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TMI Blog2012 (12) TMI 454X X X X Extracts X X X X X X X X Extracts X X X X ..... g business. In the return of income filed by it, it claimed the above two sums being claims for depreciation on the leased out assets described in the questions. Apparently its claim was that these assets were owned by it and were leased out in the course of its business and therefore the twin conditions of ownership and use for the purposes of the business laid down in section 32 were fulfilled. Documentary evidence was adduced to show that the LPG cylinders were purchased from M/s. Aravalli Cylinders Pvt. Ltd ("Aravalli") and leased to M/s. Janta Gases Pvt Ltd ("Janta"). Evidence was also adduced to show similarly that the air jet spindle assembly and positar disc were purchased from M/s. Rajaji Electronics Pvt. Ltd ("Rajaji") and leased to M/s. Maruti Syntex (India) Ltd. ("Maruti"). 3. The evidence was rejected by the AO who formed the view that paper-work created merely to support the claim and that in truth and reality the assessee never became the owner of the assets, but merely financed the transaction of purchase by Janta and Maruti, who had dealt with the manufacturers directly. It was, according to the AO, a case of a colourable device or subterfuge adopted by the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rations are not present, it would not be proper for the court in an appeal under section 260A which can be granted only on a substantial question of law, to disturb the findings of fact, particularly when two appellate authorities have reached concurrent findings of fact. It is in this light that we have examined the present case. 7. A preliminary objection was raised on behalf of the assessee to the effect that the question whether the lease in the present case is a financial lease or an operational lease - argued on behalf of the revenue - does not arise since that was not the way the case proceeded before the revenue authorities. It was contended that examination of such a question would require fresh findings of fact which exercise cannot be undertaken in an appeal under section 260A. We find merit in the preliminary objection. At no point of time did the AO or the CIT (A), who has conterminous powers over the assessment, approach the case from that angle and an examination of the question whether the lease was an operational lease or merely a financial lease would certainly involve an enquiry into the factual position, the intention of the parties and so on; that exercise no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been manufacturing cylinders for Janta earlier also. 9. The AO specifically put the letter dated 22.03.1995 allegedly written by Janta to Aravalli authorising it to sell the cylinders to the assessee, to Aravalli for its response. Aravalli by its letter dated 26.03.1998 addressed to the AO denied having received any such authorisation from Janta. It may be noted that the address given in the letter allegedly written by Janta to Aravalli was "M/s. Aravalli Cylinders, opposite Turkman Gate, Delhi". Janta did not produce any proof that the letter was received by Aravalli, such as acknowledgement card of the postal authorities or certificate of posting or any other evidence. 10. Janta, expectedly, asked for cross-examination of RatanMahipal. The AO managed to produce one M.P. Mahipal, the managing director of Aravalli, on 04.03.1998 and offering him for cross-examination to the assessee. The assessee refused to do so on the ground that the statement was given by Ratan Mahipal and not by M.P. Mahipal. The AO seems to have recorded a statement from M.P. Mahipal on the aforesaid date. In that statement, M.P. Mahipal stated that he was appearing in the place of Ratan Mahipal who was ind ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any standards, the owner of the cylinders. No motive can be, and was in fact, attributed to Aravalli when it denied the receipt of the letter. 13. As for the payment, even Aravalli admits that it received the money from the assessee. That alone does not however constitute the assessee as the owner of the cylinders. In the absence of the authority letter from Janta, the cylinders would have certainly been delivered only to Janta. There is no evidence led by Janta to show that it wanted to ascertain whether its request had been accepted by Aravalli. On the other hand, the fact that Janta wrote to Aravalli only on 22.03.1995 after a long lapse of time from the date it placed the order (4-6 months), and that too towards the close of the accounting year, sends different signals. Till that date, the assessee obviously was not in the picture at all; the contract was between Janta and Aravalli. The assessee's name crops up only on 22.03.1995 by which date the assessee would have had a clear picture of its profits. The significance of this fact should be kept in mind. The lease agreement between the assessee and Janta was also entered into three days later, i.e., on 25.03.1995. 14. The cu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lli to belie the latter's claim that it was not aware that the assessee has been, by an arrangement between it and Janta, constituted the owner of the cylinders. The assessee, however, took a technical and obstinate position that it was only Ratan Mahipal, who gave the original statement, who would be cross-examined and not M.P. Mahipal. The conduct of the assessee - taking a technical and prudish stand - was obviously untenable; it leads to an inference that it had nothing to gain by availing of the opportunity afforded by the AO. 16. The Tribunal has dealt with the issue in paragraph 10 of its order. It is reproduced below:- "10. We have considered the rival submissions. As far as the transaction with regard to purchase of cylinders by the assessee from MACPL are concerned, it is seen that as per the provisions of LPG Regular and supply and Distribution Amendment order 1994 a copy of which is placed at page 61 of assessee's paper book, there is a prohibition for sale of LPG cylinders except to parallel marketer or to a person authorised by the Government Oil Company or to consumer. It is not in dispute that MJGPL a parallel marketer within the meaning of the LPG Regulations. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-112 and the assessee only financed the sale, a show-cause notice was issued to the assessee as to why it should not be treated as only a financier and not an owner lessor. The assessment order does not show that the assessee took the plea that Aravalli had raised the invoice in its name and that there was a ledger account in its name in the books of Aravalli and therefore the assessee should be treated as the owner-lessor. Further, M.P. Mahipal had stated that he stood by the statement of Ratan Mahipal; even when M.P. Mahipal was offered for cross-examination, the assessee could have confronted him with the invoices if they had been raised in its name. He could have been asked to produce the books of account in order to prove the claim that Aravalli's ledger contained an account in the name of the assessee. The assessee however declined the offer on a technical plea. Before the CIT (A) it was submitted by the assessee in the written submissions that a copy of its account in the ledger of Aravalli was filed with the AO on 09.03.1998 and that Aravalli in its "payment discharge receipt" confirmed the sale to the assessee and supply of the cylinders to Janta, saying that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the letter allegedly written by Janta on 22.03.1995 to Aravalli authorising the latter to sell and raise the invoice on the assessee was received by Aravalli; in fact, Aravalli's denial of the receipt stands uncontroverted. Aravalli had nothing to gain or lose by the denial, unless it was the truth. Thirdly, the assessee did not avail of the opportunit y to confront Aravalli's managing director M.P. Mahipal with all the documentary evidence which it (the assessee) claimed to possess, such as the invoices drawn on it and the ledger account in its name in Aravalli's books. That was the best opportunity the assessee had to prove its case that it was the owner of the cylinders which it leased to Janta. Fourthly, the discharge receipt issued by Aravalli to the assessee acknowledges the receipt of the three cheques, all dated 20.03.1995, even prior to the authorisation claimed to have been issued by Janta to Aravalli. The discharge receipt no doubt says that the cheques were received "towards supply of empty cylinders on your behalf to M/s. Janta Gases Pvt. Ltd. vide Bill Nos.110, 111 & 112", but that by itself does not prove that the relationship between the assessee and Janta is t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d of the financial year some of these cylinders have been shown as sales to M/s. Ganpati Finance who in turn have leased them to M/s. Janta Gases only to allow M/s. Ganpati Finance to avail 100% depreciation. In fact M/s. Ganpati Finance has only financed the deal and its role is that of a financer and not that of the owner of the cylinder." 21. So far as the air jet spindles and 'positar disc' are concerned, the claim of the assessee was that it purchased them from Rajaji Electronics Pvt. Ltd. ("Rajaji") and leased them to Maruti Syntex (India) Ltd. ("Maruti"). Despite repeated issue of summons and also commission to the SHO of Sarojini Nagar Police Station, the director of Rajaji, one M.M. Sharma, did not appear in response to the query raised by the AO to furnish the particulars relating to the sale of the assets to the assessee and produce the books of account. Finally a letter dated 09.01.1998 was received by the AO from Rajaji that it sold the assets to the assessee and was also assessed to sales tax. In the sales bill No.167/15.03.1995, however, no sales-tax was found to have been charged. No particulars were furnished to show from whom the assets were purchased. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to produce sufficient evidence to prove its claim that it had purchased airjets and spindles from M/s. Rajaji Electronics. In view of this the 100% depreciation amounting to Rs.19,99,440/- is being disallowed." 22. The CIT (A), as in the case of LPG cylinders, merely reproduced the written submissions of the assessee and cryptically concluded as under: "2.7 Likewise, in the case of Airjet Spindle Assembly, and Positar Disc, the arguments given on behalf of the appellant company have shed a lot of light on the actual conduct of affairs. Here also, after a careful consideration, of all the evidence, I hold that the claim of depreciation of the appellant co., should be allowed." 23. The Tribunal, to which the revenue carried the matter in appeal, confirmed the conclusion of the CIT (A) in paragraph 11 of its order in the following manner: - "11. As far as the purchase of Airjet Spindle Assembly and Positar Disc from M/s. Rajaji Electronics P. Ltd. is concerned, we are of the view that the fact that the Assessing Officer was not able to procure the presence of the Director of the said company cannot lead to the conclusion that the said company was non-existent. Admitt ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... harging sales-tax as the copy of the invoice showed. Its sales-tax registration number and income-tax PAN number were not capable of proper verification, leading to the very existence of Rajaji coming under grave suspicion. The AO acted fairly by asking Maruti, to whom the assets were claimed to have been leased by the assessee, to produce the relevant assets inward register and explain the mode by which they were transported to its factory. This evoked a response which cannot be countenanced - that no such registers were being maintained by Maruti, and a very unusual or strange plea that the assets were transported by their own cars, which are passenger cars and not goods vehicles; even then, the AO was fair enough to ask them to show their log books showing the movement of the cars, which could not be produced as they were not maintained. There was thus precious little material before the AO from which he could accept the plea of ownership or even the existence of the assets for the purpose of claiming depreciation. 25. The CIT (A) did no better than the assessee as the quoted paragraph from his order would show. The Tribunal proceeded to view the paper-work as sacrosanc ..... X X X X Extracts X X X X X X X X Extracts X X X X
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