TMI Blog2018 (5) TMI 951X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee was in possession of an asset and was using for its business ownership of such assets should be presumed - that title deeds were not necessary as long as assessee had dominion over the assets - that De facto ownership was to be looked into and nont De jure ownership. See Indian Railway Finance Corporation (2014 (6) TMI 224 - DELHI HIGH COURT). Mysore Minerals (1999 (9) TMI 1 - SUPREME Court) and Gupta Global Exim(P.) Ltd. (2008 (5) TMI 7 - SUPREME COURT). - I.T.A./1284/Mum/2015 And I.T.A./1281/Mum/2015 - - - Dated:- 11-5-2018 - Shri Rajendra, Accountant Member And Sandeep Gosain, Judicial Member For The Revenue : Shri Saurabh Deshpande-DR For The Assessee : Shri K.B. Desai Order u/s. 254(1)of the Income-tax Act. 1961(Act ) PER RAJENDRA. AM Challenging the order. dated 04/12/2014. of the CIT(A)-58 Mumbai the Assessee and the Assessing Officer (A. O) have filed the present appeals. Assessee- company is engaged in the business of trading and processing of Iron ore. mining activity of iron ore contract basis at Jharkhand and generation of wind power. It also sells processed iron ore both in domestic and international market. It filed its retur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re not there in the preceding year. that during the year under consideration the assessee had advanced an amount of more than ₹ 50 crores to its AE. s as against ₹ 5. 28 lakhs for the earlier year. that the assessee had not charged any interest on the advances made to the AE. s. that in the previous year the expenses claimed by the assessee were related to travelling. lodging and boarding. that for the year under appeal those facts were not existing. that the assessee had contended that interest charged by the AO was quite high. that it had requested to apply LIBOR plus rate. that the request made by the assessee was reasonable. He directed the AO to charge the rate of interest as six (6) months LIBOR plus 150 basis point. 4. Befores us. the Departmental Representative (DR) stated that now the Bloomberg data is available for deciding the exact rate of interest. that the file should be sent back to the AO/TPO. The Authorised Representative (AR)stated that the figure adopted by the FAA was actually incorrect. that he had adopted the figure of ₹ 50 crores as against ₹ 19. 50 crores. that the FAA had tried to distinguish the cases relied upon by his predece ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tention of the assessee company that re-characterization of a transaction is permissible only where the economic substance of a transaction differs from its form. and where the form and substance of the transaction are the same but arrangements made in relation to the transaction. viewed in their totality. differ from those which would have been adopted by independent enterprises behaving in a commercially rational manner. pursuant whereto it is not permissible on the part of the Revenue/Department to carry out re- characterization of a share application money as a loan due to delay in allotment of shares. however in light of the facts involved in the case of the present assessee company. though we find ourselves to be in agreement with the contention of the Ld. A. R that to the extent 31. 120 shares worth US $ 6. 60. 000 had been allotted to the assessee company. the re-characterization by the AO/TPO of the remittance made by the assessee company by way of share application money to its WOS' to the said extent. as a loan due to delay in allotment of shares is not permissible in the eyes of law. but are unable to persuade ourselves to accept the contention of the Ld. A. R that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... can safely and inescapably be concluded that as the remittance of US $ 2. 00. 000 made by the assessee company to its 'WOS' did not see the light of the day and thus never crystallized into allotment of any shares to the assessee company. but rather as a matter of fact culminated into refund of the said amount to the assessee company. therefore on consideration of the said transaction in totality. as such. the same at no stage could be characterized as a remittance towards share application money. pursuant whereto the issue of any re-characterization would never arise. In this regard it would further be relevant and pertinent to point out that now when the economic substance of the remittance of US $ 2. 00. 000 (supra) by the assessee company to its 'WOS' towards share application money. can safely and inescapably be held to be in the nature of a transaction different from its form. and rather as a matter of fact the arrangements made in relation to the aforesaid transaction. viewed in their totality. differ from those which would have been adopted by the assessee company behaving in a commercially rational manner. no embargo under such factual circumstances can be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ipt of the payments by the assessee company from its aforesaid WOS/AE. Thus in light of our aforesaid observations. the Ground of appeal no. 4 and Ground of appeal no. 5 so raised by the assessee company. are thus partly allowed. Respectfully. following the above. we direct the AO/TPO to work out and restrict the said adjustment by adopting rate of interest as 6 months LIBOR plus 150bps for the delayed receipt of the payment. 7 . Ground no. 3 deals with lease rental. We find that issue of lease rental i. e. financial lease or operating lease has been deliberated upon by the Tribunal in the earlier year as under: 34. the assessee company vide its 'Ground of appeal No. 6' had challenged the order of the Ld. CIT(A) who had upheld the disallowance of 'lease rentals' made by the A. O and had concurred with the A. O that the 'lease transaction' executed by the assessee company was a Finance lease' and not an 'Operating lease'. 35. The facts pertaining to the issue under consideration are that the assessee company which is engaged in the business of mining and wind power had in the period relevant to A. Y. 2006-07 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period relevant to A. Y. 2006-07 they had entered into a similar transaction for one wagon and had given same treatment in the 'Books of accounts' and the 'Return of income'. as was so done by it during the year under consideration. which after thorough perusal was accepted by the A. 0 while framing the assessment u/s 143(3) for A. Y. 2006-07 in the hands of the assessee company. It was however fairly conceded by the assessee company during the course of the assessment proceedings for the year under consideration. that unlike the acceptance by the A. 0 of the lease transaction as an 'Operating lease transaction' in A. Y. 2006-07 and allowing of the lease rental as an expenditure in the hands of the assessee company. as claimed by the latter in its 'Return of income'. the A. 0 while framing of assessment in the hands of the assessee company for A. Y. 2007-08. did not find favour with the claim of the assessee company as regards the 'lease rentals'. and thus disallowed the same by holding that the lease transaction was a 'Finance lease' transaction. aggrieved with which an appeal was filed with the Ld. CIT(A). who though vide his order ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on' and 'Interest' of ₹ 2. 68. 14. 392/- and ₹ 73. 67. 890/-. respectively. as had been claimed by the assessee company in its profit Loss a/c'. the A. 0 refused to take cognizance of the same for the reason that the assessee company itself had given up the said claim. The A. 0 while declining to consider the entitlement of the assessee company towards 'depreciation' and 'Interest'. therein fortified his act by placing reliance on the judgment of the Hon'ble Supreme Court in the case of : Goetz India Ltd. Vs. CIT (2006) 157 Taxmann 1 (SC). on the basis of which the A. 0 concluded that he was divested of his power to entertain a claim of the assessee after filing of the 'Return of income'. as such a claim could only be entertained by him on the basis of a revised 'Return of income' filed by an assessee. 37. That on appeal the Ld. CIT(A) referring to the observations of the A. 0 as regards the issue under consideration. coupled with the fact that the assessee company though had raised a specific 'Ground of appeal No. 8' as regards the disallowance of the 'Lease rentals' of ₹ 9. 70. 34. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its 13 loss a/c' as an expense. but being of the view that the lease transaction was a 'Operating lease'. had thus while filing the 'Return of income' for the year under consideration. disallowed the 'depreciation' and the 'Interest' in the 'Computation of income' and claimed the 'lease rental' of ₹ 9. 70. 34. 749/- as an expenses by treating the lease as on 'Operating lease'. however now when the said claim of the assessee company had not found favour with the lower authorities who therein held that the lease transaction was in the nature as that of a Finance Lease and not an operating lease and on the said basis disallowed the claim of the assessee company as regards lease rental' of ₹ 9. 70. 34. 749/-. pursuant thereto we are of the view that the assessee company was duly entitled towards the 'depreciation' and 'Interest' of ₹ 2. 68. 14. 392/- and ₹ 73. 67. 890/-. respectively. as had been reflected/claimed by it in its 'I' Loss a/c'. That as regards the entitlement of the assessee company towards its claim of 'depreciation'. it would be relevant and p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 006) 157 Taxmann 1 (SC). which debars the A. 0 to allow a new claim of an assessee. which the latter had not raised in its 'Return of income'. except by way of filing a revised 'Return of income'. without going into the issue as to whether the claim raised by the assessee company in the present case towards 'depreciation' and 'Interest'. and duly reflected by the latter in the profit Loss a/c'. but had been added back by the assessee company in its 'Computation of Income'. being of the view that the lease transaction was in the nature as that of an 'Operating lease' and not a 'Finance lease'. could in the backdrop the said factual position be held to be in the nature as that of 'New claim'. therein debarring the A. 0 to allow the said claim of the assessee company. we being of the view that in light of the fact that the lease transaction is in the nature as that of a 'Finance lease' and not an 'Operating lease'. therefore the assessee company would duly stand entitled towards the consequential claim of 'depreciation' and 'Interest' as had been so raised by it in its 'I' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to an order of the Tribunal(ITA/289/Mum/2009. AY. 2005-06). that there was no change in the facts. 10 . Before us. the DR supported the order of the AO . The AR relied upon the order of the FAA and stated that where the assessee was in possession of an asset and was using for its business ownership of such assets should be presumed. that title deeds were not necessary as long as assessee had dominion over the assets. that De facto ownership was to be looked into and nont De jure ownership. He referred to the cases of Indian Railway Finance Corporation(362 ITR 548). Mysore Minerals (239 ITR 775)Gupta Global Exim(P. )Ltd. (305 ITR 132). 11. We have heard the rival submission. We find that in the case of Gupta Global Exim(P. )Ltd. Following the order of the Tribunal earlier year(supra). we decide the ground no. 4 against the AO. as the order of the FAA does not suffer from any infirmity. ITA/1281/Mum/2015: 12. Solitary ground of appeal. raised by the assessee. pertains to . While deciding the first ground of appeal filed by the AO we have restored back the issue to the file of the AO/ TPO. The AO would also make verification about the correct figure of disputed ..... X X X X Extracts X X X X X X X X Extracts X X X X
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