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TMI Blog2003 (7) TMI 281X X X X Extracts X X X X X X X X Extracts X X X X ..... the above ground, the learned CIT(A) omitted to decide the ground in regard to the quantum of the disallowance of depreciation of Rs. 24,99,750 against which the actual claim of the appellant was restricted to 75 per cent of Rs. 24,99,750 amounting to Rs. 18,74,812 in accordance with the provisions of s. 34A of the Act. II. The learned CIT(A) has also erred on facts and in law in upholding the following disallowances: (a) Rs. 11,827 out of car expenses. (b) 1/6th of the claim of depreciation on car. (c) Rs. 7,500 out of AGM expenses. III. The learned CIT(A) has also erred in holding that set-off of unabsorbed depreciation and, investment allowance is to be allowed to the extent of total income available and is not to be restricted to the extent of the total income taxable under the provisions of s. 115J of the IT Act, 1961. IV. The order of CIT(A) to the extent indicated above is contrary to facts, law and the principle of natural justice." 3. First ground of appeal relates to the alleged error of the CIT(A) in upholding the disallowance of depreciation amounting to Rs. 24,99,750 on computers purchased from M/s Pertech Computers Ltd. (PCL) and leased out in the norma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ill be treated as reversed and consequently the profit reduced from the profit of the company. (b) Depreciation will have to be allowed on the equipment covered under the arrangement by the company since consequent to the reversal of sale, the ownership of such assets will continue to vest with the company. (c) Interest component in the lease rent instalment is allowed as an expense." The assessee-company was therein asked to explain its position and the assessee-company vide its letter dt. 25th Feb., 1994, reiterated its position as under: "(1) We reiterate that there are actual lease transactions with PCL and proper lease agreements have been duly executed. Copies of the same have already been filed. (2) Assets in question have been duly purchased under sales invoices issue by PCL. Full consideration of the same was paid and constructive delivery of the assets took place. Copies of the purchase bills have already been filed. Thus, the transaction is a proper transaction under Sales of Goods Act and the ownership of the assets vests with the assessee-company. (3) Assets in question have been leased out to PCL for which proper lease agreements were executed. As stated i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t this is only a financial arrangement made with a view to reduce the incidence of taxation. He has relied on the order of Tribunal, Delhi in ITA No. 8105/Del/1992 in the case of Goyal Gases (P) Ltd. vs. Dy. CIT in which it has been held that the agreement of lease of the computers between the assessee and Altos does not inspire truthfulness for the obvious reason that manufacturer of computers would not take lease of the same in normal course of its business. The source of selling of computers by Altos to PCL and in turn by PCL to Altos under the colour of lease nothing beyond that the case have reached the place of origination therein great suspicion on the origination itself. In this case, the Tribunal has held that the transaction was not genuine and thus confirmed the order of the AO following which the AO has disallowed the claim of the assessee against which the assessee went in appeal before the CIT(A) who has also confirmed the view of the AO against which feeling aggrieved the assessee is in appeal before the Tribunal. 5. It has been held by the CIT(A) that though the assessee has tried to distinguish the facts of the case from that of Goyal Gases (P) Ltd. but from the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tio in the case of Goyal Gases (P) Ltd. is not applicable to the facts of this case. Further, in the case of Goyal Gases (P) Ltd., independent enquiries had revealed that the computers did not exist and in fact there was an observation that the computers have not even been manufactured. Therefore, the Tribunal in that case had held that it was only a financial arrangement. In the instant case, the payments made by the assessee were duly confirmed and the lease agreement had been duly acted upon and, therefore, there was no justification for the AO to disallow the claim. The learned Authorised Representative has also contended that the letters placed at pp. 25 to 28 of the paper book would show that PCL has duly confirmed that the computers had in fact been sold by it and that the computers have been leased out to it by the assessee-company. It has also been submitted that the Dy. CIT could not and should not have drawn any adverse inference from the conditional surrender, if any made by the PCL for two reasons, firstly, the surrender in any case was only a conditional surrender to which also they have raised certain objections and is, therefore, not final and, secondly, because suc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee had adopted the latter one it would not be open to the Court to hold him liable for tax on the ground that in substance the transaction is one which resulted in gain subject to tax. In matters of this kind the Court cannot ignore the form altogether as also the legal effect of the proceedings in Court. Hence, we delete the disallowance made by the AO and confirmed by the CIT(A). Thus, we dispose of ground Nos. I(1), (2), (3) and (4). 11. Ground No. II relates to the alleged error of the CIT(A) in upholding the disallowances Rs. 11,827 out of car expenses; 1/6th of the claim of depreciation on car and Rs. 7,500 out of AGM expenses. The AO has disallowed 1/5th out of the car expenses and depreciation, following the past history of the case against which the assessee went in appeal before the CIT(A) who has reduced the disallowance out of car expenses and depreciation to 1/6th. The assessee still aggrieved, is in appeal before the Tribunal. Since it is a case of company, there is no chance of using the car for personal purposes. Hence, no disallowance should be made. 12. AO has disallowed the AGM expenses by observing that since shareholders are the owners of the comp ..... X X X X Extracts X X X X X X X X Extracts X X X X
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