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TMI Blog2003 (9) TMI 310X X X X Extracts X X X X X X X X Extracts X X X X ..... th Rs. 19,54,953 by means of 30 invoices during the period w.e.f. 28th March, 1991 to 30th March, 1991. The bottles were to be directly supplied to M/s Coolade as per agreement dt. 15th Feb., 1991. The AO noted that these bottles were transported from Bombay to Sahibabad by goods train and also Transport Corporation of India. Summons under s. 131 were also issued to M/s Coolade for filing the copy of the franchise from M/s Parle (Exports) (P) Ltd., the date of receipt of the bottles along with substantiating evidence. 6. M/s Coolade filed the statement of bottles received from M/s Glass Ceramics Decorators, copy of register of empty bottles, photocopy of franchise with Parle (Exports) India Ltd. From these details, it was noticed by the AO that out of total of 5,46,000 bottles receivable from the assessee, M/s Coolade had received only 42,000 bottles and remaining were received between 3rd April, 1991 and 18th April, 1991. The assessee was asked to explain why claim of depreciation should not be disallowed in respect of bottles which were not brought to use in the relevant previous year. The assessee contended that for claiming depreciation under s. 32, it was not necessary for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bay and the assessee cannot be said to have become the owner of these bottles till these bottles have parted with the ownership of M/s Glass Ceramics Decorators of Bombay, the previous owner. Therefore, the assessee can only be said to have become the owner if these bottles in the relevant year were dispatched by M/s Glass Ceramics Decorators of Bombay before 31st March, 1991. He, accordingly, directed the AO to call for evidence and make necessary inquiry in order to ascertain how many bottles excluding 42,000 bottles which were admittedly received by the lessee before 31st March, 1993, were dispatched before 31st March, 1991, and the assessee would be entitled to depreciation in respect of those bottles which were dispatched by the previous owner upto 31st March, 1991. 7. This direction of the CIT(A) was not accepted by the assessee as well as by the Revenue. Both of them preferred an appeal before the Tribunal. The learned counsel for the assessee has emphatically argued that lease agreement was executed between the assessee and M/s Coolade on 15th Feb., 1991, to lease out the empty glass bottles against a fixed monthly rent. The lease value was stipulated to be Rs. 25,87, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lease of the bottles was neither renewed nor bottles were returned back to the lessor. It means the bottles were, in fact, not leased out to the lessee but it was rather a case of making finance by the aforesaid lessor to the lessee in purchase of bottles. In a case of lease, the lessor always retained the ownership right on the equipment and the equipment is either returned back to the lessor or the lease agreement is renewed at the end of the lease period. But, in the instant case, lease of the bottles was neither renewed nor bottles were returned to the lessor although a specific clause in this lease agreement is stipulated. It means that the assessee has simply made the finance available to the lessee in purchasing the bottles under the garb of this lease agreement and received back its entire capital along with interest. Once it is established that the assessee was not the owner of the equipment/bottles, it is not entitled for depreciation at all. The learned Departmental Representative further contended that though this aspect was not examined by the lower authorities but it is a very material point which requires a proper consideration. 9. Having considered the rival subm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... alleged rent on account of hiring of bottles was paid, it was not, in fact, a rent but was an instalment towards the advance/finance made available in purchase of the bottles, paid to the lessor. This proposition also gets support from the fact that the assessee has made the investment in purchase of bottles at Rs. 19,54,953 and received a total sum of Rs. 23,65,493.10 within a period of three years from the so-called lessee. All these facts suggest that it is not a case of simple leasing of bottles by the assessee to the lessee but it is rather a case of finance made available by the assessee to the lessee for purchasing the bottles against certain rate of interest and thereafter in equal monthly instalments, it was repaid by the lessee to the lessor and after the end of the stipulated period, the lessee becomes an absolute owner of the equipment as it was not required to return back the equipment or to get the lease renewed although a specific clause to this effect was envisaged in the lease agreement to entitle the assessee to claim 100 per cent depreciation on the bottles besides earning interest on its investment in bottles. 10. On a careful perusal of record, we find that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing that the assessee was not the absolute owner of the bottles which were allegedly put to use before the end of the financial year to claim depreciation thereon. The issue is accordingly decided against the assessee and the order of the CIT(A) on this count is set aside and the disallowance made by the AO is hereby confirmed. 12. Ground No. 2 in assessee s appeal relates to the confirmation of disallowance of depreciation in respect of soft drink bottles of Rs. 30,17,122 given on lease to M/s Aravali Leasing Ltd., who later on sub-leased it to Unikol Bottlers Ltd. 13. The facts borne out from the record on this issue are that the assessee has shown purchase of soft drink bottles from M/s Arizona Printers Packers Ltd. worth Rs. 30,17,122 which were leased out to M/s Aravali Leasing Ltd. who, in turn, sub-leased these bottles to M/s Unikol Bottlers Ltd. It was noted by the AO that the assessee has entered into a lease agreement with Aravali Leasing Ltd. on 15th March, 1991, for the purpose of leasing of soft drink bottles. M/s Aravali Leasing Ltd. had, in turn, entered into an agreement with M/s Unikol Bottlers Ltd. on 8th March, 1991, for a sub-lease of the same bottles. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enced the supply of bottles on behalf of assessee to M/s Unikol, the sub-lessee, from 10th Dec., 1990. Since the parties had already reached understanding and delivery of bottles had commenced, M/s Aravali had executed a lease deed with M/s Unikol Bottlers Ltd. on 8th March, 1991, for sub-leasing the bottles which were taken on lease by it from the assessee under the formal lease agreement executed on 15th March, 1991. Before the CIT(A), it was again contended that transportation charges were borne by M/s Unikol but no evidence to this effect was filed. The CIT(A) reexamined the issue but did not find any force in the contention of the assessee and confirmed the disallowance. 15. Aggrieved, the assessee has preferred an appeal before the Tribunal and contended before us that on account of lock out in the Unikol Ltd., no evidence could be filed with regard to the payment of transportation charges. He, however, reiterated his contentions earlier raised before the lower authorities. The learned Departmental Representative, on the other hand, has placed heavy reliance upon the order of the lower authorities. 16. Having considered the rival submissions and from a careful perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion of leasing the bottles to Unikol Bottlers Ltd. instead of leasing the bottles directly to Unikol. It is also evident from these documents that Aravali Leasing Ltd. has entered into a lease agreement with Unikol Bottlers Ltd. on 8th March, 1991, and agreed to lease out the bottles to Unikol before acquiring any right in these bottles by virtue of a lease agreement with the assessee inasmuch as the lease agreement was executed between the assesee and the Aravali Leasing Ltd. on 15th day of March, 1991. A specific query was raised during the course of assessment proceedings and the appellate proceedings before the CIT(A) how it happens that no documentary evidence was placed in support of the contention that Aravali Leasing Ltd. was involved in the transaction of leasing between the assessee and Unikol Bottlers. Ltd. It was simply stated that before the execution of this lease agreement, everything was settled orally between the parties. Had it been a fact, there would have been some mention on these tri party negotiations in any of the lease agreement but we do not find anything therein. Nothing has been placed before us to substantiate how much monthly rent was settled between ..... X X X X Extracts X X X X X X X X Extracts X X X X
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