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2001 (4) TMI 926 - ITAT MUMBAI

2001 (4) TMI 926 - ITAT MUMBAI - [2002] 74 TTJ 291 - IT (SS) A. No. 34/Mum/2000 - Dated:- 17-4-2001 - J. P. Bengra (V.P.) And S. V. Mehrotra (A.M.) For the Appellant : A. V. Sonde, J. P. Bairagra For the Respondent : H. V. Kalra ORDER This is an appeal by the assessee against the order of CIT(A), Central-VI, Mumbai, pertaining to block assessment for the period from 1st April, 1987, to 26th Sept., 1997. The assessee has raised the following grounds in this appeal : "1. The learned CIT(A) er .....

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nt to M/s National Plastic Industries Ltd. of ₹ 25 lakhs under s. 69C of the IT Act, 1961. 3(ii) Without prejudice to the above, the learned CIT(A) further erred in holding that addition of alleged payment of ₹ 25 lakhs in cash to M/s National Plastic Industries Ltd. for procuring large order should be made under s. 69C of the IT Act and no deduction of the said amount which is paid on account of interest against excess advance and cash discount should be allowed under s. 37(1) of th .....

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sed back are mere security and the appellant was never the real owner of assets. 4(iii) The learned CIT(A) further erred in heavily relying on the power of attorney issued in favour of PSEB and RSEB which authorises them to sell the leased asset to any intending purchaser at a price not less than fixed in the power of attorney on the expiry of the lease period. 4(iv) The learned CIT(A) further erred in concluding that the appellant-company does not enjoy any right of ownership of the leased asse .....

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assume any risk of ownership of the equipment purchased by them from PSEB/RSEB. 4(viii) The CIT(A) further erred in confirming the finding of the AO that all such sale and leaseback' transactions where the alleged owner does not assume any risk of ownership of the assets nor entitles himself to any reward of such ownership ensures his right to recoup his investment wholly or substantially over the period of lease, the asset is purchased from the lessee only to be given back to him on lease .....

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ransactions with PSEB/RSEB can at best be said to be an hire-purchase agreement with the lessee ultimately acquiring and equipment at the end of the lease period. 4(x) The learned CIT(A) further erred in holding that even in the case of three lease transactions with RSEB, wherein under two agreements the appellant-company has acquired the equipment from Mafatlal Finance Co. Ltd. and Kotak Mahindra Ltd. on hire-purchase basis, the conclusion arrived for not allowing the claim of depreciation of t .....

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is engaged in the business of injection mounding machinery. A survey was conducted under s. 133A(1) of the IT Act, 1961, on 26th Sept., 1997 at the corporate headquarters and the factory of the assessee-company at Thane. It is the case of the Revenue that simultaneously a search was also conducted under s. 132 of the Act at the address of the chairman of the assessee, viz. 88C, Old Prabhadevi Raod, Mumbai. During the course of the search at 88C, Old Prabhadevi Road, certain documents were seized .....

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survey report and copies were obtained which are listed in Annexure 'B' to the survey report. The assessee was asked to submit its explanation with respect to the documents and extracts. Of special relevance were the documents inventorised at Annexure 'A' and Sr. Nos. 6 to 10 of copies of documents in Annexure 'B'. The loose paper bundle containing 2 pages at serial No. 1 of Annexure 'A' is the same as pp 1 and 2 of the loose pages bundle containing 17 pages at S .....

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6, the details of six machines to be supplied by the assessee-company to M/s National Plastics are noted, showing the model number, list price, order price, the percentage discount the delivery plant and the status. This order from the party, as per the noting on this page, was finalised at the end of November, 1995. The said party was to pay ₹ 200 lakhs immediately. As regards these unaccounted transactions of supply of machines, two machines were delivered in the month of March, 1996, an .....

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had been reduced, leaving a credit of ₹ 33,59 lakhs with the assessee. The important notings on this page are at the bottom and is highlighted below : "Rs. 25 lakhs was as interest against excess advance as discount too. Approx of ₹ 8 lacs as interest and ₹ 17 lacs as further discount (2.25 per cent). We will have to recover approx. ₹ 10 lacs (as discount adjustment)." 3. The AO concluded that the payment of ₹ 25 lacs was made to M/s National Plastic Indus .....

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x machines proposed to be supplied to M/s National Plastic Industries Ltd., an additional column of cash discount at the rate of 2.25 per cent is also mentioned. The total discount shown in respect of the six machines is mentioned as ₹ 17 lacs. On the lower portion of the page, the fresh status as on 28th Sept., 1996 is noted in addition to the notings which were on page No. 1 as under : "Status : (28th Sept., 1996) Customer wants W1100 in February/March and is offering to keep advanc .....

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ivities of the assessee-company, was recorded, in relation to these documents. The AO has pointed out that in response to question No. 27, Shri Melatur confirmed that the survey team had found the above-mentioned two papers from one of the files in the room occupied by the secretary and executive director, Shri Shantanu Aditya. He further mentioned that Shri Melatur had stated that these papers contained a statement showing the latest status of orders, sales, outstandings and other details in re .....

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to his taking over as executive director. In order to appreciate this evidence, the relevant statement is extracted below : "These two papers pertain to the period prior to my taking over as executive director. The then executive director was Shri R. Venkatachalam. He is now at Nasik. I will try to give you the contact address at the earliest. Regarding these 2 papers, I have had some discussions in the past with Shri Alok Tibrewala, who used to work as Dy. General Manager (Sales) in our co .....

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vance. For this high advance, company offered then a cash discount. However, owing to poor market conditions, National Plastics did not honour their commitment and did not lift all the machines. In fact they lifted only 2 machines finally. The cost of these machines was adjusted against the advance and the balance, the amount is lying as credit balance in our account. As they did not honour their commitment, our company also did not offer the cash discount to them." 5. During the course of .....

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dy been received and because of the proposed cancellation, certain sums were to be recovered out of the payments made, it was proposed to treat the sum of ₹ 25 lakhs as unaccounted payment made by the assessee unless it was shown to have been recorded in the books of the assessee. The assessee, in reply, vide its letter dt. 24th Nov., 1999, submitted as under : "In response to your queries in connection with the above-mentioned assessment, we wish to state that our customer M/s Nation .....

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nce three machines were not supplied. Hence, the special discount offer was not given at all. We have allowed them 20 per cent discount on list price. In general practice, we are allowing discounts ranging between 15 per cent to 20 per cent depending upon business relations with party, quantity and value of order, as well as the advance given by the party. For your perusal, we are enclosing photocopies of a few bills, which show similar discount given to other parties in the same period." V .....

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the time of survey it is submitted that they are in respect of large order of ₹ 7.47 crores received from National Plastic Industries Ltd. against which advance of ₹ 2 crores was also received. Accordingly, there was a discussion going on to grant interest against the excess advance received and special discount on account of the big order. However, no such interest was granted and no special discount was given to the party as the party has ultimately purchased only two machines and .....

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ct of remarks and status as on 28th Sept., 1996, given on page No. 2 of the paper. The two concerned persons namely Shri R. Venkatachalam and Shri Alok Tibrewala have already left the services of the assessee-company long back and, therefore, the assessee-company is unable to explain these remarks. We would, therefore, submit that whatever transactions taken place with National Plastic Industries Ltd. are duly recorded in the books of the accounts of the assessee-company and they are duly confir .....

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om the assessee gave written submissions in the form of a letter briefly stating the following facts : "1. It is very clear from the facts that additional cash discount @ 2.25 per cent totalling to ₹ 17 lakhs was to be given to M/s National Plastic Industries Ltd. if they would have purchased 6 machines as per the order given. 2. It is very clear from the facts they have purchased only two machines and returned back the third machine delivered to them and cancelled the order for the r .....

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ustries Ltd. whether they have received a sum of ₹ 25 lakhs in cash in the form of cash discount of ₹ 17 lakhs and interest of ₹ 8 lakhs on the advance paid, as alleged by the AO and the receipt of the same is also not confirmed by M/s National Plastic Industries Ltd. though they have confirmed all the transactions between the appellant-company and then as per their confirmation letter, which is already filed with the AO. 5. The AO has no evidence except some remark on these tw .....

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is applicable on expenses incurred which are not accounted for by the assessee-company in its books of account. It is strange to digest that a businessman will pay a sum of ₹ 25 lakhs as discount for getting large order during the course of business; but will not record the same in his books of account as if the same is recorded in the books of account, it will be allowed as business expenditure. 8. Without prejudice to the above, it is submitted that if at all the appellant-company had ma .....

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me. 9. We rely on the decision of the Supreme Court in the case of Kishinchand Chellaram vs. CIT (1980) 19 CTR (SC) 360: (1980) 125 ITR 713(SC). In this case, the assessee had an office in Bombay and one in Madras. On receiving information that a sum of ₹ 1,07,350 was remitted by the assessee by two telegraphic transfers from Madras to Mumbai through bank. The ITO wrote two letters to the manager of the bank and got the reply that 'T' an employee of the assessee remitted the amount .....

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eted. 10. Looking to the facts of this case in the light of the above Supreme Court judgment, your honour will find that neither National Plastic has confirmed receipt of ₹ 25 lakhs nor they were examined for the same. Further, the two officers namely Shri Alok Tibrewala and Shri R. Venkatachalam who were in charge of the business of the appellant-company at the relevant time were not examined by the AO. There is no evidence available with the AO regarding payment of ₹ 25 lakhs in ca .....

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any other provision of this Act, such unexplained expenditure which is deemed to be the income of the assessee shall not be allowed as a deduction under any head of income.' 12. Since this proviso is not applicable during the block period which ends on 26th Sept., 1997, the addition, if at all made under s. 69C, the deduction of the same should be allowed as business expenditure as the assessee is alleged to have paid cash to M/s National Plastic for getting large sales order from them.&quo .....

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l for the assessee and the case laws relied in this behalf, as mentioned above, the CIT(A) concurred with the view taken by the AO for the detailed reasons given at pp. 13 to 17 of his order. He has further mentioned that the assessee is not entitled to any deduction under s. 37(1) of the Act also. 7. The learned counsel for the assessee, in brief submitted that during the course of survey action it was clearly stated in the statement recorded of Shri Ganesh Melatur, Dy. General Manager (Finance .....

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ad, the two persons, viz., Shri Ganesh Melatur and Shri Shantanu Aditya, were examined. The alleged transactions do not pertain to the period of these two persons, whose evidence were taken in support of the addition under s. 69C of the Act. It is further pointed out that the AO had not examined any employee or director of M/s National Plastic Industries Ltd. to establish whether they have received the sum of ₹ 25 lakhs in cash in the form of cash discount of ₹ 17 lakhs and interest .....

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it is concluded that the assessee-company had paid ₹ 25 lakhs out of the books in cash to M/s National Plastic Industries Ltd. The learned counsel for the assessee placed reliance on the decision of the Tribunal in the case of S.K. Gupta vs. Dy. CIT (1999) 63 TTJ (Del) 532for the proposition that if no corroborating evidence is brought on record to show the purchase and sale of properties had actually taken place, there is no question of any undisclosed investment or income as contemplated .....

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sought nor any opportunity is given, to controvert the same, the evidence could not be relied upon against the assessee. Alternatively, it was submitted that if at all the addition is to be confirmed as deemed income of the assessee under s. 69C of the Act, since it is an expenditure deduction of the same should be allowed to the assessee under s. 37(1) of the Act. It is pointed out that it is clear from these two papers that the alleged payment was made to M/s National Plastic Industries Ltd. .....

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1999. The Circular No. 772, dt. 23rd Dec., 1998 [published at (1999) 151 CTR (St) 9] clearly states that unexplained expenditure is treated as income under s. 69C. But there is no corresponding provision for disallowance of such expenditure as the taxpayers are claiming deduction of such expenses under s. 37(1) of the Act and in order to curb this practice the amendment is brought on the statute book from asst. yr. 1999-2000 and subsequent years. It is pointed out that in the case of the assesse .....

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oyees. If the loose papers found are not in dispute, the transaction recorded therein from part of materials to arrive at the conclusion that the assessee had incurred the expenditure in cash out of the books. So it shall be deemed to be the income of the assessee under s. 69C of the Act. 9. We have considered the rival submissions of the assessee and have gone through the materials available on record. Sec. 69C of the Act reads as under : "69C. Where in any financial year an assessee has i .....

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e assessee shall not be allowed as a deduction under any head of income". [The proviso was inserted by Finance (No. 2) Act, 1998, w.e.f. 1st April, 1999]. From the reading of this provision it is clear that if the assessee had incurred any expenditure for which he offers no explanation or the explanation offered is not satisfactory, the amount covered by such expenditure will be deemed to be the income of the assessee for such financial year in which the expenditure was incurred. In the pre .....

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₹ 10 lakhs) was to be recovered as discount adjustment, since M/s National Plastic Industries Ltd. had cancelled order for three machines and had not lifted the third machine manufactured by the assessee. As per the documents found, the special payment/discount given to M/s National Plastic Industries Ltd. for the 6 machines had to be recovered in respect of 4 machines, which were either cancelled or not lifted by M/s National Industries Ltd. The basic argument of the learned counsel for .....

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documents or to adduce any evidence and, therefore, reliance cannot be placed on them. In this connection, the learned counsel for the assessee relied on the decision of the Tribunal in the case of S.K. Gupta (supra) and also on the decision of the Supreme Court in the case of Kishinchand Chellaram (supra). So far as this contention is concerned, it is true that the Hon'ble Supreme Court had laid down the principle that if an evidence has to be used against the assessee it is the duty of the .....

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e. However, the facts of the present case are distinguishable from the facts of the present case are distinguishable from the facts of the case before the Hon'ble Supreme Court. In this case loose papers were found during the course of search in which transactions with M/s National Plastic Industries Ltd. were found recorded. The assessee, at no point of time, has claimed that these papers do not belong to it or to the transaction entered into with M/s National Plastic Industries Ltd. It is .....

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that he was not its owner, was on that person. Therefore, the presumption laid down under s. 110 of the Evidence Act, 1872, could be attracted to a set of circumstances that satisfy its conditions and was applicable to taxation proceedings. It was further held that a legitimate inference could be drawn that the petitioner had income which he had invested in purchasing the wrist watches and could be held to be the owner of the wrist watches and their value could be deemed to be his income by virt .....

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t. 10. The next question that arises is that if the addition is construed as deemed income of the assessee under s. 69C of the Act, whether the deduction of the same should be allowed on the basis of the same papers, under s. 37(1) of the Act as the expenditure had been found to have been incurred by the assessee in the form of cash discount and interest. Here the argument of the learned Departmental Representative was that the proviso to s. 69C of the Act was brought on the statute book, which .....

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ificatory. For example, such Explanation as in s. 263 or s. 37 started with wording "for the removal of doubts . . . . . . . ". In this case, no such wordings appear in the proviso. We would like to mention here that the controversy whether the proviso is retrospective or prospective will arise only when the section is ambiguous. In this context, we find that there was no ambiguity earlier. Therefore, it is incorrect to presume that the section was ambiguous. It is only for the purpose .....

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that a portion which is favourable to the Department should be accepted and the portion which is not favourable to the Department should be rejected. The papers clearly state that the assessee had incurred unaccounted expenditure for the purposes of business. Therefore, if this amount is added as deemed income of the assessee under s. 69C of the Act, at the same time it should be allowed as a business expenditure under s. 37(1) of the Act. This is also clear from the circular of the Board bearin .....

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of undisclosed income on account of sale and lease-back transactions with Punjab State Electricity Board (PSEB) and Rajasthan State Electricity Board (RSEB) amounting to ₹ 11,64,89,975. During the course of survey, lease agreements entered into by the assessee with PSEB and RSEB were found and inventorised as Annexure 'A' to the survey report. Copies of these documents were also mentioned at serial Nos. 6 to 9 of Annexure 'B' to the survey report. The AO examined these leas .....

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actions; that the assets alleged to have been purchased and leased back, acting merely as a security and that the assessee never owned these assets. It was also brought to the notice of the assessee that in view of these circumstances, the depreciation claimed by it in respect of these assets was not allowable and that out of the lease rental it was proposed to tax only the interest portion. The assessee was given opportunity to satisfy the doubts of the AO. The assessee vide its letter dt. 21st .....

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m RSEB. The lease agreement dt. 29th Sept., 1995, enterred into with PSEB is mentioned at pp 34 to 37 of the order of the AO, as per the submissions given by the assessee, which are quoted by the CIT(A) at p 37 of his order. The AO analysed the salient feature of the lease agreement in paras 6.1 to 6.3.19 of his order. Then the AO analysed the agreements entered into by the assessee with RSEB, dt. 27th March, 1995. The value of the equipment leased as per the three agreements was ₹ 2.15 cr .....

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spects. The AO, therefore, examined the direct sale and lease back agreements entered into by the assessee with PSEB and RSEB. He analysed the agreements with RSEB in paras 6.4 to 6.4.6 of his order. In sum and substance, he held that the lease agreements entered into between the assessee-company and PSEB and RSEB are only loan transactions, the lease of the assets can, at best, be said to be a hire-purchase arrangement with the lessee ultimately acquiring the equipment at the end of the lease p .....

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elow : Sr. No. Observation of AO Contention of appellant company 1 2 3 Ownership of the Assets 1. There was no genuine sale of equipments and several terms of the lease agreements are contrary to the claim of absolute ownership. Sale and lease-back is one of the recognised and legally accepted modes of raising finance. By purchasing the assets from Electricity Boards and paying the agreed consideration, the assessee became the legal owner of the assets. The transactions were subjected to sales-t .....

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ected by the assessee by making the lessee responsible to take proper care of the assets. 3. Sec. 26 of the Sale of Goods Act envisages that risks of ownership must pass with the property and in the instant case the purchasers of the equipment from SEBs had not assumed any risks of ownership. In fact, all losses in respect of the said equipment were to be borne by the lessee. The provisions of s. 26 of the Sale of Goods Act applies at the time of sale of equipment by the SEBs to the assessee and .....

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be mixed up with the obligations cast on the lessees as per the lease agreement. 4. Owner must give warranty for the fitness, suitability, etc. of the equipment. In the instant case, however, the lease agreements stipulate that the lessor does not make any representation or warranty, At the time of purchase of the assets it was the Electricity Boards who gave warranty for the fitness, suitability, etc. of the equipment as they were the owners at that point of sale. Immediately thereafter the ass .....

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him as a man of ordinary prudence would under similar circumstances. However, in the instant case, any loss or damage to the equipment is to be borne by the lessee and in the event of total loss/damage, the lessees would have to replace the equipment at its own cost and the lease will continue. Sec. 152 of the Indian Contract Act provides that 'the bailee' in the absence of any special contract is not responsible for the loss, destruction or deterioration of the thing bailed, if he has t .....

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to buy the leased equipments is given to the lessee in the lease agreement. It is only a power of attorney given in favour of the Secretary, PSEB, authorising to negotiate and sell these equipments to any intending purchaser at a price not less than minimum mentioned in the power of attorney on the expiry of the lease period. 2. The AO has stated that a true transaction of hire or lease can be certained by three tests as observed by the Supreme Court in the case of Damodar Valley Corporation vs. .....

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t to recover all amounts due under the lease agreement in case of any default by the lessee. The lessor had not taken any risk of ownership but had reserved the right to recoup the full investment. In case of agreement with RSEB and PSEB the agreements specifically provide that the appellant is the owner of the assets (on pg. 7 of the agreement for RSEB and on p 3 for PSEB). It is reiterated on p 13 for RSEB and in cl. 7(a) for PSEB that in spite of lease agreements, the appellant continues to r .....

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look to the substance or essence of it rather than its form. The substance and essence of the agreement will clearly show that it is a genuine lease transaction. The parties to the transaction have acted accordingly and the other revenue implications like sales-tax and lease tax were and are being fulfilled. 5. In a true transaction of lease, in case of default, the lessor would have been entitled to terminate the lease, repossess the assets and claim damages. However, in the instant case, the .....

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ease agreement goes to ensure that the lessee does not commit any breach of the terms of the agreement. This right is a specific right, over and above the normal right of repossession given under the Contract Act. Whether the transactions were loans 1. The substance of the arrangement is one of lending against security of fixed assets : A sale and lease-back transaction contemplates sale of assets by a person using the asset and in need of finance to a person who is willing to finance by purchas .....

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son willing to finance is able to earn a reasonable rate of return consequent to the lease of the said asset; (d) Since the lease of the asset would amount to a contract of bailment, the lessor has absolute right over the asset. 4. The terms of finance were worked out independent of any specific equipment to be sold by SEBs. In fact, it is apparent that the transaction has been given the colour of lease by simply identifying the assets qualifying for 100 per cent depreciation valuing them arbitr .....

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dentified assets, a fact acknowledge by the AO in para 6.3 of his order. However, the CIT(A) did not agree with the assessee and in sum and substance, concurred with the view taken by the AO for the detailed reasons given in his order, in which he has held that these agreements are, in fact, financial arrangements, which could be treated as loan and not a true lease. He, therefore, confirmed the disallowance. 13. The learned counsel for the assessee submitted that Expln. 4A to s. 43(1), which is .....

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the asset, in the hands of the lessee, who was the previous owner will be treated as cost in the hands of the lessor. The measure while not affecting bona fide transaction will prevent does making concerns from indulging in unhealthy trade of depreciation." (para 95 of the speech) Thus, it is clear that even prior to the amendment the lessors were entitled to depreciation on leased assets. The only difference that was brought in this amendment was that the cost of acquisition in the hands .....

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agreements leased assets had never existed or purchase price for the lease assets came back to the lessor by discounting the lease rental either directly from the lessee or through circuitous route from intermediaries and that the line of investigation is mentioned in that circular. It was also directed that field inquiries are to be made to identify and verify about the existence of the lease assets, the compliance of various provisions of the law relating to transfer of assets, such as payment .....

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tion. In the concluding para it was directed that if the finance lease transaction is found to be not genuine or fraudulent and the basic document like insurance papers and inspection report are found to be false, then in addition to the disallowance of the claim for depreciation, launching of prosecution should be considered. 14. In the light of the above circular, the learned counsel for the assessee submitted that in the case of the assessee the sale and lease-back transactions are entered in .....

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, as the purchase price was paid as per the valuation reports obtained from the registered valuer, which is not challenged. Expln. 4A to s. 43, which came into force w.e.f. 1st Oct., 1996, is not applicable and, therefore, the transactions entered into by the assessee are genuine, which had been confirmed by the lessee and the plant and machineries were identified and were in existence. 15. The learned counsel for the assessee further relied on the Circular No. 2 of 2001, dt. 9th Feb., 2001, [pu .....

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g lease and finance lease and also requires capitalisation of assets by the lessee in financial lease transaction, but directed that the accounting standard will have no implication on the allowance of depreciation on assets under the provisions of the IT Act. In view of this circular, it is submitted that none of the conditions mentioned in Instruction No. 1978, dt. 31st Dec., 1999, are found in the lease transaction entered into by the assessee-company. It is also submitted that the applicabil .....

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e of Unimed Technologies Ltd. vs. Dy. CIT (2000) 69 TTJ (Ahd) 25: (2000) 73 ITD 150(Ahd), the issue was position with regard to the decision of the Tribunal in the case of Coronet Investments (P) Ltd. in ITA No. 2103/Mum/1999, dt. 7th March, 2001. Regarding the two decisions of the Supreme Court relied upon by the AO, i.e., in the case of Damodar Valley Corporation vs. State of Bihar 12 STC 102and in the case of Sundaram Finance Ltd. vs. State of Kerala 1966 AIR SC 1176, it was submitted that bo .....

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al arrangement to which the ruling of the Supreme Court in the case of Sundaram Finance Ltd. was applicable. In this ruling, based on facts, the hire-purchase agreement was regarded as financial transaction. The Bombay High Court first rejected the lessee's contentions, holding that the essential distinction between a lease and a financial transaction was a retention of title by the lessor. The lessee went in appeal before a Larger Bench of the High Court, where also the contentions of the l .....

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reciation to the leasing concerns. This amendment was brought into the statute book to restrict the depreciation in the hands of the lessor w.e.f. 1st Oct., 1996, on the written down value in the hands of the previous owner, i.e., the lessee. So the amendment by way of Expln. 4A to s. 43(1) has accepted the principle of sale and lease-back of assets to restrict the depreciation from cost of acquisition to written down value in the hands of the previous owner. The CBDT, vide its Instruction No. 1 .....

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sets on paper should be discouraged and depreciation should not be allowed to the unreal owner. But that instruction is not applicable to the facts of the present case because the transactions have been entered into between the assessee and the two State Government undertakings and there is no finding of any authority that no such agreements were ever entered into between the parties and consequently the machinery was never purchased and leased back by such agreements. It will be pertinent to me .....

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the sale price of the assets from their block of assets. It will also be pertinent to mention here that in the present case, the purchase price was paid as per the valuation report obtained from a registered valuer, which had not been challenged or found false by any investigating authority or by the AO. Therefore, Expln. 4A to s. 43(1) is not applicable and the transactions entered into by the assessee are all genuine. 19. The Circular No. 2 of 2001 dt. 9th Feb., 2001, referred to above and on .....

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ioned in the Instruction No. 1978, dt. 31st Dec., 1999, are found in the impugned transactions entered into by the assessee-company. It will be pertinent to mention here that the AO has recorded the statement of all concerned authorities of the two Electricity Boards, who have confirmed the existence of sale and lease-back of assets. It is also found that no depreciation had been claimed by PSEB and RSEB on these assets. Under these circumstances, it cannot be treated as a sham transaction of le .....

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was found that the lease agreement is at arms length with the Government of Rajasthan, the claim for depreciation cannot be disallowed. Similar view was expressed by the Mumbai Bench of the Tribunal in the case of Coronet Investments (P) Ltd. in ITA No. 2103/Mum/1999 decided on 7th March, 2001, wherein the Tribunal, following its order in the case of Berlia Chemicals & Traders (P) Ltd. in ITA No. 7510/Bom/1993, dt. 25th Oct., 1999, had allowed the claim of the assessee. The facts of these c .....

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; and (vi) Accu Dress vs. Asstt. CIT (1998) 62 TTJ (Ahd)755. We find that the AO has relied on the two decisions of the Supreme Court in the case of Sundaram Finance Ltd. (supra) and in the case of Damodar Valley Corporation (supra). But these decisions were considered by the Bombay High Court in the case of Prakash Industries Ltd. in Appeal No. 12 of 1999, decided on 28th Jan., 1999, in Notice of Motion No. 2343 of 1998 in Suit No. 3196 of 1998. We find that the Special Leave Petition against t .....

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to claim depreciation. This ground of the assessee is accordingly allowed. 20. The next grievance of the assessee in this appeal is that CIT(A) erred in holding that the assessee-company is liable for interest under s. 158BFA of the IT Act. In this ground the assessee has challenged the charging of interest under s. 158BFA of the Act. The CIT(A) has discussed the same on pp 65 and 66 of his order and held that though the extension was granted by the AO of 30 days vide his letter, dt. 25th Nov., .....

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28th Nov., 1997. The assessee has filed the return on 28th Nov., 1997, itself. Therefore, from this factual aspect of the matter, the return filed by the assessee is within the time and, therefore, the assessee is not liable for any interest under s. 158BFA of the Act. The order of the CIT(A) on this issue is set aside and the AO is directed to delete the interest. This ground of the assessee is accordingly allowed. 21. The next grievance of the assessee is that the CIT(A) erred in holding that .....

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