TMI Blog1993 (10) TMI 126X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee's claim for grant of weighted depreciation on trucks for the entire accounting period of 27 months. The relevant facts are that the assessee is a private limited company. It was incorporated in 1973 and commenced its business of cylinders hiring in 1974 with calendar year as its accounting period. This was followed till31-12-1986relevant to the assessment year 1987-88. For the assessment year 1988-89 on an application, the assessee was allowed extension of the accounting period and closed its books on30th June, 1988. In view of amendment to section 3 of the Income-tax Act, the assessee was, however, obliged to close its books of account on31st March, 1989instead. In other words, while there was no return of income for assessment year 1988-89, the return of income for the assessment year 1989-90 was for a period of 27 months i.e., 1-1-1987 to 30th June, 1988 and 1-7-1988 to 31st March, 1989. During the period involved the assessee added a new activity to its business w.e.f.1st March, 1988i.e. leasing of trucks (later on computers also). The assessee claimed weighted depreciation on trucks for the entire period of 27 months in accordance with Para 5 of Schedule X of the Income-t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g separately as is apparent from its own books of account. 5. Rival submissions heard and relevant records seen. We have carefully considered the submissions made by both the parties. The assessee admittedly is already in the business of hiring of its business assets since 1974 (cylinders). During the relevant previous year it acquired some more business assets i.e. trucks and gave the same again on rent under agreement of lease with various parties: The additional activity undertaken by the assessee is nothing but extension of its existing business activity of letting out of its business assets on rent though in another firm; which is leasing as against hiring of cylinders. Undoubtedly there is common management and common control of the business involving interlocking and interlacing of funds. As held by the Hon'ble Supreme Court in the case of B.R. Ltd. the decisive test is unity of control and not nature of the two lines of the business. Undeniably there is common management, common business organisation, common administration, common fund and a common place of business. Applying the test of "same business" as laid down by the Hon'ble Supreme Court in the cases of B.R. Ltd.; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ostat copies of six air consignment notes with its letter dated20th February, 1992. On going through these notes the Assessing Officer found the same irrelvant as also noted discrepancy in the date of despatch which was15th March, 1989in one note when the agreement with ALTOS was signed only on18th March, 1989. The Assessing Officer also recorded statements of Shri Raj Singh of PCL and Shri Tapas Majumdar of ALTOS on11th March, 1992during the course of survey under section 133A of the Act. The Assessing Officer felt that the assessee was coming out with different versions with regard to whereabouts of the computers when on the one hand the same were claimed to be leased out to ALTOS, as per agreed terms, the computers were to remain with ALTOS, the same stood sub-leased by ALTOS to PCL without the knowledge or the consent of the assessee. He further noted violation of the terms of agreement between the assessee and ALTOS regarding insurance of computers. The Assessing Officer recorded the statement of Shri Suresh Goel, Director of the assessee-company, on 18th March, 1992 and again on 30th March, 1992, when he was, according to the Assessing Officer, unable to satisfactorily explai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... month of March 1989 in terms of the agreement dated 18th March, 1989. 7. The matter was taken up in appeal before the learned CIT(Appeals) who noted that PCL had given different versions with regard to payments made by the assessee and the amount of security transferred by PCL to the assessee under the lease agreement with M/s ALTOS, in its letter dated 27th March, 1992 and 30th March, 1992. He also made enquiries from ALTOS and on the basis of a reply dated 7-9-1992 from ALTOS found altogether a different version with regard to source of security given to the assessee who had claimed to have received the same from ALTOS while ALTOS in their letter dated 7-9-1992 intimated that it has been paid by PCL [reference to paras 5.6 to 5.9 of the order of the learned CIT (Appeals)]. Agreeing with the findings of the learned assessing authority, the learned first appellate authority rejected the grounds of appeals taken by the assessee. 8.The assessee is in appeal. The learned authorised representative for the assessee took us through his paper book in support of his contention that the transaction involved is genuine and the purchases of computers and leasing thereof is a normal busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ow the whereabouts of the computers. He also invited our attention to the manner in which the whole transaction was transacted as also the terms of agreement between the assessee and M/s ALTOS and pointed out that whereas there has been glaring violation on the part of ALTOS of the agreed terms, the assessee has shown total indifference for obvious reason which goes to establish that this is an agreement which was never intended to be enforced by either party, the whole transaction being sham. The learned Departmental Representative submitted that on the facts and circumstances the assessee has failed to establish that the computers involved were ever manufactured much less purchased. 10. We have heard both the parties at length and have also perused the relevant records very carefully. We are entirely agreed with the learned counsel for the assessee that the reliance placed by the learned assessing authority on the information received from another Assessing Officer i.e. Dy. Commissioner of Income-tax, Special Range-15, New Delhi in the case of M/s Avanti Overseas Pvt. Ltd., is not relevant, more so when no opportunity was given to the assessee and therefore deserves to be exclu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hly instalments from ALTOS in all aggregating to Rs. 33,42,420 @ Rs. 92,845 p.m. The interest of the assessee in this connection is fully secured under the agreement. The agreement of lease of the computers between the assessee and ALTOS does not inspire truthfulness for the obvious reason that the manufacturer of computers would not take lease of the same in normal course of its business. The story of selling of computers by ALTOS to PCL and in turn by PCL to the assessee and again giving back the same computers to ALTOS under the colour of lease is nothing beyond that the goods have reached the place of origination throwing great suspicion on the origination itself. 12. While considering the entire material on record we cannot lose sight of the fact that there is a common Director in ALTOS and PCL namely Dadan Bhai and as such it was very much convenient for the assessee to deal in the name of two companies with a common man. We fail to understand why a manufacturing concern would take its own manufactured computers on lease and would pay a heavy hiring charges totalling to Rs. 33,42,420 while the computers are valued at a little over Rupees fifty lakhs and that too without get ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed a civil suit in the court of Civil Judge,Mathurain 1985 for recovery of principal of Rs. 10 lakhs and interest of Rs. 5,22,000. During the pendency of the suit Shri Rattan Lal partner of Bharatpur Industries died in November 1988. The assessee on a consideration of all relevant facts and circumstances treated the amount of Rs. 5,21,482 as bad debt and wrote off the same in its books of account for the period ending31st March, 1989. The claim of bad debt of the assessee was disallowed by the Assessing Officer and concurrently by the CIT(Appeals) with the finding that it was a made-up transaction aimed at diverting assessee's income looking to the close relationship between the Managing Director of the assessee-company and the partners of the above firm. The Assessing Officer also took note of the subsequent compromise arrived at between the assessee and the heirs of Shri Rattan Lal for giving up amount of interest. 16. Shri Aggarwal, the learned authorised representative argued that authorities below mis-read and misinterpreted the facts. He argued that it is not in dispute that the assessee had been receiving interest till30th June, 1982and had been offering the same as it ..... 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