9911796707
TMI Blog2006 (9) TMI 90X X X X Extracts X X X X X X X X Extracts X X X X ..... to March 30, 1991. Under the directions of the assessee, these bottles were to be directly supplied by manufacturer to the lessee. The lease agreement for the soft drink bottles between the assessee and lessee was entered into on February 15, 1991. The Assessing Officer allowed the claim of the assessee for 100% depreciation only on 42,000 soft drink bottles out of 5,46,000 bottles which were leased out to the lessee on the ground that only 42,000 bottles were received by the lessee and put in use before March 31, 1991. There was another claim of depreciation made by the assessee in respect of soft drink bottles leased out to M/s. Aravali Leasing Limited. The assessee had shown purchase of soft drink bottles from M/s. Arizona Printers and Packers Limited, Greater Kailash, New Delhi for Rs.30,70,122/- and allegedly leased out the same to M/s. Aravali Leasing Limited vide lease agreement dated March 15, 1991. M/s. Aravali Leasing Limited, according to the assessee, had sub-leased these bottles to M/s. Unikol Bottlers Limited. The assessee filed a certificate from M/s. Unikol Bottlers Limited stating that these bottles were put to use during the financial year ending March 31, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... said to have become owner of the bottles till these bottles had parted the ownership of manufacturer i.e M/s. Glass and Ceramics Decorators, Bombay. The assessee can be said to have become owner only if these soft drink bottles, in the relevant previous years, were dispatched by the manufacturer before March 31, 1991. He, therefore, referred back the question of depreciation in respect of bottles leased to M/s. Coolade Beverages Pvt. Ltd. and directed the Assessing Officer to call for the evidence and make inquiry to ascertain how many of the remaining bottles i.e excluding 42,000 bottles were dispatched before March 31, 1991. He observed that appellant would be entitled to depreciation in respect of those bottles which were dispatched by the previous owner i.e manufacturer on or before March 31, 1991. As far as the lease in respect of soft drink bottles between the assessee and M/s. Aravali Leasing Limited was concerned, the Commissioner of Income-tax (Appeals) agreed with the conclusion arrived at by the Assessing Officer that it was only a paper transaction and upheld the order of Assessing officer by not allowing depreciation claim. The assessee preferred an appeal agains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e have heard counsel for the parties at length and perused the record. 7. We shall first deal with arguments of the appellant that Tribunal had no jurisdiction to examine the lease deed and arrive at a conclusion different from the Assessing Officer. Section 254 (1) which empowers the Tribunal to hear the appeals reads as under : "254(1) The Appellate Tribunal may, after giving both the parties to the appeal an opportunity of being heard, pass such orders thereon as it thinks fit." 8. This section does not put any fetters on the power of Tribunal to consider the issue which may arise in an appeal. When an appeal comes before the Tribunal for hearing and appellate Tribunal finds that some documents have been relied upon by the assessee, which are on record and the document are crucial to allow or refuse the claim made by the assessee, even if the Assessing Officer and Commissioner of Income-tax (Appeals) had not gone into the contents of the document and had not bothered to find out the real nature of the document, the appellate Tribunal cannot close its eyes to the real nature of the document and is not helpless in coming to a different conclusion than Assessing Officer and Com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee with the lessees to claim the depreciation, claiming that assessee was a leasing company. In order to appreciate the claim of the assessee, it was necessary for the Tribunal and for that matter any adjudicating body to go into the different clauses of the lease agreement. If the Assessing Officer or Commissioner of Income-tax (Appeals) had not looked into lease agreement and considered the claim of assessee only on the face of it, no fault can be found with the Tribunal for analysing the lease agreement by looking into its different clauses and finding the true import of the lease agreement. We, therefore, consider that there is no force in this argument of the appellant/assessee. No question of law arises for our consideration. 10. The next issue raised is that order of Tribunal in not allowing the depreciation is illegal and the assessee was entitled for 100% depreciation on the leased bottles. The contention of the assessee is that the leasing of assets was one of the business of the assessee and assessee was entitled to depreciation once assessee puts the stocks in his business. 11. The argument advanced is that in case of M/s. Coolade Beverages Pvt. Ltd, the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease was executed in advance in respect of bottles which were yet to be manufactured. The period of lease was stated to be three years and could be extended on such terms and conditions as may be agreed between the parties. Regarding commencement of the lease, it was stated that it shall commence from the date of delivery of bottles or from the date of the payment made by the assessee for the bottles to the manufacturer whichever was earlier. It was provided in Clause 4 that glass bottles would be supplied directly by supplier i.e manufacturer to the location specified by the lessee and the lessor will not be responsible for any damage prior to delivery or during the delivery. It was lessee who was to pay all charges in respect of delivery from the supplier to the lessee. In written arguments filed by assessee, it is contended that lessor was liable for any loss or breakage during transportation and to take out transit insurance. This argument runs contrary to admitted facts and Clause 4 of the lease. The next clause shows that all rental i.e lease amount was payable from the commencement date shown in the schedule and subsequent rentals payable on the first date of the mont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot called back by the assessee after expiry of lease period despite non-renewal of lease. The assessee took the plea that the bottles had lived their life and it was worthless to recall them as they were useless for the assessee. Their life span itself was hardly three years and the cost of calling them back would have been more than the value of the bottles. All these facts point out to only one thing that it was not a lease arrangement but a finance arrangement. 14. In Damodar Vally Corporation v. State of Bihar- [1961] 12 STC 120 (SC), Supreme Court laid down two tests to determine the question whether a particular contract was a contract of mere hiring or whether it was a contract of purchase of a system on deferred payment of purchase price (1) Whether there is any binding obligation on the hirer to purchase the goods (2) whether there is right reserved to the hirer to return the goods at any time during the subsistence of the contract. 15. In the present case the lease agreement was for a period of three years, after which the hirer was supposed to return the articles but the articles i.e. bottles were never returned nor the stock was called back by the assessee, neither le ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment as per direction of the lessor, it shall be deemed that lessee had elected to hire the equipment at the same terms and conditions and such tenancy shall be terminable by the lessor on payment of default by serving a seven days notice. 16. All the above clause and many more in the lease agreement are contrary to what actually transpired between the parties. It is apparent that the lease agreement was merely meant for consumption of Income Tax Department to claim depreciation. Fact is that neither bottles were recalled by the assessee nor lease was renewed and the bottles became the property of the lessee after three years. 17. The entire conduct of the parties in relation to the bottles is contrary to the provisions contained in the lease agreement entered into between the parties. It is clear from the conduct of the parties that the intention of the parties was not to lease and the lease agreement was executed not to be implemented and actually it was a financial arrangement between the assessee and the lessee and the lessee paid the amount back to the assessee along with market rate of interest spread over quarterly installment in three years starting from 28.2.1991 irrespe ..... X X X X Extracts X X X X X X X X Extracts X X X X
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