TMI Blog2012 (12) TMI 284X X X X Extracts X X X X X X X X Extracts X X X X ..... he business of the assessee and usage of cylinders by the assessee’s customers is to be considered as usage by the assessee itself. Therefore, it could not be said that the cylinders were not used by the assessee in its business and the depreciation cannot be disallowed. - AO directed to allow depreciation at 100% on cylinders - Decided in favor of assessee. - ITA No. 262 & 263/Hyd/2002, 330/Hyd/2002, 318/Hyd/2002, 154 & 155/Hyd/2000, 288/Hyd/2001, 319/Hyd/2001, 152 & 153/Hyd/2000 - - - Dated:- 8-6-2012 - SHRI CHANDRA POOJARI, AND SMT. ASHA VIJAYARAGHAVAN, JJ. Assessee by: Shri S. Ravi and Shri A.V. Raghuram Revenue by: Shri M.S. Rao O R D E R PER CHANDRA POOJARI, AM: These ten cross appeals filed by assessee and revenue are directed against the different orders of CIT(A) for the A.Y. 1993-94, 1994-95, 1995-96, 1996-97 and 1997-98. Since issues involved in all these appeals are common in nature, they are clubbed, heard and being disposed of by this combined order for the sake of convenience. 2. The common issue in assessee s appeals in ITA Nos. 154/Hyd/2000, 155/Hyd/2000, 262/Hyd/2002, 263/Hyd/2002, 288/Hyd/2001 is with regard to allowability of depreci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... were claimed to have been used for sale of gas, on many occasions, the date of loaning of the cylinders precedes or succeeds the date of sale of gas. The Assessing Officer had also visited the gas filling plant of Ideal Engineers Hyderabad Limited at Balanagar, Hyderabad where the cylinders of the assessee were claimed to have been filled with 1/2 Kg LPG. She had examined Shri Anil Agate. Plant In-charge of the gas filling plant. At the time of her visit, she had also examined the Daily Report of Gas Filling for financial year 1997-98 and she found that at no point of time, any cylinder was filled with 1/2 Kg LPG and she found that the cylinders were filled in single step. She had asked Shri Agate and also Ideal Engineers Hyderabad Limited to produce records for daily filling of LPG for the financial years 1994-95 to 1997-98. Though at the time of the visit of the Assessing Officer Shri Agate had given the undertaking to produce the required documents after return of the Record Keeper from leave; only the documents relating to financial year 1997-98 were produced. A reply was however furnished by Shri Agate in this regard. On examination of the records relating to financial year ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eal Engineers Hyderabad Limited M/s. P.K.L. Limited and M/s Kabsons Gas Equipment Limited are one and the same, i.e., Shri G.K. Kabra. b) Because M/s. Kabsons Gas Equipment Limited is a closely held company managed by Sri Satish Kabra and M/s. P.K.L. Limited is closely held company managed by Shri Rajiv Kabra, the brother of Shri Satish Kabra. c) Because it is proved beyond doubt that the assesseecompany never sold 1/2 Kg of gas in cylinders as claimed by the assessee. d) Because the primary record of filling up of gas has been destroyed to suit convenience of the assessee. e) Because the assessee and its sister concerns are, tampering with the records. f) Because of statement given by Shri Anil Agate that at no point of time the cylinders were partly filled-up and at no point of time partly filled up cylinders were brought to filling plant of M/s. Ideal Engineers Hyderabad Limited for refilling them. g) Because purchase ledger of the assessee-company does not tally with the subsequent details of purchases filed. h) Because the correlation of invoice cum delivery challan for the sale of gas and the Subscription Vouchers raised for loaning of cylinder has proved beyond ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tomers has collected security deposit from its customers. Since the security deposits is liability of the Company as such it was treated as liability in the Balance sheet. The ownership of the LPG cylinders is with the Company and Company has given cylinders to its customers on lease basis by collecting security deposits. The LPG cylinders are property of the company and the name of the Company has been engraved on the foot of the cylinders which are given to customers. The Company has given cylinders by collecting security deposits which is refundable on return of cylinders by the customers. It is further submitted that the assessing officer himself examined where the Company has returned the security deposits to customers as and when they return the cylinders. It is submitted that the assessing officer was wrongly held that it is sale transaction and the assessee is sold cylinders to its customers. During the year under consideration the assessee has collected security deposit from its customers and kept the same under liabilities. It was further submitted that in fact as per the statutory provisions of Indian Explosives Act, 1884 and Gas Cylinders Rules 1981 and The LPG (Regulat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as separately collected the security deposits and the amount collected does not have any relation to the price fixed for the goods to be delivered i.e. LPG. The amount was held by the assessee as security till the consumer returning the cylinder and it is also evident from other terms and conditions of agreement entered by the assessee with the customers that the business connection came to end only when the consumer surrendered the cylinder. The assessee repaid the deposit as and when the customer returned the cylinder. Thus the contract has every element of contract of supply of cylinders on lease basis and amount of deposits constitutes security deposits just like borrowed funds. As for as the contention of the revenue is concerned that there was a transfer of ownership in cylinders to the customers, in our opinion, there was only leasing of cylinder to use the same by assessee s customers during the currency of contract and there is no absolute sale of cylinders. The consumer has no right over the cylinder and they were prohibited from alienating the right over the cylinders. The cylinder is to be returned to the assessee company and the company has to refund the security dep ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be an oral contract and under the rules, when the assessee is not entitled to sell the cylinder, the transaction entered into by it is deemed to be pursuant to such oral contract. As per the said contract, the assessee is liable to-refund the deposit as and when the customer surrenders back the cylinder. It was in this context, the Special Bench held that the business connection came to an end only when the consumers decided to terminate the contract by surrendering the gas connection or it would hove come to on end if notice had been given by either party. On such termination, the amount became repayable. We do not see any material distinction between the facts of the present case and those in the case before the Special Bench. It was only the audacity of the CIT(A) not to submit to the higher wisdom despite the following observations of the Supreme Court in the case of Union of India v. Kamlakshi Finance Corporation Ltd., AIR 1992 SC 711: "It cannot be too vehemently emphasised that it is of utmost importance that in disposing of the quasijudicial issues before them revenue officers are bound by the decisions of the appellate authorities. The order of the Appellate Collector i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d discussion, we direct the Assessing Officer to delete the addition of Rs. 52,06,650. 7. Since we have upheld the claim of the assessee, the latter remains the owner of the cylinders and hence would be entitled to depreciation at 100% following the order of the Tribunal in the case of Prakun Equipments Pvt. Ltd. (supra). The Assessing Officer is directed to grant depreciation of Rs. 33,28,534. 8. Last ground in the appeal is without prejudice to the first ground and is against the addition of Rs. 1,67,519 being the difference between the cost of cylinders on which depreciation is claimed and outgoing expenses amounting to Rs. 31,61,015. Since we have held the deposits not to be the income of the assessee, this ground does not survive and is rendered infructuous. 10. Even otherwise, assessability of security deposits stands squarely covered by the order of the Special Bench in the case of Detective Devises Limited Vs. Income tax Officer (22 ITD 9)(HYD) wherein held that: (i) It is open to every prudent businessman to utilise amounts which come into his coffers to the maximum advantage. Therefore, the mere fact that large cash balances were not maintained does not supp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs can not be considered as dubious transaction. In our, opinion, the deposit received on loaning of cylinders can not be treated as sales receipt and it is a liability on the assessee which is required to be returned like borrowed money and therefore amount collected as deposits during relevant assessment years could not be taxed as trading receipt. Thus, we hold that the receipts of security deposits do not constitute sales receipts and consequently the difference between the cost price of the cylinders and security deposit received on leasing the same does not constitute as income of the assessee. Therefore, in view of the above discussion, we hold that the collection of security deposit on loaning the gas cylinder could not be treated as a sale transaction and the resultant difference is also not business profit of the assessee. Accordingly, we decide the issue in favour of the assessee and against the Revenue. 12. The next issue before us is whether the LPG cylinders were property of the assessee or not. If so, is it a Plant as defined within the meaning of section 32 of the Income Tax Act, 1961 and eligible for depreciation at 100%. So far as the depreciation on cylinders, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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