TaxTMI 
TaxTMI 
2007 (2) TMI 238
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....of the issues are covered either in favour of the assessee or in favour of the department. Some of the grounds are not pressed and in remarks column it has been mentioned as not pressed. It was submitted by the ld. AR that the summarized grounds and the issues shown in the chart are in consonance with the grounds taken originally at the time of filing of appeal, therefore, the summarized grounds may be taken into consideration. 5. Ground 1A is against disallowance under Rule 6D at Rs. 1,47,165. 6. It has been stated in the chart that this issue has to be decided against the assessee in view of the decision of the Bombay High Court in the case of CIT v. Aorow India Ltd. [1998] 229 ITR 325. Therefore, the same is decided against the assessee. 7. Ground 2B is against disallowance under section 37(2A) at Rs. 3,84,986. 8. This issue has to be decided against the assessee, as the same was not pressed during the course of hearing. Accordingly, this ground is dismissed. 9. Ground 3C is against disallowance of earlier year's expenditure at Rs. 18,94,929. 10. Similar addition was made and upheld by the CIT(A) in earlier years. The Tribunal while deciding the appeal for assessment years....
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....as submitted by the ld. counsel of the assessee that Bombay High Court has held that no disallowance can be made while computing the deduction under section 80M. This decision was rendered by the Bombay High Court in the case of CIT v. Emerald Co. Ltd. [2006] 284 ITR 586. Further reliance on the decision of Bombay High Court in the case of CIT v. General Insurance Corpn. of India (No. 1)[2002] 254 ITR 203 and in the case of State Bank of Indore v. CIT [2005] 275 ITR 23 (MP). On the other hand, the ld. DR placed reliance on the orders of the authorities below. 21. After considering the submissions and perusing the material on record we find that this issue is covered by the decision of the Bombay High Court in the ease of Emerald Co. Ltd. wherein it has been held: "that the interest on the overdraft and the expenses were related to the business of trading in shares and ought to be allowed as computed income under the head "business". The said expenses could not once again be deducted from the dividend income for the limited purpose of computing the deduction under section 80M of the Act. There was no statutory provision requiring the Assessing Officer to deduct the same expenses u....
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....y of interest itself challenged then the same is appealable. As stated above, the assessee has challenged the chargeability of interest under section 234B; therefore, the issue has to be decided on merit. The ld. counsel of the assessee has placed reliance on the decision of Hon'ble Uttaranchal High Court that on similar circumstances the High Court has held that interest under section 234B cannot be charged. Since no decision has been given by the CIT(A) on merit, therefore, we set aside this issue to the file of the ld. CIT(A) to decide the same afresh on merit after affording opportunity of being heard to the assessee and after taking into consideration the provisions of law as well as the decision of the Hon'ble Uttaranchal High Court in the case of Sedco Forex International Drilling Co. Ltd. We order accordingly. 27. The remaining grounds i.e. ground Nos. 13M and 14N, which relates to disallowance of depreciation on sale and lease back of assets (SLB) to Gujarat Electricity Board (GEB) and Rajasthan State Electricity Board (RSEB) and on other assets leased during the year under consideration respectively. 28. Since both these grounds are inter-linked, therefore, for the sake....
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....e-company was not an owner of the assets and hence it was not entitled to depreciation, the order of the Assessing Officer denying depreciation at Rs. 106.50 crores was upheld. Thereafter, the CIT(A) examined the issue in regard to the remaining claim of depreciation i.e. on other items leased out during the year under consideration. After considering the details and submissions, the CIT(A) found that the assessee is not entitled to any depreciation under section 32 as the assets are not owned by it but was for the purpose of security against loan given to parties in the course of financing transactions. Accordingly, the Assessing Officer was directed to disallow the claim of depreciation on other items claimed during the year under consideration. 30. Firstly, the ld. AR who appeared before the Tribunal reiterated the contentions raised before the lower authorities. Thereafter, the ld. counsel Shri S.E. Dastur, Sr. Advocate stated that though there is a decision of the Special Bench of the Tribunal in the case of Mid East Portfolio Management Ltd. v. Dy. CIT [2003] 87 ITD 537 (Mum.), where the assessee was also one of the parties and the Special Bench, has decided the issue agains....
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....ons of the decision of the Bombay High Court in the case of Development Credit Bank Ltd. v. Prakash Industries Ltd. [Notice of Motion No. 2346 of 1998 in Suit No. 3196 of 1998 dated 16-9-1998] and the decision of the Calcutta High Court in S.B.I Home Finance Ltd.'s case. It was further submitted that SLP against the decision of the Bombay High Court has been dismissed by the Supreme Court. Attention of the Bench was also drawn on the copy of the order placed in the paper book. 30.1 It was further submitted that over 50 per cent of the total capital is held by the financial institution and UTI. The assessee-company is not a private company of few persons. This is a Banking company, where public are substantially interested. Therefore, it is not so simple to say that the assessee-company was indulging collusive transaction with various parties including Government institutions i.e. GEB and RSEB. The assessee is the owner of the assets, which were leased out, and there should not be no dispute in respect of genuineness of transaction with GEB and RSEB as they have confirmed this fact. Both the Boards were paying lease rent regularly and the same has been offered for taxation. It was ....
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....nagement Ltd., the assessee was one of the parties. Therefore, in view of consistency, the decision of Special Bench, which is binding in nature, should be followed. Further reliance was placed on the decision in Avasarala Automation Ltd. v. Jt. CIT [2004] 266 ITR 178 (Kar.) and CIT v. Goodlass Nerolac Paints Ltd. [1991] 188 ITR 1 (Bom.). 30.3 In reply, the ld. counsel of the assessee again explained the facts once again and stated that there was a constructive delivery in the present case and after the decision of the Mid-East Portfolio Management Ltd.'s case and the decision in Avasarala Automation Ltd.'s case there are further developments as now the Hon'ble Rajasthan High Court who after taking into consideration the decision of Special Bench in the case of Mid-East Portfolio Management Ltd. held that these transactions are genuine. The various Benches of the Tribunal have taken a contrary view to the view taken in the case of Mid-East Portfolio Management Ltd. Therefore, rule of consistency is in favour of the assessee because in subsequent developments similar issue has been decided in favour of the assessee. 31. We have heard rival submissions and considering them carefull....
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....ast Portfolio Management Ltd. has already been distinguished and considered by the Hon'ble High Court, therefore, we are not inclined to consider that decision at this point of time. 32.2 In case of CIT v. George Williamson (Assam) Ltd. [2004] 265 ITR 626, it has been held by the Hon'ble Guwahati High Court that actual delivery does not mean physical possession of the assets. The symbolic delivery has taken place as per the agreement. It is a valid delivery/sale as per that the definition of the delivery of goods in section 33 of Sale of Goods Act, 1930. After observing these observations, the Hon'ble High Court has held that the assessee's Board and lessor with various companies had entered into a genuine agreement. Accordingly, the claim of the assessee was allowed by the Hon'ble High Court. 32.3 The ld. counsel has rightly placed reliance on Explanation 4A(2) section 43(1) of the Act, Board circular No. 762 dated 18-2-1998 reported in 230 ITR 12, 31 ST that this Explanation was introduced in order to curb the higher claim of depreciation by the lessor. In order to curb such transaction, an amendment had been made to deal with a case where the assets had been sold and acquired ....
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....C v. Duke of Westminster [1936] AC 1 (HL) are still applicable in this country and it is open to assessee to arrange their affairs in such a manner that it would not attract the tax liability, if it cannot be managed within the permissible liability of law. As stated above, in this decision the decision in case of McDowell & Co. Ltd. have considered. Thereafter in case of Azadi Bachao Andolan the Hon'ble Supreme Court has approved the decision of the Madras High Court. Therefore, with utmost respect regarding the decision of the McDowell & Co. Ltd.'s case, we are of the considered view that in each and every case it cannot be said that the transactions are malafidely and are not genuine, therefore, the depreciation should not be allowed to the assessee. In the present case the transactions were entered into with Electricity Boards and these Boards are Government bodies, therefore, there cannot be any scope for collusion. 32.6 The Hon'ble Calcutta High Court in case of Competent Authority v. Smt. Bani Roy Chowdhury [1981] 131 ITR 578 has held that: "where the transferor or transferee is the Government or a statutory body, there cannot be any scope for such collusion between the pa....
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....t so many years and department has itself accepted the transaction as genuine in past and had allowed the depreciation claimed by the assessee. 32.9 Without bringing any material on record regarding a specific item that the transaction is not genuine, in our considered view formation of a general opinion at the end of Assessing Officer and again at the end of the ld. CIT(A) that the transactions are not genuine either on the facts of the present case or in the eyes of the law, in our considered view that the formation of general opinion cannot be approved. 32.10 The ld. counsel of the assessee has invited our attention on some of the clauses of the agreements, which were similar to the clause of the agreement before the Hon'ble Bombay High Court in case of Developmental Credit Bank Ltd.. We have seen these clauses and found that these are similar clauses in case of Developmental Credit Bank Ltd. Therefore, we are of the considered view that both the lower authorities were not justified in rejecting these agreements and holding that there was colourable device to claim higher depreciation. 33. We have also taken into consideration various decisions of the Tribunal i.e. in case of....
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....e assessee had been allowed up to the assessment year 1992-93, therefore, with utmost respect, we are not inclined to follow the decision in case of Housing Development & Finance Corporation but inclined to follow the decision in case of Invest Well Publisher (P.) Ltd., whereby the decision in case of H.D.F.C. has been considered. 35. In a recent decision in case of Dy. CIT v. Global Tele System Ltd. [IT Appeal No. 1 085 (Mum.) of 1998 vide order dated 30-11-2006] has allowed the claim of the assessee by dismissing the appeal of the Department. In that case also the assessee claimed depreciation of Rs. 3.42 crores on Surface Banking Oven. These assets were sold by Tata Engineering and Locomotives Company to M/s. Classic Finance Services Enterprises for a consideration of Rs. 3.42 crore. M/s. Classic Finance Services made full payment of Rs. 3.42 crores to M/s. Telco and sold the same assets to M/s. Global Tele System under Hire & Purchase agreement dated 20-6-1993. M/s. Global Tele System gave assets on lease to Telco under an agreement dated 27-9-1993. The assessee claimed depreciation at the rate of 100 per cent, however, Assessing Officer denied the claim of depreciation by hol....
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.... the case of R.S.E.B. the lease rental paid was claimed as deduction. However, department treated this payment as interest on lease. The Jaipur Bench of the Tribunal allowed the claim of RSEB. The High Court has confirmed the view of the Tribunal in R.S.E.B.'s case. Assets are shown in the block of assets. Whenever these assets were taken back they were shown as taken back and whenever these assets were sold they were shown as sold. Insurance cover in respect of the items involved in these transactions is in the name of assessee. Any liability on account of insurance premium or on account of theft, damage etc. is on account of assessee. Therefore, merely on suspicion or conjectures, doubting that the transactions are entered into for claiming higher depreciation, in our considered view were not justified either at the end of the Assessing Officer or at the end of ld. CIT(A), who enhanced the disallowance on the entire transactions entered into in the year under consideration. In view of the above facts and the circumstances, we set aside the orders of the authorities below and direct the Assessing Officer to allow the claim of depreciation on all items claimed by the assessee. We o....