TMI Blog2015 (1) TMI 516X X X X Extracts X X X X X X X X Extracts X X X X ..... f suggests, the bank is engaged in the industrial development of the country by advancing thousands of crores to the entrepreneurs. The loans advanced by the bank during the year under appeal stood over 20,000 crores. We set aside the order of the CIT(A) and delete the addition as made by him - Decided in favour of assessee. - ITA No.1839/Mum/2004, ITA No.3369/Mum/2004, ITA No.3370/Mum/2004, ITAs No.1951, 3922 & 3923/Mum/2006 - - - Dated:- 29-10-2014 - N. K. Billaiya, AM And Vivek Varma, JM,JJ. For the Petitioner : Shri Arvind Sonde Shri Satish B Mody For the Respondent : Shri Preetam Singh ORDER Per Vivek Varma, JM. The instant appeals on quantum, are filed against the orders of CIT(A) XII, Mumbai, dated 07.01.2014, 06.02.2014 11.02,2004 for AYs 1994-95, 1995-96 1996-97 respectively. 2. Since all the three appeals have one common ground of appeal, we, for the sake of convenience and brevity are disposing off the appeals through common and consolidated order. We are taking ITA No. 1839/Mum/2004, pertaining to assessment year 1994-95 as the lead year. ITA No. 1839/Mum/2004 : Asst. year 1994-95 : 3. The following grounds have been taken: A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty. 6. The rental structure is uniform and has been laid down in the respective agreements. 7. The agreements provide for insurance of the assets . 7. The AO, while examining the books and scope of business of the assessee, identified that, transaction conducted with the following parties were loans and not lease . a) Gujarat Electricity Board b) Empee Distilliers Ltd. c) Billary Steels Alloy Ltd. d) Kedia Group e) REPL Engineering Ltd f) Patheja Bros Forging Stampings Ltd g) Padma Alloys Castings Ltd. 8. At the time of hearing, the AR submitted that the issue involves two types of indulgence, i.e. transactions held to be loan, after consideration and transactions held to be loan, without any specific reason. 9. The AR provided the break up as follows: Cases classified as Finance Transaction Sr. No. Name of Lessee 1 Gujarat Electricity Board (Asset pertaining to transaction in earlier financial year) 2 Gujarat Electricity Board (Transaction entered during the year) 3 Empee Distilleries Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leased out . 11. The AR, therefore, submitted that the depreciation as claimed by the assessee, be allowed on the above transaction. 12. The AR further submitted that in so far as cases not classified as transaction Finance Transactions , the revenue authorities did not accord reasonable opportunity to the assessee to substantiate its case on the claim made for allowance of depreciation. To show as to how the prayer made by the assessee was not adhered to by the revenue authorities, the AR referred to the SOF (taking up one case to explain the facts) and submitted, REPL Engineering: The learned AO has not properly appreciated the evidence on record. REPL is a well known engineering concern. IDBI has given under lease certain equipment, details of which are set out at page 30 of the assessment order. The AO has sought to derive support for disallowing the claim of the basis of a survey made by IT department and a statement recorded at that time. In response to AO's letter the appellant filed a detailed reply enclosing letter of REPL dt. 10/3/97 clarifying the doubts created by IT survey. Along with our letter, REPL furnished a copy of the letter dt. 22/1/97 writ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... irect the AO to examine the transactions with Kedia Group of companies, REPL Engineering Ltd., Patheja Bros Forging Stampings Ltd., and Padma Alloys Castings Ltd. afresh, for the allowance and claim of depreciation as per law and judicial decisions as mentioned in pre para. 18. Ground no.1 is therefore allowed for statistical purposes. 19. In the result, appeal of the assessee in ITA 1839/Mum/2004 for AY 1994-95 is partly allowed. ITA No. :3369/Mum/2004 : AY 1995-96 : 20. The following grounds have been taken: Aggrieved by the Order u/s 250 of the Income Tax Act, 1961 dated 7.1.2004 passed by the Commissioner of Income Tax (Appeals) XII, Mumbai hereinafter referred to as the CIT(A)] for the assessment year 1994-95, the appellant begs to file this appeal and raise the following grounds of appeal which are independent of and without prejudice to each other. 1.1 The learned CIT(A) erred in holding that lease transactions entered into by the appellant are in the nature of loan transactions. He ought to have allowed the depreciation claim made by the appellant in respect of all the lease transactions entered into by the appellant in accordance with the law and circu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the assessee, identified that, transaction conducted with certain parties were loans and not lease. 24. At the time of hearing, the AR submitted that the issue involves two types of indulgence, i.e. transactions held to be loan, after consideration and transactions held to be loan, without any specific reason. 25. The AR provided the break up as follows: Cases classified as Finance Transaction Sr. No. Name of Lessee 1 Gujarat State Fertilizer 2 Petrofilsar) 3 Godrej Soaps 4 Shriram Transport 5 Shriram Investment 6 Shipping Corporation 7 APS Star Industries 8 Selvel Advertising 9 Wipro GE 10 Borosil Glass Works 11 Mcdowell 12 Siris 13 Libra Filament ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... taxman.com 217 10. First Leasing Company of India Ltd. vs. ACIT Madras High Court [2013] 38 taxman.com 213 11. DCIT vs Gujarat Narmada Valley Fertilizers Co Ltd Gujarat High Court [2013] 33 taxman.com 117 12. CIT v Gujarat Gas Co Ltd Gujarat High Court [2009] 308 ITR 243 13. CIT vs Zuari Finance Ltd Bombay High Court [2005] 144 TAXMAN 113 14. CIT vs. Punjab State Electricity Board Punjab Haryana High Court [2009] 183 TAXMAN 419 15. Industrial Dev. Corp of Orissa Ltd vs CIT Orissa High Court [2004] 137 TAXMAN 556 and the decision of Hon'ble Supreme Court in the case of ICDS Ltd vs CIT, reported in 29 taxman.com 129, wherein it was held (in the catch note), Where assessee, engaged in business of hire purchase, leasing etc., having purchased vehicles from manufacturers, leased out those vehicles to customers, it was entitled to claim depreciation in respect of vehicles so leased out . 27. The AR, therefore, submitted that the depreciation as claimed be allowed on the above transaction. 28. The AR further submitted that in so far as cases not classified as transaction Finance Transactions , the revenue authorities did not accord reasonable opportun ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed for statistical purposes. 35. Ground no. 2 relates to deduction under section Deduction u/s 80M. 36. As argued and relied upon by the AR before us in the departmental appeal in the case of DCIT vs M/s Industrial Development Bank of India for AY 1992-93 vide ITAT Mumbai 'I' Bench order dated 24th December, 2002 in ITA No. 3249/Bom/1995 and relevant portion of the order covering the impugned issue reads as under: The assessee bank advances loans to entrepreneurs and thus helps in the industrial development of the country. During the year under appeal in addition to earning income from bank operations, it earned dividend income. For allowing u/s 80M of the Income Tax Act, 1961, the Assessing Officer disallowed proportionate expenses for earning dividend income as per para 19 of page 18 of the assessment order. The assessee appealed to the learned CIT(A) and submitted that proportionate expenses estimated by the Assessing Officer were on the high side. The learned CIT(A) concurred with the findings of the Assessing Officer and held that the assessee must have incurred expenditure for earning dividend, but the proportionate expenses disallowed by the Assessing Of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt begs to file this appeal and raise the following grounds of appeal which are independent of and without prejudice to each other. 5.1 The learned CIT(A) erred in holding that lease transactions entered into by the appellant are in the nature of loan transactions. He ought to have allowed the depreciation claim made by the appellant in respect of all the lease transactions entered into by the appellant in accordance with the law and circulars issued by the CBDT. In accordance with the provisions of section 32 of the IT Act, depreciation on assets given on lease should have been allowed to the appellant, being the owner of the assets in the said lease transactions. 5.2 The learned CIT(A) committed a gross error of law and facts in confirming the disallowance of depreciation in respect of assets given on lease in the earlier years. 6. Deduction u/s 80M : The learned CIT(A) committed a gross error of law and facts in not accepting the claim of appellant u/s 80M in the manner in which it was claimed. The learned CIT(A) erred in not giving a finding on this issue and also not following the decision of the ITAT in appellant's case in AY 1992- 93 and 1993-94. The appellan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Trichi Distilleries Ltd. (two) 6 Mangalore Refineries and Petro Chemcials 7 Essar Steel Ltd. (three) 8 Alembic Chemicals 9 Delton Cables Limited 10 Karnataka Electricity Board 11 Mesco Airlines Ltd. 12 Unitech Ltd. (two) 13 Simbhaoli Sugar Mills 14 Beta Napthol Ltd. (two) 15 Noida Medicare Centre Ltd. 16 V M Jog Engineering Ltd. 17 Uma Parmeshwari Mills 18 Diwan Steel Ltd. 19 Jay Yushin Ltd. 20 Maruti Udyog Ltd. 21 Shriram Investment Ltd. 22 Shriram Transport Finance 23 Mc. Dowell (two) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in business of hire purchase, leasing etc., having purchased vehicles from manufacturers, leased out those vehicles to customers, it was entitled to claim depreciation in respect of vehicles so leased out . 46. The AR, therefore, submitted that the depreciation as claimed be allowed on the above transaction. 47. The AR further submitted that in so far as cases not classified as transaction Finance Transactions , the revenue authorities did not accord reasonable opportunity to the assessee to substantiate its case on the claim made for allowance of depreciation as submitted by the AR in assessment year 1994-95 and also as referred to in the SOF. The AR submitted that similar treatment had been given to the other transactions. 48. The AR submitted that though the case of the assessee was strong enough to substantiate the claim, but it is prepared to go back to the AO, to satisfy its claim, but it is prepared to go back to the AO, to satisfy its claim before the AR by having joint inspection and reconciliation of the facts and transactions in the current year as well, to the transactions falling in cases not classified as finance transactions . 49. The DR on the other h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ortionate expenses for earning dividend income as per para 19 of page 18 of the assessment order. The assessee appealed to the learned CIT(A) and submitted that proportionate expenses estimated by the Assessing Officer were on the high side. The learned CIT(A) concurred with the findings of the Assessing Officer and held that the assessee must have incurred expenditure for earning dividend, but the proportionate expenses disallowed by the Assessing Officer were on the high side. Following the decision of the Tribunal in the case of ICICI Ltd. in which 1% dividend income is deductible while determining the deduction u/s 80M of the Act, the learned CIT(A) directed the Assessing Officer to restrict the disallowance to 1% only. 7. The learned departmental representative submitted that the assessee earned substantial dividend income, it did incur expenditure on staff, stationery etc. for earning such dividend and while the learned CIT(A) has upheld in principle the incurrence of such expenses, his direction for disallowance of only 1% gross dividend income as expenses is not justified as it is on the lower side. 8. The learned counsel for the assessee submitted that even 1% disall ..... 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