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2005 (6) TMI 547 - ITAT MUMBAIDisallowance of depreciation on assets purchased and leased back transactions - sham transactions - search action u/s 132 - State Government undertaking - deduction u/s 80-IA - Cost of presentation articles HELD THAT:- In the present case, the Revenue has not even established that the underlying motive of the assessee-company in claiming depreciation at the rate of 100 per cent has resulted in some economic detriment or prejudice to the Revenue. Even though the assessee-company is claiming depreciation at the rate of 100 per cent, the assessee-company is disclosing lease rentals as its taxable income for a period of more than 5 years, on a regular basis. The depreciation is claimed only by the assessee-company. The lessees are not claiming depreciation. Therefore, if at all any detriment is alleged in this case, that is only relative/presumptive and not absolute. Revenue has not established that the transactions were sham transactions. The lease agreements executed by the assessee-company had the transactions entered into thereupon are not prohibited by law. They are within the four corners of law. Therefore, in obedience of the decision of the Orissa High Court in the case of Industrial Development Corporation of Orissa Ltd. vs. CIT & Ors. [2004 (3) TMI 43 - ORISSA HIGH COURT], we have to hold that the assessee is entitled to claim depreciation at the rate of 100 per cent on the assets leased out by it to the four parties mentioned The Calcutta High Court has held in Competent Authority vs. Smt. Bani Roy Chowdhari [1981 (3) TMI 70 - CALCUTTA HIGH COURT] that where the transferor or transferee is Government or statutory bodies, there cannot be any scope for collusion between parties. The Court further held that when Government or statutory body is party to a transaction, question of evasion of tax does not arise. In the present case three out of four lessees are State Government undertakings. Thus, we find that there is no evidence to hold that the transactions were sham and therefore, the claim of the assessee for depreciation at the rate of 100 per cent need to be accepted as genuine. Therefore, we direct the assessing authority to grant the depreciation allowance as claimed by the assessee. This issue is decided in favour of the assessee. Deduction u/s 80-IA- The exemption provided in s. 80-IA is available to an assessee, among others, who has set up a plant for generation of power. It does not speak anything about consumption of the power generated by the assessee. There is no fetter against the assessee using the power for self-consumption. The only condition to be satisfied is that the assessee should generate power. In such provisions of law relating to exemption, there is no scope for any intendment to bring out hypothetical fetters and restrictions. The law should be read and understood in its literal sense. Therefore, we are of the considered view that the assessee has generated power from the two DG sets implanted by it, and therefore, the assessee-company is entitled for the deduction under s. 80-IA on the income imputable from the generation of power. The exemption itself was introduced as an incentive to increase the power generation in the country. The said objective is made clear in the memorandum explaining the provisions of the Finance Bill, 1993 introduced in the Parliament. The object has further been clarified in its Circular No. 657 issued by CBDT on 20th Aug., 1993. Therefore, we direct the assessing authority to grant the deduction u/s 80-IA to the assessee on the profits imputable to power generation made out of two DG sets. Having held that the assessee is entitled for the deduction available u/s. 80-IA, the next question is what should be the price attributable to the power generated and consumed by the assessee. We direct the assessing authority to work out the profits on the basis of the price of the power generated by the assessee at the average of the annual landed cost of electricity purchased by the assessee from Karnataka State Electricity Board during the impugned previous year. It may be determined on the basis of payment details available from the bills issued by the Karnataka State Electricity Board, during the year under consideration. This issue is therefore, decided in favour of the assessee. Cost of presentation articles - The turnover of the assessee had increased as a result of payment of such commission. It was also proved that it was a trade practice. It was in such special circumstances that the Tribunal has come to a conclusion that such a secret commission could be allowed as a deduction in computing the taxable income. But in the present case, the assessee has not established any such nexus between the presentation of articles and the turnover of the business. Therefore, the ratio of the decision as such cannot be applied here. In the present case, it is the case of the Revenue that the details were not furnished. We are not inclined to take a different view from the CIT(A) on this point. This ground is rejected and the disallowance is confirmed. The assessee is partly successful in its appeal for asst. yr. 1997-98. In result, these two appeals filed by the assessee are partly allowed.
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