TMI Blog2017 (3) TMI 1817X X X X Extracts X X X X X X X X Extracts X X X X ..... cannot be cancelled within the scope and ambit of section u/s 263. See MAX INDIA LTD. [ 2007 (11) TMI 12 - SUPREME COURT] and MALABAR INDUSTRIAL CO. LTD. [ 2000 (2) TMI 10 - SUPREME COURT]. AO has applied his mind and taken a view therefore, such an order of assessment cannot be held to be erroneous in so far as prejudicial to the interest of revenue‟, unless it is shown that the view of the AO, itself is untenable in law and on facts. Here the ld.PCIT has not even specified as to what kind on enquiry is to be conducted by the AO. Thus, such an assessment order cannot be cancelled u/s 263 - Decided in favour of assessee. - I.T.A. No.2748/Mum/2015 - - - Dated:- 8-3-2017 - Shri Amit Shukla, JM And Shri Rajesh Kumar, AM Appellant by: Shri Arvind Sonde Respondent by : Shri Rajesh Kumar ORDER Rajesh Kumar, AM : The aforesaid appeal has been filed by the assessee against the impugned order dated 20.3.2015, passed by Ld. Principal Commissioner of Income Tax -3, Mumbai under section 263, setting aside the order of the Assessing officer dated 20.3.2013 for passing it afresh. The assessee in this appeal has taken following grounds of appeal: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g principle amount of ₹ 37,14,49,999/- as it was not considered in the profit and loss account. Similarly, it has reduced lease finance charges of ₹ 21,45,45,000/- credited to Profit and loss account. Further, the assessee has reduced the value of leased plant and machinery of ₹ 159.81 crores in the depreciation chart as per Companies Act in the books. However, it has not reduced the same value of plant and machinery from the block of assets for the purpose of income tax. On these premises the Ld.Principal Commissioner of Income under revisionary powers u/s 263 has observed that :- Firstly, under the Income Tax Act, in terms of section 32, the depreciation on asset is allowed to the assessee who is owner‟ of the assets and such asset has been used for the purpose of business or profession; and in case of leased assets, ownership of the assets is to be determined in terms of contract between Lessor and lessee. He also referred to treatment as provided by Accounting Standard-19 which provides allocation of depreciation in the hands of the assessee in the financial lease; Secondly, the assessee has entered into financial lease agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the year of leasing plant and machinery to RIL as required by the said AS-19; v) A reference was also made to various clauses of lease agreement, which closely provided that at every step, the assets were owned by the lessor/owner and will remain asset of lessor/owner during the period of lease. This fact was clearly mentioned that lessee have been given right only for use of the assets for the term of the lease on payment of specified leased rent for a lease period of 10 years. vi) Apart from the above, further detailed submissions were made along with the decisions which have been dealt with by the Ld.PCIT in the impugned order at pages 5 to 7 of the appellate order. 4. It was also pointed out before the ld.PCIT that, figures of claim of depreciation on plant and machinery of ₹ 34,75,58,071/-, was for all plant and machineries and not confined to lease assets; and against the lease rent of ₹ 37.14 crores, the assessee has claimed depreciation of ₹ 25.56 crores. Thus, there is no excess claim of depreciation as mentioned in the show cause notice. The details of income offered and depreciation claimed was given in the following manner: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment under AS-19 and submitted that it mainly required capitalization in the books of accounts of the Lessor which do not, has any effect under Income Tax Act. In support of his various propositions; he referred and relied upon the following decisions which are as under : i) S.B.I. Home Finance Ltd V. CIT (280 ITR 006)(CAL); ii) Rajshree Roadways V. Union of India (263 ITR 206)(RAJ); iii) KM Sugar Mills Ltd. v. CIT (2015) 57 taxmann.com 68(SC); iv) I.C.D.5. v. CIT (2013) 29 taxmann.com 129 (SC); v) Minda Corporation Limited V DC IT (2016) 69 taxmann.com 317(Del-Trib); vi) Industrial Development Corporation of India v. CIT - 268 ITR 130 (Orissa High Court) vii) CIT V/s Zuari Finance Ltd. and Another 271 ITR 538(Bom); viii) CIT V/s v. Gujarat Gas Co. Ltd. - - 308 ITR 243(Guj); ix) CIT V/s Cosmo Films Ltd. - - 338 ITR 266 (Del); x) CIT V/s George Williamson (Assam) Ltd. - 265 ITR 626(Guw); xi) Bharti Hexacom Ltd. v. ACIT (2016) 68 taxmann.Com 357 (Del-Trib) xii) IClCI Bank Ltd vs. JCIT (ITAT Mumbai) ITA Nos.3643 3644/Mum/2001; xiii) SICOM Ltd. v. JCIT [2013]40 taxmann.com 469 (Mumbai - Trib.) xiv) Parle Soft Drinks (P.) Ltd.v. JCIT[2015]6 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich was leased to the Lessee was held by the assessee for more than 5 years and from the terms of lease agreement it has been pointed out before us that the assessee till the period of lease continued to be the owner of the assets for all practical purpose. This is the most important and distinguishing feature here in this case, that ownership, title etc., has not been passed to the Lessee during the period of Lease. This fact has not been properly appreciated by the Ld.PCIT, who got swayed by the fact that it is a financial lease‟ and therefore, the depreciation should have been claimed by lessee and not the Lessor. The assessee had also filed a copy of confirmation from the Lessee, wherein it has been stated that the assessee has not claimed depreciation on the leased plant and this fact has not been rebutted by the Ld.PCIT in his order. On several times it was re-iterated by the assessee after pointing out from various paras of the lease agreement that it was assessee who only owns by the assets and it remained the property of the Lessor during the period of lease and therefore, it was only Lessor who was entitled for claim of depreciation. This aspect too has not been r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... curred for dismantling the plant and installing the same at Gandhar location of RIL. Such expenditure was incurred during F Y 31.03.2009 and was debited under the head 'Capital work in progress' and accordingly on completion of installation of plant at Gandhar, a sum of ₹ 97.28 crores has been transferred from Capital work in progress to Fixed assets given on lease and capitalized on 01.04.2009. For this reason, there is no separate deduction from the block of fixed assets as per Companies Act in 31.03.2010 as the expenditure was never capitalized under the head Plant Machinery, but was directly transferred from Capital work in progress to leased assets. Accordingly we started receiving lease rent from RIL from April, 2009. Lease finance charges of ₹ 2145.461akhs as received by us during F Y 2009-10 is duly reflected in income from operations (Refer Annexure 6(22)(i) filed earlier- copy enclosed). We may bring to your notice that though, in the books of accounts we have shown only lease finance charges of ₹ 21,45,45,500/-, but since the actual lease rent received by us including principal is ₹ 37,14,49,991/-, we have offered the lease rent ..... X X X X Extracts X X X X X X X X Extracts X X X X
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