TMI Blog2017 (1) TMI 1725X X X X Extracts X X X X X X X X Extracts X X X X ..... ts with Usha India Ltd., Sayaji Hotels and Shaan Packaging - letters were issued to the supplier which were returned unserved therefore the supplier were not in existence - HELD THAT:- The claim of the assessee was declined on the ground of that the letters were written to the supplier which were returned unserved and the supplier denied the supply or plant was not in existence. On appraisal of the above said evidence produced before us the finding of the AO as well CIT(A) does not seem reasonable. The evidence adduced by the assessee nowhere examined and discussed by the AO as well as CIT(A). Since the matter of controversy has not been decided by discussing the evidence adduced by the assessee, therefore finding of the CIT(A) is not liable to be sustainable in the eyes of law. We set aside the finding of the CIT(A) on this issue and direct the Assessing Officer to examine the issue afresh in the light of the evidence adduced by the assessee and decide the issue in accordance with law after giving an opportunity of being heard to the assessee. Accordingly, this issue is decided in favour of the assessee against the revenue. Disallowance of depreciation on the transaction with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1. The appellant appeals from the order dated February 10, 2005 passed by the Commissioner of Income Tax (Appeals) XXVII Mumbai (CIT(A) under section 250 of the Income Tax Act, 1961 (the Act) for the Assessment Year 1994-95 and received by the appellant on March 17, 2005 on the following amongst other grounds which are without prejudice to each other. (A) Re: Disallowance of depreciation on assets leased to GEB and Prakash Industries ₹ 1,02,47,527 (Para 3 page 2 of the order) 2. The CIT(A) erred in disallowing depreciation amounting to ₹ 1,02,47,527/- on assets leased to Gujarat Electricity Board and Prakash Industries following order passed for the assessment year 1993-94 (B) Re: Disallowance of depreciation on leased assets (Para no.5-8, page nos. 5-14 of the Assessment order) 3. The Assessing Officer erred in law and on facts in disallowing the depreciation on various assets amounting to ₹ 86,67,685 on the under mentioned grounds:- Rs. a) Supplier not in existence 8,07,325/- b) Supplier denied supply of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... acts of the case are that the assessee filed the return of income for A.Y.1994-95 on 30.11.1994 declaring total income to the tune of Rs.Nil. The said return of income was duly processed u/s.143(1)(a) of the Income Tax Act, 1961( in short the Act ) without making any adjustment therein. Revised return for income dated 08.01.1996 was filed declaring total income at Rs.Nil. The revised return was filed on account of certain changes made by the assessee as a consequence of revision of depreciation claim made during the course of proceedings of A.Y.1993-94. The effect of the said depreciation claim was also modified for A.Y.1994-95 accordingly. Notice u/s.143(2) of the Act was issued and duly served upon the assessee. 4. The assessee is a public limited company, the shares of the company are quoted in the Stock Exchange. The company is carrying on business of industrial leasing, hire and purchase. Recently the company has diversified into retail financing i.e. basically dealing in hire and purchase of cars and their equipments for personal use. For the purpose of carrying the business of hire and purchase financing, the company has obtained loans from financial institutions and ban ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fore, the nature of transaction carried on by M/s.Anagram Finance Ltd. should have been considered independently irrespective of the findings in the case of ICICI Bank Ltd. 8.2 Further, having considered the submissions made by the parties, facts and circumstances of the case and the decision relied upon by the parties as well as the fact that the order of CIT(Appeals) is not a speaking order as well as in the interest of substantial justice, we restore the issue relating to the nature of transactions with GEB and M/s.Prakash Industries Ltd. as well as levy of interest u/s.234-B and 234-C of the Act, back to the file of Assessing Officer with the directions that the same be decided afresh in accordance with law and the decisions to be relied upon by the Assessee. Further, in case the transactions are found to be in the nature Lease transactions, claim of depreciation be allowed and if the transactions are found to be simply of financing then only interest part embedded in the receipts claimed to have been received as Lease rentals be taxed. The Assessee will be provided a proper opportunity of being heard. The orders of CIT(Appeals) and of the Assessing Officer on these issues ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rmation letter dated 31.03.1994 from Usha (India) Ltd. (Lies at page 27 of the paper book). 4. Copy of letter dated 14.02.1997 from Usha (India) Ltd. reg. declaration of assets leased. (Lies at page 28 of the paper book). 5. Company s confirmations regarding assets leased by virtue of letter dated 27.02.1997 to ACIT, Ahd giving declaration from Usha India confirming receiving assets from supplier Luptron Ltd. (Lies at page 14 of the paper book). 9. So far as the asset was in existence and was leased with the Sayaji Hotels is concerned the assessee has relied upon the following documents:- 1. Invoice from A-one Traders dated February 27th, 1994. (Lies at page 30 of the paper book). 2. Invoice from Freeze Cool Refrigeration and Air conditioners. (Lies at page 31 of the paper book). 3. Leased confirmation from Sayaji Hotels Limited by virtue of dated February 14, 1997 confirming assets taken by the assessee. (Lies at page 32 of the paper book). 4. Letters from Sayaji Hotels Limited dated 1st March, 1997 confirming to the Assessing relating assets taken on leased. (Lies at page 102 of the assessment order). 5. Companies confirmation letter dated 17.02.1997 to AC ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the paper book) 7. Letter dated 25th March 1997 to ACIT, Ahd establishing ownership over the assets evidenced from the invoice and insurance policy submitted.(Lies at page 21 of the paper book). 12. So far as the existence of the asset and leased in the matter of Khatau Junker is concerned, the assessee has relied upon the following documents:- 1. Confirmation receipt from Nile dated 24th November 1995.(Lies at page 41 of the paper book). 2. Confirmation to Assessing Officer dated 7th November 1997 from supplier. (Lies at page 39 of the paper book). 3. Confirmation to Anagram Finance dated 10th November 1997 from supplier. (Lies at page 40 of the paper book). 4. On termination of lease agreement asset sold to lessee and consideration duly relected in Anagram s accounts. (Lies at page 51 of CIT(A) grounds). 5. Company s confirmations regarding assets leased letter dated 17th February 1997 to ACIT, Ahd confirming lease with Khatau Junker, receipt of payment received by supplier and lease rentals accounted for in the year ended 31st March, 1994.(Lies at page 2 and 3 of the paper book). 6. Letter dated 27 February 1997 to ACIT, Ahd informing of letter writte ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t of lease rentals. Also asked for copy of search report of Addl. Director (Inv), Pune. (Lies at page 5 to 6 of the paper book). 7. Letter dated 17th February 1997 to ACIT, Ahd stating that since transaction with Western is sale and leaseback the question of actual delivery of assets does not arise. Also in view of payments made, insurance policy ownership of Anagram over the assets established. (Lies at page 8 to 10 of the paper book). 8. Letter dated 25th March 1997 to ACIT, Ahd submitting letter from Western Paques confirming existence of the assets and that no depreciation was claimed by them. (Lies at page 22 to 23 of the paper book). 15. The claim of the assessee was declined on the ground of that the letters were written to the supplier which were returned unserved and the supplier denied the supply or plant was not in existence. On appraisal of the above said evidence produced before us the finding of the Assessing Officer as well CIT(A) does not seem reasonable. The evidence adduced by the assessee nowhere examined and discussed by the Assessing Officer as well as CIT(A). Since the matter of controversy has not been decided by discussing the evidence adduced by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... paper book). 14. Invoice from Jaipur Metal and Electricals Limited dated October 30, 1993. (Lies at page 77 of the paper book). 15. Lessee s confirmation letter from Gujarat Electricity Board dated March 25, 1997 confirming purchase of assets. (Lies at page 78 to 79 of the paper book). 16. Company s confirmations regarding assets leased letter dated February 17, 1997 to ACIT, Ahd giving invoice of Simco Engg. one of the supplier. (Lies at page 5 of the paper book). 17. Letter dated February 27, 1997 to ACIT, Ahd informing the AO that the name of Simco had changed to Sea Horse Ind. Ltd. (Lies at page 12 of the paper book). 18. Letter dated March 25, 1997 to ACIT, Ahd submitting that evidence of disbursement, installation and put to use certificate ownership has been established. (Lies at page 20 of the paper book. 17. The Assessing Officer as well as CIT(A) has declined the claim of the assessee on account of this facts that the supplier sold the goods to the GEB and the GEB did not transfer the ownership to Anagram and the machinery was not supplied because parts were supplied. The evidence adduced by the assessee nowhere examined and discussed by the Assessing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... case is for the A.Y.1994-95 and the CIT(A) has declined the contention of the assessee on the ground of that the explanation 4A to the Section 43(1) of the Act was clarifactory in nature whereas the legal position is quite different which has been discussed above specifically in view of the law settled in Berlia Chemicals Traders (P) Ltd. Vs. Assistant Commissioner of Income Tax, ITAT, Mumbai B Bench in ITA No.7510/Bom/1993 decided on 25.10.1999 and also Hon ble Madras High Court in case titled as Om Sindhoori Capital Investments Ltd. Vs. Joint Commissioner of Income Tax reported in 274 ITR 427. Accordingly, we are of the view that the disallowance on depreciation on sale of lease back transaction to the tune of ₹ 25,01,250/- is wrong against law and facts which is not liable to be sustainable. Accordingly, we set aside the finding of the CIT(A) on this issue and allowed the depreciation on sale of leased back transaction of ₹ 25,01,250/-. This issue is accordingly decided in favour of the assessee against the revenue. ISSUE NO.11:- 19. The issue no.11 is in connection with the levy of interest u/s.234 of the Act. It is consequential on the basis of the demand t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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