2004 (9) TMI 581 - AT - Income Tax

Summary

Issues Involved:
1. Deletion of disallowance of Rs. 50,68,200 being lease rent.
2. Deletion of disallowance of Rs. 31,12,525 as the said payment was made for acquiring capital assets.
3. Deletion of addition of Rs. 27,02,610 paid as service charges without evidence of services rendered.

Issue-wise Detailed Analysis:

1. Deletion of Disallowance of Rs. 50,68,200 Being Lease Rent:
The Assessing Officer (AO) added Rs. 50,65,200 to the income on account of lease rental received on Steel Cops and Rs. 31,12,525 on aircraft lease rental. The assessee initially filed a return declaring nil income and later revised it, adding back depreciation claimed on aircraft and steel cops, declaring an income of Rs. 14,66,630. The AO treated the revised return as non est but computed income based on it, not allowing the reduction of lease rentals. The assessee argued that the lease rentals should be treated as loans and advances, not income, as per the Voluntary Disclosure of Income Scheme (VDIS) 1997 declaration for the assessment year 1995-96. The Commissioner of Income-tax (Appeals) (CIT(A)) agreed, noting that Rs. 10,45,200 represented interest, and the balance Rs. 40,20,000 was the cost of the asset, which cannot be taxed. The Tribunal upheld CIT(A)'s decision, emphasizing that the Revenue cannot treat the same transaction differently in subsequent years.

2. Deletion of Disallowance of Rs. 31,12,525 as the Said Payment was Made for Acquiring Capital Assets:
Similar to the first issue, this disallowance pertained to lease rentals on aircraft. The CIT(A) directed the AO to delete the addition, recognizing that the assessee had offered the finance charges of Rs. 9,45,849 as income. The Tribunal upheld this decision, reiterating that the Revenue cannot treat the transaction inconsistently across different assessment years.

3. Deletion of Addition of Rs. 27,02,610 Paid as Service Charges Without Evidence of Services Rendered:
The AO disallowed service charges paid to M/s. Olympic Management & Financial Services Ltd. (OMFSL) on the grounds that the assessee could not prove the services rendered. The assessee argued that OMFSL, a SEBI-registered company, did provide services, and the payment was genuine. The CIT(A) examined the evidence, including service details and payment confirmations, and concluded that the payment was justified and deductible under section 37(1) of the Act. The Tribunal upheld CIT(A)'s decision, noting that the assessee had received substantial service charges from its principals and paid OMFSL for executing the services, resulting in a significant profit. The Tribunal found no evidence of collusion or tax evasion and confirmed the genuineness of the expenditure.

Conclusion:
The Tribunal dismissed the Revenue's appeal, upholding the CIT(A)'s decisions on all counts. The Tribunal emphasized consistency in treating transactions across different assessment years and recognized the genuineness of the service charges paid by the assessee.