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TMI Blog2015 (4) TMI 293X X X X Extracts X X X X X X X X Extracts X X X X ..... e hands of the assessee on protective basis by taking recourse to sec. 143(3). Thus we set aside the order of Ld. CIT(A) and direct the AO to delete the addition on account of depreciation. See case of Kapil Dev [2012 (3) TMI 397 - ITAT DELHI] - Decided in favour of assessee. Disallowance of depreciation on leased assets to AEL - Held that:- As relying on I.C.D.S Ltd. vs. CIT [2013 (1) TMI 344 - SUPREME COURT ] wherein held that as the entire lease rent received by the assessee is assessed as business income in its hands and the entire lease rent paid by the lessee has been treated as deductible revenue expenditure in the hands of the lessee. This reaffirms the position that lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out. - Decided in favour of assessee. Addition of broken period interest - CIT(A) deleted the addition - Held that:- As decided in assessee's own case [2014 (8) TMI 119 - BOMBAY HIGH COURT] addition of broken period interest n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n into the genuineness of large scale leasing of Wind Mills with REPL Engineering Ltd. with various companies. The company was found to have entered into bogus leasing transaction with various companies which include HDFC Bank Ltd. As a sequel of the search operation, conducted by Investigation Directorate in the case of REPL group establishing non-existence of assets and bogus lease transactions entered by the group, the AO disallowed the claim of depreciation on assets leased to REPL. 3.1 Aggrieved, the assessee carried the matter before Ld. CIT(A). It was strongly contended before Ld. CIT(A) that the proper course of action should be under section 158BD of the Act and, therefore, the additions/disallowance made by the AO is bad in law. 3.2 Ld. CIT(A) did not accept this contention of the assessee. Aggrieved, before us the Ld. Counsel for the assessee reiterated that the additions, if at all can be made only under section 158BD of the Act. In support strong reliance was placed on the decisions of the Tribunal Delhi Bench in the case of Kapil Dev in ITA No.2259/Del/2002. 3.3 Per contra, Ld. DR strongly submitted that the facts of the case in hand are totally different fro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rs emerge from the block assessment order of RC: (i) Assessec s explanation was considered during block assessment proceedings and it was held that the seized material represented undisclosed income of RC and not the assessee. (ii) No indication is given that the cash entries in diary may also amount to Kapil Dev s income. (iii) No satisfaction u/s 158BDwas communicated to the assessee s AO. 11.3. In view of these observations, we are inclined to hold that if the department proposed to make an assessment based on searched material, then the course available to it was to proceed as per the provisions of Chapter XIV-B i.e. sec. 158BD read with sec. 158BC of the Act and not u/s 143(3). 11.4. Hon ble Delhi High Court in the case of R.K. Jam (supra) has observed that in case of search material, the same is to be assessed by way of block assessment under Chapter XIV-B. Similar view is echoed by Hon ble Bombay High Court in the case of Dr. M.K. E. Menon and by Hon ble Gujarat High Court in N.R. Paper Board Ltd. others (supra). A similar view has been upheld by Hon ble Supreme Court in the case of Manish Maheshwari (supra). In view of above, we are of the view that the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent based on searched material itself and vests power in AO to initiate proceedings u/s 158BD read with sec. 158BC in the hands of other persons. Thus, the AO has to record satisfaction either to the effect that the seized material belonged to the searched person or the other person. 11.6. In the light of foregoings, we delete the addition of ₹ 83 lacs on merit also. 3.5 The only distinguishing fact if at all is that in the case of Kapil Dev (supra) a diary was found by the search party and in the case in hand on physical investigation made during the search of REPL bogus transaction came to the notice of the Department. In our considered opinion, these facts cannot be said to be distinguishable in the light of the provisions of section 158 BD. Therefore, respectfully following the decision of the Co-ordinate Bench we set aside the order of Ld. CIT(A) and direct the AO to delete the addition on account of depreciation. Ground No.2 is allowed. 4. Ground No.3 relates to the claim of depreciation on assets given on lease to REPL. Since we had decided this issue in favour of the assessee and against the Revenue qua ground No.2, this ground by the assessee become infruct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 5 Since we have allowed Ground No. 2 4, the grievance raised vide Ground No.5 become otiose. 5.6 The additional ground raised by the assessee relates to disallowance of cost of assets leased to REPL as trading loss. Since we have allowed Ground No.2 of the present appeal, additional ground raised by the assessee becomes infructuous. ITA NO.1700/M/2000-A.Y.1996-97, REVENUE S APPEAL: 6. The sole ground in the Revenue s appeal relates to the deletion of the addition on account of broken period interest. This issue has been decided by the Hon ble Jurisdictional High Court in assessee s own case in Income Tax Appeal No.330 of 2012. 6.1 We have carefully perused the order of the Hon ble Jurisdictional High Court (supra). We find that Question B before the Hon ble Court was: Whether the ITAT was correct in law in holding that the broken period interest is allowable as the deduction, inspite of the Hon ble Supreme Court decision in the case of CIT vs. Vijaya Bank, 187 ITR 541 and Rajasthan High Court decision in the case of Bank of Rajasthan, 316 ITR 391. ? The Hon ble Court held as under: 6. Even as far as question (B) is concerned, we find no infirmity in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest. An identical issue has been decided by us in ITA No.1700/M/2000, wherein we have followed the decision of Hon ble Jurisdictional High Court in assessee s own case. For similar reasons this ground is dismissed. 11. Ground No.2 relates to the disallowance of interest attributable to earn tax free income. 11.1 Ld. Counsel for the assessee brought to our notice the decision of the Tribunal in assessee s own case for A.Y. 2001-02 to A.Y 2005-06 in ITA No.330. 354, 328, 329, 335/M/2012. It is the say of the Ld. Counsel that in all these years the Tribunal has decided this issue in favour of the assessee and against the Revenue. 11.2 Considering the fact that in earlier years the Tribunal has decided this issue in favour of the assessee and against the Revenue, we do not find any reason why same should not be allowed for the year under consideration. In the light of the decision of the Tribunal in assessee own case in earlier years we confirm the finding of Ld. CIT(A) and dismiss Ground No.2 of Revenue s appeal. 12. In the result, the appeal filed by the Revenue is dismissed. ITA NO.341/MUM/2003-A.Y. 1998-99- ASSESSEE S APPEAL: 13. The sole disallowance is i ..... X X X X Extracts X X X X X X X X Extracts X X X X
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