TMI Blog2006 (9) TMI 138X X X X Extracts X X X X X X X X Extracts X X X X ..... lease agreement, 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 instalments in three years starting from February 28, 1991, irrespective of the fact that no bottles were delivered on February 28, 1991. The same is the fate of the other lease agreement entered into between the assessee and M/s. Aravali Leasing Limited. It is the case of the assessee that M/s. Aravali Leasing Limited executed a sub-lease but the tone and tenor of this sub-lease is that of a first lease. The terms and conditions are also the same as between the assessee and Aravali and both have claimed to be the owner. We have considered all the aspects of the transaction between the assessee and the lessee and carefully scrutinized the documents/lease deeds. We consider that the Tribunal rightly came to the conclusion that the transactions between the assessee and the lessees were not transactions of lease but that of financ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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, 1991. The Assessing Officer considered all facts and called for the records from the assessee, lessee and sub-lessee. The Assessing Officer found that while the leasing agreement for soft drink bottles between the assessee and M/s. Aravali Leasing Limited, was entered into on March 15, 1991, M/s. Aravali Leasing Limited, for these very bottles, entered into a sub-lease agreement seven days before this agreement, i.e., on March 8, 1991, with M/s. Unikol Bottlers Limited. However, the record of delivery of the bottles shows that these bottles were dispatched to M/s. Unikol Bottlers Limited between December 10, 1990 and March 16, 1991. It was alleged that these goods were transported from Tapovan i.e the place of manufacturer to Shahibabad where M/s. Unikol Bottlers Limited was situated, by Khanna Goods Transport Company. The assessee took the stand that the transportation charg ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease 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 the Assessing Officer by not allowing depreciation claim. The assessee preferred an appeal against the order of the Commissioner of Income-tax (Appeals) to the Income-tax Appellate Tribunal. The Revenue also preferred an appeal against the order of the Commissioner of Income-tax (Appeals) regarding first lease to the Income-tax Appellate Tribunal. Vide the impugned order the Income-tax Appellate Tribunal allowed the appeal of the Department and dismissed the appeal of the assessee holding that the lease agreement was a financial arrangement between the assessee and the lessee and also upheld the order of the Commissioner of Income-tax (Appeals) of not allowing the depreciation on bottles allegedly leased to M/s. Aravali Leasing Limited. 4. The Tribunal analysed the contents of the lease agreement entered into between the assessee and the lessee in respect of both the transactions and came to the conclusion that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e been relied upon by the assessee, which are on record and the documents are crucial to allow or refuse the claim made by the assessee, even if the Assessing Officer and the 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 the Assessing Officer and the Commissioner of Income-tax (Appeals) about the true meaning and nature of the document. Even otherwise there is no prohibition on the power of the Tribunal to entertain an additional ground which, according to the Tribunal, arises in the matter and for just decision of the case is necessary. In CIT v. Bhopal Sugar Industries Ltd. [1998] 233 ITR 429, it was held by the Madhya Pradesh High Court that there was no prohibition on the power of the Tribunal to entertain a new ground which according to the Tribunal arises in the matter and was necessary to be considered for just decision of the case. The assessee therein although did not claim bonus to the agricultural staff as deduction before the Ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 the order of the Tribunal in not allowing the depreciation is illegal and the assessee was entitled for 100 per cent. depreciation on the leased bottles. The contention of the assessee is that the leasing of assets was one of the businesses of the assessee and the assessee was entitled to depreciation once the assessee puts the stocks in his business. 11. The argument advanced is that in the case of M/s. Coolade Beverages Pvt. Ltd., the assessee had entered into a lease agreement with the lessee on February 15, 1991 and the equipment, i.e., bottles had become the property of the assessee before March 31, 1991 and once the assessee had become the owner of the assets which the assessee has to put into the use of leasing, the assessee became entitled for depreciation. As per the bills/ documents/invoices the bottles were purchased by the assessee between March 28, 1991 and March 30, 1991. The assessee therefore had become the owner of the bottles in the financial year ending March 31, 1991. The assessee was entitled for depreciation since by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the lessee and the lessor will not be responsible for any damage prior to delivery or during the delivery. It was the lessee who was to pay all charges in respect of delivery from the supplier to the lessee. In written arguments filed by the assessee, it is contended that the lessor was liable for any loss or breakage during transportation and to take out transit insurance. This argument runs contrary to the 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 month as specified in the schedule annexed from time to time. An analysis of the above clause would show that the argument of the assessee that the lease commenced from the date of delivery of bottles to the lessee was contrary to the terms of lease as the lease commenced from the date of payment made by the lessor to the manufacturer or from February 28, 1991, whichever was earlier. It is clear from this clause that the moment the lessor, i.e., the assessee paid money to the manufacturer, the lessee became liable for making payment of lease rent to the assessee, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oration v. State of Bihar 12 STC 102 (SC), the 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 on a system of deferred payment of purchase price : (1)whether there is any binding obligation on the hirer to purchase the goods ; (2) whether there is a 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 was the stock called back by the assessee, nor was the lease agreement renewed even at the nominal lease money of 50 paise per 1000 bottles. This shows the real intention of the parties. Although the document provided for renewal of lease and calling back the stock in the case of non-renewal, in fact there was no right reserved by the assessee to get goods back at the termination of the lease agreement and the lease agreement was merely a camouflage to evade tax payment. The lease agreement which has been executed is a pro forma lease agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for consumption of the Income-tax Department to claim depreciation. The fact is that neither were the bottles recalled by the assessee nor was the lease 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 instalments in three years starting from February 28, 1991, irrespective of the fact that no bottles were delivered on February 28, 1991. 18. The same is the fate of the other lease agreement entered into between the assessee and M/s. Aravali Leasing Limited. There the facts are more strange. Before Aravalli Leasing Ltd. became the lessee of the assets, it executed another lease deed with M/s. Unikol Bottlers Limited in respect of the same bottles. In the lease ..... X X X X Extracts X X X X X X X X Extracts X X X X
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