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TMI Blog2011 (7) TMI 32X X X X Extracts X X X X X X X X Extracts X X X X ..... .K. JAIN, JJ. For the Appellant : Ms Suruchi Aggarwal For the Respondent : Mr Ajay Vohra with Ms Kavita Jha, Mr Sriram Krishna and Ms Akansha Aggarwal BADAR DURREZ AHMED, J 1. This appeal under Section 260-A of the Income-tax Act, 1961 (hereinafter referred to as „the said Act) has been preferred by the revenue being aggrieved by the judgment and / or order dated 22.02.2008 passed by the Income-tax Appellate Tribunal in revenues appeal being ITA No.4516/Del/2003 pertaining to the assessment year 1996-97, inasmuch as the Income-tax Appellate Tribunal had dismissed the appeal of the revenue on the ground that the Commissioner of Income-tax (Appeals) had erred in deleting the addition of ₹ 2,30,40,000/- made on account of depreciation. The Assessing Officer by virtue of his assessment order dated 29.03.2001 had disallowed the claim of the respondent / assessee with regard to 100% depreciation on the equipment purchased by it from the Haryana State Electricity Board (hereinafter referred to as „HSEB), which was already installed at the said Boards Thermal Power Station at Faridabad and immediately thereupon leasing the said equipment back to the HSEB on certain ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... v. The Joint Commissioner of Income Tax: 266 ITR 178 (Kar), which had been relied upon by the department, had been considered in the Bombay High Court decision as well as in the decision rendered by the Rajasthan High Court and had been distinguished by the said High Courts. 4. The present appeal was admitted on 06.07.2009, when the following question of law had been framed for adjudication:- "Whether the Tribunal was justified in law in allowing depreciation on the assets for which the Assessing Officer had treated the transaction as that of finance and not of leasing ?" 5. Ms Suruchi Aggarwal, the learned counsel appearing on behalf of the revenue, contended that the transaction in question was a pure lease finance transaction and, therefore, the assessee was not entitled to claim depreciation in respect of the equipment in question. The learned counsel placed strong reliance on a letter dated 26.09.1995 written by the Chief Accounts Officer, Haryana State Electricity Board, Panchkula to the Financial Commissioner and Secretary to the Government of Haryana, Irrigation and Power Department, Civil Secretariat, Haryana where, it is stated that the transaction was entered into by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... , reliance was placed on Sections 19 and 33 of the Sale of Goods Act, 1930. The learned counsel submitted that what is to be seen in the present case is - whether the equipment in question came into the ownership of the respondent / assessee ? If it were to be so, then the respondent / assessee would certainly be entitled to claim depreciation in respect thereof because leasing was also a part of its business. He submitted that, therefore, the entire question hinges on the factual determination of whether the transaction was genuine or not. The tribunal, being the final fact finding authority, has held it to be genuine and the revenue has not been able to point out any perversity in such conclusion. In fact, Mr Vohra submitted that no question of law has been framed on the issue of perversity. Therefore, on the facts as on record, the question framed in the present appeal has to be decided in favour of the assessee and against the revenue and the revenue‟s appeal is liable to be dismissed. Mr Vohra placed reliance on the following decisions: 1) Industrial Development Corporation of Orissa Limited v. Commissioner of Income-tax and Others: 268 ITR 130 (Ori); 2) Commissioner o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .: 2009 (9) SCC 447 that the dismissal of an SLP in limine by the Supreme Court does not amount to the merger of the order of the High Court with that of the Supreme Court and does not entail a decision on the question of law by the Supreme Court. 8. Before we examine the rival contentions raised by the learned counsel for the parties, it would be appropriate to set out the facts. By a sale deed executed on 28.09.1995, the HSEB, a statutory corporation constituted under Section 5 of the Electricity (Supply) Act, 1948 and having its head office at Shakti Bhawan, Sector-6, Panchkula, Haryana - 134108, sold the equipments installed at its Thermal Power Station at Faridabad and described in the invoice No.CAO/95-96/13 dated 28.09.1995 to the respondent / assessee for a consideration of ₹ 2,30,40,000/-. The description given in the invoice-cum-delivery challan dated 28.09.1995 is - Instrumentation and Monitoring System for Monitoring Energy Flows - Automatic Electrical Load Monitoring System at Thermal Power Station Faridabad. A valuation certificate dated 23.09.1995 had been obtained by the respondent / assessee through Virtuous Finance Limited Bombay, who had facilitated the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or encumbrance of any type and that the lessor would have all the rights of owner, including the right to mortgage the same with the owners, bankers / financiers without prejudice to the rights of the lessee under the said lease. Clause 8(a) specifically provided as under:- "Notwithstanding the grant of lease of the said Equipment, the lessor shall continue to be the sole owner thereof (as a Hire Purchase Hirer) and the Lessee would not, merely by reason of grant of this lease, have or claim any right, title or interest in any of the said equipments except as the Lessee thereof in accordance with the terms and conditions of this Lease Agreement." The lease also provided that the lessee (HSEB) shall not part with the possession of the equipment, nor shall the lessee (HSEB) sub-lease the equipment without prior approval of the lessor (the respondent / assessee). 10. From a plain reading of the sale deed, the invoice-cum-delivery challan and the lease agreement, we are inclined to agree with the submission made by the learned counsel for the respondent / assessee that the ownership of the equipment in question was that of the respondent / assessee. The sale of the equipment by HSEB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t had also been acknowledge by the HSEB which was the erstwhile owner of the same. 12. It is true that the letter dated 26.09.1995, written by the Chief Accounts Officer, HSEB, Panchkula to the Financial Commissioner and Secretary to the Government of Haryana, which had been relied upon by the learned counsel for the revenue, does indicate that the transaction was entered into by HSEB in order to raise finance for its day-to-day needs and that HSEB had decided to go in for tapping the system of sale and lease back assets as a mode of raising finance at a lower cost. But, this does not bind the respondent / assessee. What was the intention of HSEB in going in for the transaction in question cannot be transposed onto the respondent / assessee. 13. Insofar as the respondent / assessee is concerned, on the basis of the factual position on record, it had purchased the equipment which was already installed at HSEBs Thermal Power Plant at Haryana and immediately thereafter, it had leased back the said equipment to HSEB for a period of 72 months on condition of the payment of lease rentals as well as an interest free security deposit. If, in doing so, it was attracted by the prospect of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... strue a taxing statute, while considering a device to avoid tax, is not to ask whether the provisions should be construed literally or liberally, nor whether the transaction is not unreal and not prohibited by the statute, but whether the transaction is a device to avoid tax, and whether the transaction is such that the judicial process may accord approval to it." 16. However, these observations as also the other decisions were considered by the Supreme Court in Union of India and Another v. Azadi Bachao Andolan and Another: 2003 (263) ITR 706 (SC), wherein the court observed that "tax planning may be legitimate provided it is within the framework of law". Furthermore, the Supreme Court concluded that:- "With respect, therefore, we are unable to agree with the view that Duke of Westminsters case: 1936 (AC-1); is dead, or that its ghost has been exorcised in England. The House of Lords does not seem to think so, and we agree, with respect. In our view, the principle in Duke of Westminster‟s case [1936 (AC-1)] is very much alive and kicking in the country of its birth. And as far as this country is concerned, the observations of Shah, J, in Commissioner of Income-tax v. Raman ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the ownership and title of the said equipment had been transferred to the respondent / assessee and that after the said transfer, the lease was entered into and the said equipment was leased back to the HSEB. It has not at all been established on the basis of evidence on record that the transaction was a colourable device entered into by and between the HSEB and the respondent / assessee. 19. We also note that a similar view has been taken by the Rajasthan High Court in the case of Commissioner of Income-tax v. Rajasthan State Electricity Board (supra) and the Gujarat High Court in the case of Commissioner of Income-tax v. Gujarat Gas Company Ltd (supra) which followed the decision of the Rajasthan High Court in the case of Commissioner of Income-tax v. Rajasthan State Electricity Board (supra). 20. We find that the observations of the Supreme Court in the case of Asea Brown Boveri Ltd (supra) with regard to the nature of a financial lease are not of much use to the case of the revenue in view of the factual backdrop that, on facts, the transaction in question has been found to be genuine. Once it is established that the ownership of the said equipment is that of the assessee, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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