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2019 (11) TMI 209

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..... depend upon the provisions of Law relating thereto, and not on the view, which the assessee might take of his right, nor could the existence or absence of entries in the books of account by decisive or conclusive in the matter. No justification to sustain the addition. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. Levy of penalty under section 271(1) (c) - disallowance of loss of 10B Unit, which claim of assessee have been allowed by the Ld. CIT(A) and addition have been deleted. - A.O. made further addition on account of finance lease and long term capital gains - HELD THAT:- Matter requires reconsideration at the level of the Ld. CIT(A). It is well settled Law that CIT(A) while deciding the appeal of assessee shall have to mention point for determination and reasons for decision in the appellate order. CIT(A) confirmed the levy of penalty merely because Ld. CIT(A) confirmed both the additions on quantum appeal. It is well settled Law that quantum proceedings and penalty proceedings are independent and distinct in nature. CIT(A) shall have to give reasons for decision while confirming the penalty or deleting the addition. In this v .....

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..... nance lease. 4.1. The addition was challenged before the Ld. CIT(A). The written submissions of assessee is reproduced in the appellate order in which the assessee has briefly explained that assessee had taken infrastructure/movable assets on lease which were located at the three places i.e., Malleswaram Centre, Bangalore, Mehdipatnam Centre, Hyderabad, Mylapore Centre, Chennai. It was further submitted that in accordance with the mandatory prescription of Accounting Standard AS-19 on Leases issued by the Institute of Chartered Accountants of India [ ICAI ], the aforesaid leases were recognised as finance lease. Accordingly, the present value of future lease rents was recognised as capital assets in the books of account and correspondingly recognised as liability. Lease rents payable over the period of lease are divided into two parts i.e., (i) principal payment of its cost of asset, which is reduced from the liability recognised in the books and (ii) finance charges, which is recognised as expense and debited to the P & L A/c. Accordingly in the books of account, out of the total lease rent of ₹ 56,73,765/- paid by the assessee during the relevant previous year, an amoun .....

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..... tation of income for tax purpose under the Act. The assessee also relied upon Judgment of the Hon ble Supreme Court in the case of ICDS Ltd., vs. Commissioner of Income Tax 350 ITR 527 (SC) wherein the Court held that lesser is the owner of the leased property in the case of finance lease and is, therefore, entitled to depreciation on the same. The assessee also relied upon Judgment of the Hon ble Rajasthan High Court in the case of Commissioner of Income Tax vs., Banswara Synthetic Ltd., 216 Taxman 113 (Raj.) in which it was held that lease rentals paid by the lessee in case of a finance lease was allowable as revenue expenditure under section 37(1) of the I.T. Act and not as interest by treating cost of lease assets as loan amount. The assessee also relied upon decision of Hon ble Karnataka High Court in the case of Banashankari Medical and Oncology Research Centre Ltd., [2009] 316 ITR 407 (Kar.). In that case, the assessee had taken certain equipments on lease, for which, it had paid certain sum as deposit which was to be adjusted against the lease rentals and besides that, the assessee was also paying finance/interest charges to the owner of the equipments. The entire amount of .....

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..... expenditure. He has also relied upon Judgment of ITAT, Ahmedabad Bench in the case of Axis Bank Ltd., vs. Addl. Commissioner of Income Tax, Range-1, Ahmedabad [2017] 79 taxmann.com 187 (Ahd.-Trib.) in which the Tribunal following the Order of the Coordinate Bench, allowed the claim of assessee for depreciation of wind energy generators acquired under operating lease agreement. 6. On the other hand, Ld. D.R. relied upon Orders of the authorities below and submitted that assessee made entries in the books of account as amount is capital in nature, therefore, appeal of assessee may be dismissed. 7. We have considered the rival submissions and perused the material available on record. It is not in dispute that in assessment year under appeal assessee is engaged in the business of Information Technology Education and Knowledge Solutions. The assessee claimed the amount in question as revenue expenditure because finance lease were paid for the purpose of business. It is not in dispute that assessee entered into lease agreements time to time with different parties and provisions have been made for infrastructure facilities. Copies of the lease agreements Dated 01.09.2006, 01.04.2008 and .....

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..... is also well settled that whether the assessee was entitled to a particular deduction or not, would depend upon the provisions of Law relating thereto, and not on the view, which the assessee might take of his right, nor could the existence or absence of entries in the books of account by decisive or conclusive in the matter. In view of the above discussion, we do not find any justification to sustain the addition. We, accordingly, set aside the Orders of the authorities below and delete the entire addition. 8. In the result, ITA.No.376/Del./2014 of the Assessee allowed. ITA.No.2801/Del./2017 - A.Y. 2009-2010 : 9. This appeal by assessee has been directed against the Order of the Ld. CIT(A)-27, New Delhi, Dated 27.02.2017 for the A.Y. 2009-2010, challenging the levy of penalty under section 271(1) (c) of the I.T. Act, 1961. 10. In this case assessment was completed under section 143(3) of the I.T. Act, 1961. The A.O. made addition of ₹ 7.33 crores on account of disallowance of loss of 10B Unit, which claim of assessee have been allowed by the Ld. CIT(A) and addition have been deleted. The A.O. made further addition of ₹ 50,09,835/- on account of finance lease and additi .....

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