd. Thus expenses estimated at the rate of 1 per cent of gross dividend made by the Assessing Officer were upheld by the CIT(A). 20. Similar disallowances were made by the Assessing Officer for assessment years 1989-90 and 1990-91. The Tribunal while deciding the appeal for assessment years 1989-90 held that 1 per cent of the salary only be considered as expenses for earning dividend. However, while deciding the appeal for assessment year 1990-91, the Tribunal upheld the expenses estimated at 1 per cent for earning dividend. Now, it was submitted by the ld. counsel of the assessee that Bombay High Court has held that no disallowance can be made while computing the deduction under section 80M. This decision was rendered by the Bombay High Court in the case of CIT v. Emerald Co. Ltd. (2006) 284 ITR 586 . Further reliance on the decision of Bombay High Court in the case of CIT v. General Insurance Corpn. of India (No. 1) (2002) 254 ITR 203 and in the case of State Bank of Indore v. CIT (2005) 275 ITR 23 (MP). On the other hand, the ld. DR placed reliance on the orders of the authorities below. 21. After considering the submissions and perusing the material on record we find that this issue is covered by the decision of the Bombay High Court in the ease of Emerald Co. Ltd. (supra) wherein it has been held : "that the interest on the overdraft and the expenses were related to the business of trading in shares and ought to be allowed as computed income under the head "business". The said expenses could not once again be deducted from the dividend income for the limited purpose of computing 5 ITA-4109/M/01-ICICI the deduction under section 80M of the Act. There was no statutory provision requiring the Assessing Officer to deduct the same expenses under the different heads of income. Since the income by way of dividend included in the gross total income was Rs. 1,34,984 the deduction under section 80M had to be granted with reference to the said amount of Rs. 1,34,984." 22. In view of the decision of the Bombay High Court, we are of the view that no disallowance on account of expenses can be made while computing deduction under section 80M. We have seen the order of the Tribunal also in the case of the assessee itself and found that the decision of the Bombay High Court was not cited, therefore, the same could not be taken into consideration. With utmost respect and in view of the decision of the Bombay High Court, we are taking this view that no disallowance can be made under section 80M. We order accordingly." Respectfully following the above,ground D is decide in favour of the assessee.Here,we would like to mention that that the judgment of Emerald Co.Ltd.(supra)has not been reversed by any later judgment and that the later decisions dealing with disallowance to be made u/s.14A will have to be applied to that section and that we have decided the issue relating to section 80M of the Act. 5.Ground G is with respect to disallowance of depreciation on asssets leased to Rajasthan State Electricity Board(RSEB)and the amount involved is Rs.30.05 Crores.During the assessment proceedings,the AO found that the assessee had leased out a boiler costing Rs.63 crores to the RSEB during the last assessment year,it had claimed depreciation @ 100% on the boiler,that the assets were used after Sept. 1994, the depreciation had been claimed at Rs.31.50crores only,that the balance depreciation was claimed for the year under appeal. Referring to the order of the preceding AY the AO disallowed the depreciation of Rs.31,50, 00,000/- for the year under consideration also. An appeal filed by the assessee ,before FAA in that regard was rejected. 5.1.Before us, the AR stated that issue stands covered by the order of the Tribunal delivered in its own case for the AY.1995-96(115 ITD 25).The DR fairly conceded that the issue is covered in favour of the assessee by the above mentioned order of the Tribunal.We would like to reproduce the relevant portion of the order dealing with the assets leased to RSEB and same reads as under : "27. The remaining grounds i.e. ground Nos. 13M and 14N, which relates to disallowance of depreciation on sale and lease back of assets (SLB) to Gujarat Electricity Board (GEB) and Rajasthan State Electricity Board (RSEB) and on other assets leased during the year under consideration respectively. 28. Since both these grounds are inter-linked, therefore, for the sake of convenience, they are disposed of together. 29. Briefly stated facts of the case are that during the course of assessment proceeding, the Assessing Officer noticed that the assessee has claimed depreciation of Rs. 2,78,46,90,877 by filing return of income. In the revised statement, depreciation claimed was at Rs. 2,78,99,16,523. The reason for revising the depreciation claim was given by the assessee that certain additions were made in assessment year 1993-94. Thus, these additions were confirmed by the CIT(A). Although the additions still being disputed before the Tribunal, it has revised the statement on the basis of addition made in the earlier years. This contention of the assessee was not accepted by the Assessing Officer. Therefore, depreciation claimed in the original return was only taken into consideration by the Assessing Officer for the purpose of allowability of the same. The Assessing Officer further noted that in earlier year, the assessee has claimed depreciation on boiler plant auxiliaries worth Rs. 175 crores purchased from GEB and, same were leased back to GEB. The Assessing Officer further noticed that similarly the assessee has purchased the assets from RSEB in earlier year i.e. assessment year 1994-95 and they were leased back to RSEB. The case was examined in earlier year in detail and the claim of the assessee of 100 per cent depreciation was negated by holding that the transactions were of loan transaction. The Assessing Officer further noticed that in similar manner, the claim of the assessee was negated for assessment year 1993-94 also. In view of the past history, the Assessing Officer disallowed the depreciation claim of 100 per 6 ITA-4109/M/01-ICICI cent on the assets purchased from two Boards i.e. GEB and RSEB. Since the claim of the assessee was disallowed by the Assessing Officer on account of assets leased out to these Electricity Boards were excluded from the total income of the assessee because the Assessing Officer has treated the transaction as loan transaction and interest component on these transactions was taxed only by the Assessing Officer. The total depreciation disallowed on account of allegedly leased to GEB and RSEB was at Rs. 106.50 crores. The CIT(A) upheld the order of the Assessing Officer on the ground that sale and leased back transaction with GEB and RSEB are in fact loan transactions. By further observing that the assessee-company was not an owner of the assets and hence it was not entitled to depreciation, the order of the Assessing Officer denying depreciation at Rs. 106.50 crores was upheld. Thereafter, the CIT(A) examined the issue in regard to the remaining claim of depreciation i.e. on other items leased out during the year under consideration. After considering the details and submissions, the CIT(A) found that the assessee is not entitled to any depreciation under section 32 as the assets are not owned by it but was for the purpose of security against loan given to parties in the course of financing transactions. Accordingly, the Assessing Officer was directed to disallow the claim of depreciation on other items claimed during the year under consideration. XXXXXXXX 31. We have heard rival submissions and considering them carefully. We have also perused all the relevant material on which our attention were drawn by the respective parties along with various case laws relied upon. 32. The ld. Departmental representative has strongly stated that the issue has already been decided by the Special Bench in which the assessee was one of the intervener. The Special Bench in case of Mid-East Portfolio Management Ltd. (supra) has held that the transactions of lease buy-back were not genuine and the ratio of the decision in case of McDowell & Co. Ltd. (supra) is applicable. We find that the decision of the Special Bench in case of Mid-East Portfolio Management Ltd. (supra) have been considered by Hon';ble Rajasthan High Court in case of Rajasthan State Electricity Board (supra) and held that the transaction entered into between RSEB and ICICI (the assessee) are genuine. The lease rent paid by RSEB was allowed as deduction by the Hon';ble Rajasthan High Court. In that case Assessing Officer held that the sale of lease back transaction were sham in the light of the McDowell & Co. Ltd.';s case (supra). The CIT(A) upheld the decision of the Assessing Officer. However, Tribunal allowed the appeal of the RSEB. The Hon';ble High Court observed that the transaction of the sale took place between the parties as Arm';s length. The Hon';ble High Court has also observed that Explanation 4A to the section 43(1) which was introduced by the Legislature with effect from 1-10-1996 in order to curb the claim of higher depreciation in cases where the assets had been sold and acquired by the assessee by way of hire, lease or otherwise. The Hon';ble Rajasthan High Court has taken into consideration the decision of the Hon';ble Karnataka High Court in case of Avasarala Automation Ltd. (supra) relied upon by the ld. DR. The decision of the Special Bench in case of Tej International (P.) Ltd. v. Dy. CIT (2000) 69 TTJ (Delhi) 650 was also taken into consideration by the Hon';ble Rajasthan High Court wherein it has been observed that "once the authority higher than the Tribunal has expressed an opinion on the issue before the Tribunal, it is not permissible for it to rely upon the contrary decision by the Tribunal included by a Special Bench. The fact that the judgment was rendered by High Court other than the jurisdictional High Court does not alter the position". 32.1 Therefore, now the circumstances has been changed as the decision of the Special Bench in case of Mid-East Portfolio Management Ltd. (supra) has already been distinguished and considered by the Hon';ble High Court, therefore, we are not inclined to consider that decision at this point of time. 32.2 In case of CIT v. George Williamson (Assam) Ltd. (2004) 265 ITR 626, it has been held by the Hon';ble Guwahati High Court that actual delivery does not mean physical possession of the assets. The symbolic delivery has taken place as per the agreement. It is a valid delivery/sale as per that the definition of the delivery of goods in section 33 of Sale of Goods Act, 1930. After observing these observations, the Hon';ble High Court has held that the 7 ITA-4109/M/01-ICICI assessee';s Board and lessor with various companies had entered into a genuine agreement. Accordingly, the claim of the assessee was allowed by the Hon';ble High Court. 32.3 The ld. counsel has rightly placed reliance on Explanation 4A(2) section 43(1) of the Act, Board circular No. 762 dated 18-2-1998 reported in 230 ITR 12, 31 ST that this Explanation was introduced in order to curb the higher claim of depreciation by the lessor. In order to curb such transaction, an amendment had been made to deal with a case where the assets had been sold and acquired by any assessee by way of hire, lease or otherwise. In such a case the actual cost for the purpose of deduction of depreciation allowance shall be taken to the written down value at the time of transaction of the assets in the hands of the seller but subsequently acquired the assets by the way of hire, lease or otherwise. The Explanation 4A section 43(1) support the case of the assessee. The Legislature is well aware of such type of transaction and to curb the higher depreciation, this Explanation was introduced to section 43(1) with effect from 1-10-1996, therefore, it cannot be said in any way that the sale of lease back transactions are not genuine transactions. 32.4 The Hon';ble Orissa High Court in case of Industrial Development Corpn. of Orissa Ltd. v. CIT (2004) 268 ITR 130has allowed depreciation under section 32 of the Act on account of purchase and lease back of assets. While allowing the claim of depreciation under section 32 the Hon';ble High Court has observed that there was no evidence which suggested that the transactions were not genuine. In that case also the lessor entered into a purchase-cum lease agreement with Orissa State Electricity Board for generation, distribution and supply of Electricity and there was no finding, evidence or material that the findings of the Tribunal was based only on conjecture, suspicion and surmises and was otherwise perverse. Accordingly the transaction of sale and lease back were held as genuine and depreciation was allowed. The decision of the Hon';ble Orissa High Court has been further fortified by the Hon';ble Guwahati High Court in case of George Williamson (Assam) Ltd. (supra). In the said judgment, the decision of the Hon';ble High Court, in case of Azadi Bachao Andolan (supra) by which the decision of the Hon';ble Madras High Court in case of M.V. Valiappan v. ITO (1988) 170 ITR 238was approved. 32.5 In case of M.V. Valiappan (supra) the Hon';ble Madras High Court had held that the decision in case of McDowell & Co. Ltd. (supra) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored or with every transaction or arrangement, which is perfectly permissible under law, which has the effect of reducing the tax burden or the assessee must be looked upon with disfavour. In view of the aforesaid legal principle laid down by the Hon';ble Supreme Court, it is clear that the principle laid down by the IRC v. Duke of Westminster (1936) AC 1 (HL) are still applicable in this country and it is open to assessee to arrange their affairs in such a manner that it would not attract the tax liability, if it cannot be managed within the permissible liability of law. As stated above, in this decision the decision in case of McDowell & Co. Ltd. (supra) have considered. Thereafter in case of Azadi Bachao Andolan (supra) the Hon';ble Supreme Court has approved the decision of the Madras High Court. Therefore, with utmost respect regarding the decision of the McDowell & Co. Ltd.';s case (supra), we are of the considered view that in each and every case it cannot be said that the transactions are malafidely and are not genuine, therefore, the depreciation should not be allowed to the assessee. In the present case the transactions were entered into with Electricity Boards and these Boards are Government bodies, therefore, there cannot be any scope for collusion. 32.6 The Hon';ble Calcutta High Court in case of Competent Authority v. Smt. Bani Roy Chowdhury (1981) 131 ITR 578has held that : "where the transferor or transferee is the Government or a statutory body, there cannot be any scope for such collusion between the parties. The untrue statement about the agreed consideration is made only for the purpose of the evasion of tax. When the Government or statutory body is a party to the transfer, the question of evasion of tax does not arise. If the presumption under clause (b) of section 269C(2) is applied, it will mean that the untrue statement regarding the agreed consideration is made also at the instance of the Government or the statutory body which is absurd." 32.7 In case of S.B.I. Home Finance Ltd. v. CIT (2006) 280 ITR 6 the Hon';ble Calcutta High Court has held that the transactions were genuine. In this case the Finance Company had 8 ITA-4109/M/01-ICICI entered into lease agreement, which was not accepted by the Departmental Authority as genuine transaction and the claim of the depreciation was negative. The Hon';ble High Court has held that even though the premises of the lease given to 3rd party an option to purchase the property the right to such option does not affect the ownership of lessor and the lessor was, accordingly, entitled to depreciation. 32.8 We have also seen the decision of the Bombay High Court in case of Developmental Credit Bank Ltd. (supra) wherein, the Hon';ble Bombay High Court after examining the clauses of the lease agreement had come to the conclusion that the lessor bank and purchased the machinery as owner of the asset and was leased to the lessee based on terms and conditions which was to be returned to the lessor bank on the expiry of the lease. The lessee do not have any ownership rights in respect of the lease equipments and the Hon';ble Bombay High Court has held that the lessor is the owner and, therefore, is entitled for depreciation. Though, this decision of the Hon';ble Bombay High Court was taken into consideration by the Special Bench in case of Mid-East Portfolio Management Ltd. (supra) and after observing that the facts before the Hon';ble Bombay High Court were that in that case the transaction itself was not doubted but in case of Mid-East Portfolio Management Ltd. (supra) the genuineness of the transaction itself was challenged by the department. With all respect with the observations of the Special Bench in case of Mid-East Portfolio Management Ltd. (supra), we find that this is the stand of the department that the transactions are not genuine but the assessee is objecting from the day one that all the transactions were genuine as this is regular business of the assessee for last so many years and department has itself accepted the transaction as genuine in past and had allowed the depreciation claimed by the assessee. 32.9 Without bringing any material on record regarding a specific item that the transaction is not genuine, in our considered view formation of a general opinion at the end of Assessing Officer and again at the end of the ld. CIT(A) that the transactions are not genuine either on the facts of the present case or in the eyes of the law, in our considered view that the formation of general opinion cannot be approved. 32.10 The ld. counsel of the assessee has invited our attention on some of the clauses of the agreements, which were similar to the clause of the agreement before the Hon';ble Bombay High Court in case of Developmental Credit Bank Ltd. (supra). We have seen these clauses and found that these are similar clauses in case of Developmental Credit Bank Ltd. (supra). Therefore, we are of the considered view that both the lower authorities were not justified in rejecting these agreements and holding that there was colourable device to claim higher depreciation.
33. We have also taken into consideration various decisions of the Tribunal i.e. in case of West Coast Paper Mill Ltd. v. Jt. CIT [IT Appeal No. 2154 (B) of 1999 (Mum.)], in case of Invest Well Publishers (P.) Ltd. (supra), and in case of Investment Trust of India Ltd. (supra) and found that the ratio of these decisions are squarely applicable on the present case. In these cases also the depreciation on Sale of Lease Back (SLB) transaction were denied and after taking into consideration the various cases including the Special Bench in case of Mid- East Portfolio Management Ltd. (supra), the various Benches of the Tribunal has taken a view that the transactions were genuine and the respective assessees were entitled for depreciation. 33.1 We have also seen the Board Instruction No. 1978, dated 31-12-1999 issued by CBDT suggesting guidelines for investigation in the case of finance lease agreement. These instructions issued by the Board show that SLB transaction as such are not to be disapproved but are only to be regulated by the assessing authority. We have also seen circular No. 2 of 2001 issued on 9-2-2001 which states that the accounting standards on lease issued by the Institute of the Chartered Accountants of India, which required the lessee to capitalize the assets in case of financial lease will have no implication on the allowance of the depreciation on assets. From the instructions of Board and from the Circular issued by Board, it is clear that nowhere it is suggested that lease back transactions are doubtful transactions or depreciation is not allowable, however, it has been suggested to the departmental authority that they should be regulated. The regulated word does not mean that assessee is not entitled for depreciation. 9 ITA-4109/M/01-ICICI 34. We have also taken into consideration the decision in case of Dy. CIT v. Housing Development and Finance Corpn. Ltd. (2006) 98 ITD 319 (Mum.) on which the reliance was placed by ld. DR. The Tribunal has held that the lease agreement between the parties was financing arrangements, which has been given the colour of lease transaction by adopting a device. This decision of the Tribunal has been considered in case of Invest Well Publishers Private Ltd. (supra) wherein, the depreciation claimed by assessee was allowed on similar transactions. We further noted that in case of Housing Development & Finance Corpn. (supra) the assessee was not in the business of leasing whereas, the present assessee carrying on business of leasing since 1983 and the claim of the assessee had been allowed up to the assessment year 1992-93, therefore, with utmost respect, we are not inclined to follow the decision in case of Housing Development & Finance Corporation (supra) but inclined to follow the decision in case of Invest Well Publisher (P.) Ltd. (supra), whereby the decision in case of H.D.F.C. (supra) has been considered. 35. In a recent decision in case of Dy. CIT v. Global Tele System Ltd. [IT Appeal No. 1085 (Mum.) of 1998 vide order dated 30-11-2006] has allowed the claim of the assessee by dismissing the appeal of the Department. In that case also the assessee claimed depreciation of Rs. 3.42 crores on Surface Banking Oven. These assets were sold by Tata Engineering and Locomotives Company to M/s. Classic Finance Services Enterprises for a consideration of Rs. 3.42 crore. M/s. Classic Finance Services made full payment of Rs. 3.42 crores to M/s. Telco and sold the same assets to M/s. Global Tele System under Hire & Purchase agreement dated 20-6-1993. M/s. Global Tele System gave assets on lease to Telco under an agreement dated 27-9-1993. The assessee claimed depreciation at the rate of 100 per cent, however, Assessing Officer denied the claim of depreciation by holding that all these transactions are colourable to reduce the tax burden. The CIT(A) allowed the claim of the assessee. On further appeal, the Tribunal discussing the issue at great length and after considering the decision of the Mid-East Portfolio Management Ltd.';s case (supra) and the decision of the Chennai Bench in Investment Trust of India Ltd.';s case (supra) whereby the decision of the Mid-East Portfolio Management Ltd.';s case (supra) was considered and distinguished, allowed claim of the assessee. Other cases were also taken into consideration along with the decision of the Hon';ble Rajasthan High Court in case of Rajasthan Electricity Board (supra) and the decision of Sharyans Resources Ltd. v. Jt. CIT (2002) 83 ITD 340(Mum.) and in case of Dy. CIT v. Sony Capital Market Ltd. (sic) and also the decision of the Jodhpur Bench in case of Shree Rajasthan Syntex Ltd. v. Asstt. CIT (2005) 93 ITD 78then allowed the claim of the assessee. 36. We have also taken into consideration the decision of the CIT(A) and found that the ld. CIT(A) has gone on the basis of general presumption that the assets were leased out to the bank just to secure the amount given on loan otherwise there was no occasion to sale and lease back transaction with the bank. The CIT(A) has considered various aspects and confirmed the findings of the Assessing Officer that the transactions were non-genuine as they were colourable just to reduce the tax burden by claiming higher depreciation. The CIT(A) has not taken into consideration the aspect that the assessee is in regular leasing business and about 7000 transactions had been entered into by the assessee with various parties for sale and lease back. The assessee who is a banking corporation was maintaining all the records in regard to each and every item, proper Profit & Loss A/c is maintained. All the details were furnished and not a single was detected by the Assessing Officer that these are genuine or are only paper transactions. 36.1 The lease rental is received regularly and has been shown in the Profit & Loss A/c. The other parties who are paying lease rentals to the assessee have shown lease rental paid to the assessee. The department has not brought a single case on record that the parties who had paid lease rental has not shown/claimed the deduction on account of lease rental but has claimed deduction of interest paid to assessee bank. In one case i.e. in the case of R.S.E.B. (supra) the lease rental paid was claimed as deduction. However, department treated this payment as interest on lease. The Jaipur Bench of the Tribunal allowed the claim of RSEB. The High Court has confirmed the view of the Tribunal in R.S.E.B.';s case (supra). Assets are shown in the block of assets. Whenever these assets were taken back they were shown as taken back and whenever these assets were sold they were shown as sold. Insurance cover in 10 ITA-4109/M/01-ICICI respect of the items involved in these transactions is in the name of assessee. Any liability on account of insurance premium or on account of theft, damage etc. is on account of assessee. Therefore, merely on suspicion or conjectures, doubting that the transactions are entered into for claiming higher depreciation, in our considered view were not justified either at the end of the Assessing Officer or at the end of ld. CIT(A), who enhanced the disallowance on the entire transactions entered into in the year under consideration. In view of the above facts and the circumstances, we set aside the orders of the authorities below and direct the Assessing Officer to allow the claim of depreciation on all items claimed by the assessee. We order accordingly." Respectfully following the above,we decide ground G in favour of the assessee and direct the AO to allow depreciation on the asset leased out to RESB during last AY. 6.Last ground of appeal is about disallowance of depreciation claimed on assets leased during the year under appeal,amounting to Rs.2,57,88,11,541/-.During the assessment proceedings, the AO found that the assessee had given distribution transformers amounting to Rs.300 crores on 15th Sept.RSEB and had claimed depreciation @ 25%, that it had purchased assets from third parties in certain cases and has leased them, that in other cases assets had been purchased and leased back to same parties,that it had claimed total depreciation Rs.4,62,62, 66,102/-,that the assessee had bifurcated the assets under two heads namely own assets and the leased assets, that the written down value of the leased assets was shown at Rs.395.42 crores.On 12.2.1999,the AO issued a show cause notice to the assessee to furnish details of assets leased out during the year under appeal and depreciation claimed thereon and also to explain as to why the depreciation should not be disallowed by treating the leased transactions as finance transactions.He also directed the assessee to furnish the details of capital component and rental component comprised in lease rentals credited to the P&L Account.After considering the submission of the assessee,dt.5.3.99,the AO observed that the assessee had entered into 181 lease transactions of new equipments of the value of Rs.189.30 crores and 16 transaction of value of 340.74 crores for sale and lease back of used/old equipments respectively,that depreciation in respect of new equipment was claimed at Rs.146.29 crores,that rent in respect of the leased transactions amounted to Rs.16.33 crores,that depreciation on used/old assets was claimed at Rs.91.68 crores, that the rent for the used/old assets was credited at Rs.24.31 crores, that the total equipment/assets given on lease were of Rs.536.64 crores, that only 8% assets related to used/old equipments, that it had claimed depreciation to the extent of 39% with regard to such assets.referring to the judgment of the Bombay Tribunal delivered in the case of C.M.I.E (ITA 3820/B/90 dt.29.4. 96)held that transaction in respect of old and new assets were to be regarded as transactions of finance only, that the portion relatable to finance charges in lease rent was only chargeable /deductible in the hands of the lessor/lessee, that assessee was not entitled to depreciation on equipments leased out during the year including the depreciation on sale and leased back transaction,that the requisite condition of ownership of assets as envisaged in s.32(1) of the Act was not satisfied.Finally,the AO worked the disallowance at Rs.2,05,30,36,918/-.The disallowance included the depreciation on sale and lease back of asset to RSEB, depreciation in respect to assets leased to Rajendra Steel and Rajendra Pipe and depreciation claimed for assets leased to GEB. 6.1.During the appellate proceedings,before the FAA the assessee contended that the AO had failed to appreciate the factual as well as legal position, that the assessee had genuinely entered into lease transactions, that the assessee was entitled for the depreciation claimed by it on all the assets whether old or new. The FAA referring to the order of his predecessor for AY.93-94held that the transactions were in the nature of financial transactions.He also referred to the order of the FAA for the year 95-96 where the claim of assessee for depreciati -on was disallowed. Finally,he dismissed the claim of the assessee. 6.2.Before us,the AR stated that the issue is covered by the decision of the Tribunal delivered 11 ITA-4109/M/01-ICICI in assessee's own case for AY 95-96 (115 ITD 25).she also referred to the case of ICICI Bank(40CCH 175),ICICI Ltd. ITA/1881 & Ors.(erstwhile SCICI Ltd.)/Mum/2000-A.Y.s.93- 94,95-96, 96-97, 97-98 ; dt. 25.7.2014, ICICI Bank Ltd. (ITA/3643-44/Mum/2001 A.Y96-97, 97-98 dt.2.5.2014, ICICI Bank Ltd. 2801/Mum/2004 A.Y.98-99 dated 5.12.2014, ICICI Bank Ltd. ITA 4499/M/2006 A.Y.2001-02 dated 31/10/14 and I.C.D.S Ltd.(350 ITR 527).Dr left the issue to the discretion of the Bench. 7.3.We have heard the rival submissions and perused the material before us.We find that while deciding the appeal for the AY.1995-96 in assessee's own case the Tribunal has deliberated upon and has decided the issue in following manner: 27. The remaining grounds i.e. ground Nos. 13M and 14N, which relates to disallowance of depreciation on sale and lease back of assets (SLB) to Gujarat Electricity Board (GEB) and Rajasthan State Electricity Board (RSEB) and on other assets leased during the year under consideration respectively. 28. Since both these grounds are inter-linked, therefore, for the sake of convenience, they are disposed of together. 29. Briefly stated facts of the case are that during the course of assessment proceeding, the Assessing Officer noticed that the assessee has claimed depreciation of Rs. 2,78,46,90,877 by filing return of income. In the revised statement, depreciation claimed was at Rs. 2,78,99,16,523. The reason for revising the depreciation claim was given by the assessee that certain additions were made in assessment year 1993-94. Thus, these additions were confirmed by the CIT(A). Although the additions still being disputed before the Tribunal, it has revised the statement on the basis of addition made in the earlier years. This contention of the assessee was not accepted by the Assessing Officer. Therefore, depreciation claimed in the original return was only taken into consideration by the Assessing Officer for the purpose of allowability of the same. The Assessing Officer further noted that in earlier year, the assessee has claimed depreciation on boiler plant auxiliaries worth Rs. 175 crores purchased from GEB and, same were leased back to GEB. The Assessing Officer further noticed that similarly the assessee has purchased the assets from RSEB in earlier year i.e. assessment year 1994-95 and they were leased back to RSEB. The case was examined in earlier year in detail and the claim of the assessee of 100 per cent depreciation was negated by holding that the transactions were of loan transaction. The Assessing Officer further noticed that in similar manner, the claim of the assessee was negated for assessment year 1993-94 also. In view of the past history, the Assessing Officer disallowed the depreciation claim of 100 per cent on the assets purchased from two Boards i.e. GEB and RSEB. Since the claim of the assessee was disallowed by the Assessing Officer on account of assets leased out to these Electricity Boards were excluded from the total income of the assessee because the Assessing Officer has treated the transaction as loan transaction and interest component on these transactions was taxed only by the Assessing Officer. The total depreciation disallowed on account of allegedly leased to GEB and RSEB was at Rs. 106.50 crores. The CIT(A) upheld the order of the Assessing Officer on the ground that sale and leased back transaction with GEB and RSEB are in fact loan transactions. By further observing that the assessee-company was not an owner of the assets and hence it was not entitled to depreciation, the order of the Assessing Officer denying depreciation at Rs. 106.50 crores was upheld. Thereafter, the CIT(A) examined the issue in regard to the remaining claim of depreciation i.e. on other items leased out during the year under consideration. After considering the details and submissions, the CIT(A) found that the assessee is not entitled to any depreciation under section 32 as the assets are not owned by it but was for the purpose of security against loan given to parties in the course of financing transactions. Accordingly, the Assessing Officer was directed to disallow the claim of depreciation on other items claimed during the year under consideration. XXXXXXXXXXXXXXX 31. We have heard rival submissions and considering them carefully. We have also perused all the relevant material on which our attention were drawn by the respective parties along with various case laws relied upon. 12 ITA-4109/M/01-ICICI 32. The ld. Departmental representative has strongly stated that the issue has already been decided by the Special Bench in which the assessee was one of the intervener. The Special Bench in case of Mid-East Portfolio Management Ltd. (supra) has held that the transactions of lease buy-back were not genuine and the ratio of the decision in case of McDowell & Co. Ltd. (supra) is applicable.We find that the decision of the Special Bench in case of Mid-East Portfolio Management Ltd. (supra) have been considered by Hon'ble Rajasthan High Court in case of Rajasthan State Electricity Board (supra) and held that the transaction entered into between RSEB and ICICI (the assessee) are genuine. The lease rent paid by RSEB was allowed as deduction by the Hon'ble Rajasthan High Court. In that case Assessing Officer held that the sale of lease back transaction were sham in the light of the McDowell & Co. Ltd.';s case (supra). The CIT(A) upheld the decision of the Assessing Officer. However, Tribunal allowed the appeal of the RSEB. The Hon'ble High Court observed that the transaction of the sale took place between the parties as Arm';s length. The Hon'ble High Court has also observed that Explanation 4A to the section 43(1) which was introduced by the Legislature with effect from 1-10-1996 in order to curb the claim of higher depreciation in cases where the assets had been sold and acquired by the assessee by way of hire, lease or otherwise. The Hon'ble Rajasthan High Court has taken into consideration the decision of the Hon'ble Karnataka High Court in case of Avasarala Automation Ltd. (supra) relied upon by the ld. DR. The decision of the Special Bench in case of Tej International (P.) Ltd. v. Dy. CIT (2000) 69 TTJ (Delhi) 650 was also taken into consideration by the Hon'ble Rajasthan High Court wherein it has been observed that "once the authority higher than the Tribunal has expressed an opinion on the issue before the Tribunal, it is not permissible for it to rely upon the contrary decision by the Tribunal included by a Special Bench. The fact that the judgment was rendered by High Court other than the jurisdictional High Court does not alter the position". 32.1 Therefore, now the circumstances has been changed as the decision of the Special Bench in case of Mid-East Portfolio Management Ltd. (supra) has already been distinguished and considered by the Hon'ble High Court, therefore, we are not inclined to consider that decision at this point of time. 32.2 In case of CIT v. George Williamson (Assam) Ltd. (2004) 265 ITR 626, it has been held by the Hon'ble Guwahati High Court that actual delivery does not mean physical possession of the assets. The symbolic delivery has taken place as per the agreement. It is a valid delivery/sale as per that the definition of the delivery of goods in section 33 of Sale of Goods Act, 1930. After observing these observations, the Hon'ble High Court has held that the assessee';s Board and lessor with various companies had entered into a genuine agreement. Accordingly, the claim of the assessee was allowed by the Hon'ble High Court. 32.3 The ld. counsel has rightly placed reliance on Explanation 4A(2) section 43(1) of the Act, Board circular No. 762 dated 18-2-1998 reported in 230 ITR 12, 31 ST that this Explanation was introduced in order to curb the higher claim of depreciation by the lessor. In order to curb such transaction, an amendment had been made to deal with a case where the assets had been sold and acquired by any assessee by way of hire, lease or otherwise. In such a case the actual cost for the purpose of deduction of depreciation allowance shall be taken to the written down value at the time of transaction of the assets in the hands of the seller but subsequently acquired the assets by the way of hire, lease or otherwise. The Explanation 4A section 43(1) support the case of the assessee. The Legislature is well aware of such type of transaction and to curb the higher depreciation, this Explanation was introduced to section 43(1) with effect from 1-10-1996, therefore, it cannot be said in any way that the sale of lease back transactions are not genuine transactions. 32.4 The Hon'ble Orissa High Court in case of Industrial Development Corpn. of Orissa Ltd. v. CIT (2004) 268 ITR 130has allowed depreciation under section 32 of the Act on account of purchase and lease back of assets. While allowing the claim of depreciation under section 32 the Hon'ble High Court has observed that there was no evidence which suggested that the transactions were not genuine. In that case also the lessor entered into a purchase-cum lease agreement with Orissa State Electricity Board for generation, distribution and supply of Electricity and there was no finding, evidence or material that the findings of the Tribunal was based only on conjecture, suspicion and surmises and was otherwise perverse. 13 ITA-4109/M/01-ICICI Accordingly the transaction of sale and lease back were held as genuine and depreciation was allowed. The decision of the Hon'ble Orissa High Court has been further fortified by the Hon'ble Guwahati High Court in case of George Williamson (Assam) Ltd. (supra). In the said judgment, the decision of the Hon'ble High Court, in case of Azadi Bachao Andolan (supra) by which the decision of the Hon'ble Madras High Court in case of M.V. Valiappan v. ITO (1988) 170 ITR 238was approved. 32.5 In case of M.V. Valiappan (supra) the Hon'ble Madras High Court had held that the decision in case of McDowell & Co. Ltd. (supra) cannot be read as laying down that every attempt at tax planning is illegitimate and must be ignored or with every transaction or arrangement, which is perfectly permissible under law, which has the effect of reducing the tax burden or the assessee must be looked upon with disfavour. In view of the aforesaid legal principle laid down by the Hon'ble Supreme Court, it is clear that the principle laid down by the IRC v. Duke of Westminster (1936) AC 1 (HL) are still applicable in this country and it is open to assessee to arrange their affairs in such a manner that it would not attract the tax liability, if it cannot be managed within the permissible liability of law. As stated above, in this decision the decision in case of McDowell & Co. Ltd. (supra) have considered. Thereafter in case of Azadi Bachao Andolan (supra) the Hon'ble Supreme Court has approved the decision of the Madras High Court. Therefore, with utmost respect regarding the decision of the McDowell & Co. Ltd.';s case (supra), we are of the considered view that in each and every case it cannot be said that the transactions are malafidely and are not genuine, therefore, the depreciation should not be allowed to the assessee. In the present case the transactions were entered into with Electricity Boards and these Boards are Government bodies, therefore, there cannot be any scope for collusion. 32.6 The Hon'ble Calcutta High Court in case of Competent Authority v. Smt. Bani Roy Chowdhury (1981) 131 ITR 578has held that : "where the transferor or transferee is the Government or a statutory body, there cannot be any scope for such collusion between the parties. The untrue statement about the agreed consideration is made only for the purpose of the evasion of tax. When the Government or statutory body is a party to the transfer, the question of evasion of tax does not arise. If the presumption under clause (b) of section 269C(2) is applied, it will mean that the untrue statement regarding the agreed consideration is made also at the instance of the Government or the statutory body which is absurd." 32.7 In case of S.B.I. Home Finance Ltd. v. CIT (2006) 280 ITR 6 the Hon'ble Calcutta High Court has held that the transactions were genuine. In this case the Finance Company had entered into lease agreement, which was not accepted by the Departmental Authority as genuine transaction and the claim of the depreciation was negative. The Hon'ble High Court has held that even though the premises of the lease given to 3rd party an option to purchase the property the right to such option does not affect the ownership of lessor and the lessor was, accordingly, entitled to depreciation. 32.8 We have also seen the decision of the Bombay High Court in case of Developmental Credit Bank Ltd. (supra) wherein, the Hon'ble Bombay High Court after examining the clauses of the lease agreement had come to the conclusion that the lessor bank and purchased the machinery as owner of the asset and was leased to the lessee based on terms and conditions which was to be returned to the lessor bank on the expiry of the lease. The lessee do not have any ownership rights in respect of the lease equipments and the Hon'ble Bombay High Court has held that the lessor is the owner and, therefore, is entitled for depreciation. Though, this decision of the Hon'ble Bombay High Court was taken into consideration by the Special Bench in case of Mid-East Portfolio Management Ltd. (supra) and after observing that the facts before the Hon'ble Bombay High Court were that in that case the transaction itself was not doubted but in case of Mid-East Portfolio Management Ltd. (supra) the genuineness of the transaction itself was challenged by the department. With all respect with the observations of the Special Bench in case of Mid-East Portfolio Management Ltd. (supra), we find that this is the stand of the department that the transactions are not genuine but the assessee is objecting from the day one that all the transactions were genuine as this is regular business of the assessee for last so many years and department has itself accepted the transaction as genuine in past and had allowed the depreciation claimed by the assessee. 14 ITA-4109/M/01-ICICI 32.9 Without bringing any material on record regarding a specific item that the transaction is not genuine, in our considered view formation of a general opinion at the end of Assessing Officer and again at the end of the ld. CIT(A) that the transactions are not genuine either on the facts of the present case or in the eyes of the law, in our considered view that the formation of general opinion cannot be approved. 32.10 The ld. counsel of the assessee has invited our attention on some of the clauses of the agreements, which were similar to the clause of the agreement before the Hon'ble Bombay High Court in case of Developmental Credit Bank Ltd. (supra). We have seen these clauses and found that these are similar clauses in case of Developmental Credit Bank Ltd. (supra). Therefore, we are of the considered view that both the lower authorities were not justified in rejecting these agreements and holding that there was colourable device to claim higher depreciation. 33. We have also taken into consideration various decisions of the Tribunal i.e. in case of West Coast Paper Mill Ltd. v. Jt. CIT [IT Appeal No. 2154 (B) of 1999 (Mum.)], in case of Invest Well Publishers (P.) Ltd. (supra), and in case of Investment Trust of India Ltd. (supra) and found that the ratio of these decisions are squarely applicable on the present case. In these cases also the depreciation on Sale of Lease Back (SLB) transaction were denied and after taking into consideration the various cases including the Special Bench in case of Mid- East Portfolio Management Ltd. (supra), the various Benches of the Tribunal has taken a view that the transactions were genuine and the respective assessees were entitled for depreciation. 33.1 We have also seen the Board Instruction No. 1978, dated 31-12-1999 issued by CBDT suggesting guidelines for investigation in the case of finance lease agreement. These instructions issued by the Board show that SLB transaction as such are not to be disapproved but are only to be regulated by the assessing authority. We have also seen circular No. 2 of 2001 issued on 9-2-2001 which states that the accounting standards on lease issued by the Institute of the Chartered Accountants of India, which required the lessee to capitalize the assets in case of financial lease will have no implication on the allowance of the depreciation on assets. From the instructions of Board and from the Circular issued by Board, it is clear that nowhere it is suggested that lease back transactions are doubtful transactions or depreciation is not allowable, however, it has been suggested to the departmental authority that they should be regulated. The regulated word does not mean that assessee is not entitled for depreciation.
34. We have also taken into consideration the decision in case of Dy. CIT v. Housing Development and Finance Corpn. Ltd. (2006) 98 ITD 319 (Mum.) on which the reliance was placed by ld. DR. The Tribunal has held that the lease agreement between the parties was financing arrangements, which has been given the colour of lease transaction by adopting a device. This decision of the Tribunal has been considered in case of Invest Well Publishers Private Ltd. (supra) wherein, the depreciation claimed by assessee was allowed on similar transactions. We further noted that in case of Housing Development & Finance Corpn. (supra) the assessee was not in the business of leasing whereas, the present assessee carrying on business of leasing since 1983 and the claim of the assessee had been allowed up to the assessment year 1992-93, therefore, with utmost respect, we are not inclined to follow the decision in case of Housing Development & Finance Corporation (supra) but inclined to follow the decision in case of Invest Well Publisher (P.) Ltd. (supra), whereby the decision in case of H.D.F.C. (supra) has been considered. 35. In a recent decision in case of Dy. CIT v. Global Tele System Ltd. [IT Appeal No. 1085 (Mum.) of 1998 vide order dated 30-11-2006] has allowed the claim of the assessee by dismissing the appeal of the Department. In that case also the assessee claimed depreciation of Rs. 3.42 crores on Surface Banking Oven. These assets were sold by Tata Engineering and Locomotives Company to M/s. Classic Finance Services Enterprises for a consideration of Rs. 3.42 crore. M/s. Classic Finance Services made full payment of Rs. 3.42 crores to M/s. Telco and sold the same assets to M/s. Global Tele System under Hire & Purchase agreement dated 20-6-1993. M/s. Global Tele System gave assets on lease to Telco under an agreement dated 27-9-1993. The assessee claimed depreciation at the rate of 100 per cent, however, Assessing Officer denied the claim of depreciation by holding that all these transactions are 15 ITA-4109/M/01-ICICI colourable to reduce the tax burden. The CIT(A) allowed the claim of the assessee. On further appeal, the Tribunal discussing the issue at great length and after considering the decision of the Mid-East Portfolio Management Ltd.';s case (supra) and the decision of the Chennai Bench in Investment Trust of India Ltd.';s case (supra) whereby the decision of the Mid-East Portfolio Management Ltd.';s case (supra) was considered and distinguished, allowed claim of the assessee. Other cases were also taken into consideration along with the decision of the Hon'ble Rajasthan High Court in case of Rajasthan Electricity Board (supra) and the decision of Sharyans Resources Ltd. v. Jt. CIT (2002) 83 ITD 340(Mum.) and in case of Dy. CIT v. Sony Capital Market Ltd. (sic) and also the decision of the Jodhpur Bench in case of Shree Rajasthan Syntex Ltd. v. Asstt. CIT (2005) 93 ITD 78then allowed the claim of the assessee. 36. We have also taken into consideration the decision of the CIT(A) and found that the ld. CIT(A) has gone on the basis of general presumption that the assets were leased out to the bank just to secure the amount given on loan otherwise there was no occasion to sale and lease back transaction with the bank. The CIT(A) has considered various aspects and confirmed the findings of the Assessing Officer that the transactions were non-genuine as they were colourable just to reduce the tax burden by claiming higher depreciation. The CIT(A) has not taken into consideration the aspect that the assessee is in regular leasing business and about 7000 transactions had been entered into by the assessee with various parties for sale and lease back. The assessee who is a banking corporation was maintaining all the records in regard to each and every item, proper Profit & Loss A/c is maintained. All the details were furnished and not a single was detected by the Assessing Officer that these are genuine or are only paper transactions. 36.1 The lease rental is received regularly and has been shown in the Profit & Loss A/c. The other parties who are paying lease rentals to the assessee have shown lease rental paid to the assessee. The department has not brought a single case on record that the parties who had paid lease rental has not shown/claimed the deduction on account of lease rental but has claimed deduction of interest paid to assessee bank. In one case i.e. in the case of R.S.E.B. (supra) the lease rental paid was claimed as deduction. However, department treated this payment as interest on lease. The Jaipur Bench of the Tribunal allowed the claim of RSEB. The High Court has confirmed the view of the Tribunal in R.S.E.B.';s case (supra). Assets are shown in the block of assets. Whenever these assets were taken back they were shown as taken back and whenever these assets were sold they were shown as sold. Insurance cover in respect of the items involved in these transactions is in the name of assessee. Any liability on account of insurance premium or on account of theft, damage etc. is on account of assessee. Therefore, merely on suspicion or conjectures, doubting that the transactions are entered into for claiming higher depreciation, in our considered view were not justified either at the end of the Assessing Officer or at the end of ld. CIT(A), who enhanced the disallowance on the entire transactions entered into in the year under consideration. In view of the above facts and the circumstances, we set aside the orders of the authorities below and direct the Assessing Officer to allow the claim of depreciation on all items claimed by the assessee. We order accordingly."(115ITD25) We also find that in the case of ICICI Ltd.(erstwhile SCICI Ltd.),the Tribunal had,while deciding the issue for the AY.1998-99,held as under,:- "6. Before us, the Ld, Counsel for the assessee submitted that identical issues were there in assessment years 1996-97 and 1997-98 and the Tribunal in ITA Nos. 3643 & 36441M12001 has considered similar grievance and while deciding the issue in favour of the assessee, the Tribunal has followed the decision of the Hon'bIe Supreme Court in the case of ICDS Vs CIT 350 ITR 527, Delhi High Court in the case of CIT Vs Cosmos Films 338 ITR 266 and the Tribunal Bombay Bench in the case of Development Credit Bank Ltd. in ITA Nos. 3006/M/01 & 4892/M/03 and also the decision of the Tribunal Bombay Bench in the case of Sicom Vs DCIT in ITA Nos. 7901 & 7955/M/03 and in the case of L&T in ITA No. 2200 & 2803/M/2000 and 2890 &3533/M/01. 7. Per contra, the Ld, Departmental Representative supported the findings of the lower authorities. 8. We have carefully perused the orders of the lower authorities and the relevant material 16 ITA-4109/M/01-ICICI evidences brought on record before us. We have also carefully gone through the decisions relied upon by both the parties. In so far as the issue relating to the claim of depreciation on leased transactions is concerned, we find force in the submission of the Ld. Sr. Counsel that Hon'ble Supreme Court in the case of ICDS vs. CIT, 350 ITR 527 (supra), had the occasion to consider the question - "Whether the assessee is entitled to depreciation on vehicles financed by it which is neither owned by the assessee nor used by the assessee". The Hon'ble Supreme Court after perusing the lease agreement and other related factors held that the lessor is the owner of the vehicles. As an owner, it used the assets in the course of its business satisfying both the requirements of Sec. 32 of the Act and hence is entitled to claim depreciation. 9.A similar view was taken by the Hon'ble Delhi High Court in the case of Cosmos Films (supra) wherein the Hon'ble Delhi High Court has considered the implications of Sec. 19 of Sale of Goods Act, 1930. 10. The Tribunal, Mumbai Bench in the case of Development Credit Bank Ltd. (supra) has followed the decision of the Hon'ble Supreme Court in the case of ICDS (supra) and the decision of Hon'ble Delhi High Court in the case of Cosmos Films (supra) and allowed the claim of depreciation. 11. The Tribunal, Mumbai Bench, in the case of L&T (supra) has considered a similar issue at para 27 of its order and at para 28 followed the findings of the Hon'ble Supreme Court in the case of ICDS (supra) and also of the co-ordinate Bench in the case of Development Credit Bank Ltd. (supra) and allowed the claim of depreciation on sale of lease back assets. Respectfully following the decisions mentioned herein above, we direct the AO to allow depreciation. Ground No. 1 is accordingly allowed." Respectfully following the above decisions,ground No.H is decided in favour of the assessee. As the result appeal filed by the assessee stands partly allowed. . Order pronounced in open court on 9th September, 2015. 9 ,2015 Sd/- Sd/- (. , / D.MANMOHAN ) ( / RAJENDRA) / VICE PRESIDENT / ACCOUNTANT MEMBER /Mumbai, /Date: 09.09.2015. ... Jv.Sr.PS. /Copy of the Order forwarded to : 1.Appellant / 2. Respondent / 3.The concerned CIT(A)/ , 4.The concerned CIT / 5.DR Bench, ITAT, Mumbai / , ,.. . 6.Guard File/ //True Copy// / BY ORDER, / Dy./Asst. Registrar , /ITAT, Mumbai. 17
 
 
Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Organic SEO Outsourcing Organic Search Engine Optimization Outsourcing Organic Website SEO Organic SEO India Website SEO India Organic Search Engine Optimization India Organic Internet SEO India Organic Web

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions