9911796707
TMI Blog2015 (4) TMI 725X X X X Extracts X X X X X X X X Extracts X X X X ..... a matter of convenience, these appeals were heard together and are being disposed of by way of this consolidated order. However, in order to understand the implication, it would be necessary to take note of the facts of one appeal. We are, accordingly, narrating the facts, as they appear in the assessee's appeal in I. T. A. No. 7901/Mum./2013, for the assessment year 1997-98 and proceed to dispose of the appeals one by one for each assessment year. 3. The assessee, in the present case, is an undertaking set-up by the Government of Maharashtra for providing finance for industrial development. It is mainly engaged in the business of leasing along with the other financing activities for the industrial development. The business of leasing is being carried out from the last several years on which it was assessed to tax. Assessee's appeal in I. T. A. No. 7901/Mum./2013, for assessment year 1997-98. 4. In ground No. 1, the assessee has challenged the disallowance of survey charges of Rs. 19,75,520. 5. The assessee, for the implementation of port development programme of the Government of Maharashtra, was required to spend survey charges which included preparing of offer docum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ns should be given for allowing the same in the assessment year 1999-2000. He also submitted a petition for admission of the additional ground relevant for the appeal for the assessment year 1999-2000 which is also the subject matter of hearing before us, that the amount taxed in the assessment year 1999-2000 should be directed to be deleted. 8. On the other hand, the learned Departmental representative relying upon the findings of the learned Commissioner (Appeals), submitted that when the expenditure has been incurred on behalf of other persons and the same was to be recovered by the assessee, then there was no need for claiming it as an expenditure. However, he has not disputed the fact that this amount has already been offered for tax in the assessment year 1999- 2000. 9. We have given our anxious consideration to the rival contentions and perused the relevant material on record. The assessee was acting as an advisor to the Government of Maharashtra and was required to implement port development programme in Maharashtra. For this purpose, it has to incur various expenses which was recoverable from the successful bidders. As apparent from the records, these expenses have been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ame to the conclusion that these are nothing but financial lease and are in the nature of financial transactions only therefore, depreciation cannot be allowed in such transactions. He has given a very detail analysis of terms and conditions of the lease agreement and has also referred to various case law to come to the conclusion that these are nothing but loan transactions and are not proper lease transactions as they were entered to gain the benefit of depreciation and reduce the legitimate tax liability ; firstly, the assets were not owned by the assessee but were held by the assessee only for the purpose of security and secondly, it was purely for financing various industries. His detail findings have been given from pages 8 to 26 of the assessment order. 12. The learned Commissioner (Appeals), looking to the various nature of lease agreements, held that there were mainly two categories of lease transactions one was in the nature of sale and leaseback transactions and other finance lease, i.e., normal lease transactions. The break-up of these categories have been given by him as under : Category of lease Depreciation (Rs.) Sale and leaseback transactions 5,46,58,200 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Learned counsel, Mr. Rajan R. Vora, appearing on behalf of the assessee, first of all, raised a preliminary submission that out of the total disallowance of depreciation of Rs. 22,78,84,378, the depreciation aggregating to Rs. 15,58,39,334, pertains to the assets which were leased out in the earlier years and on some assets opening written down value was shown in the block of assets as on April 1, 1996. The depreciation of these written down value assets now cannot be disallowed in this year. His other main contention was that in the subsequent years also the Department has allowed the depreciation on similar assets which were on similar nature of transactions, thus, the disallowance of depreciation for in between period cannot be upheld. He gave the details of written down value of lease assets and the depreciation claimed on these assets under normal lease as well as sale and leaseback transactions. In case of depreciation on normal lease, he submitted that depreciation on opening written down value comes to Rs. 14,71,07,522, which is the subject matter of the Departmental appeal and the depreciation on opening written down value in relation to sale and leaseback transaction is R ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) CIT v. Cosmo Films Ltd. [2011] 338 ITR 266 (Delhi) ; (ii) CIT v. Punjab State Electricity Board [2010] 320 ITR 469 (P&H) ; (iii) CIT v. Gujarat Power Co. Ltd., Income-tax Appeal No. 215/2010, judgment dated August 1, 2011 ; and (iv) First Leasing Co. of India Ltd. v. Asst. CIT, Madras High Court, Income-tax Appeal No. 107 of 2007, judgment dated February 21, 2010. He further referred to the decision of the Tribunal, Mumbai Bench, in Development Credit Bank Ltd. v. Deputy CIT [2013] 26 ITR (Trib) 209 (Mum). 17. Further, he submitted that even the decision of the Special Bench of the Tribunal in IndusInd Bank Ltd. v. Addl. CIT [2012] 15 ITR (Trib) 89 (Mum) [SB], the issue of sale of leaseback transaction have been decided in favour of the assessee and in support of this, he referred to para 6.7 of the order. He also pointed out the comparison of the facts in the case of Indusind Bank with that of the assessee and then again facts of the case in Prakash Industries Ltd. as decided by the Bombay High Court and Indusind Bank vis-a-vis the assessee's case and submitted that even on the facts, the Special Bench decision supports the case of the assessee. Lastly, he pointed out ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... arty. In this case, the preliminary issue is that in most of the leased assets, depreciation aggregating to Rs. 15,58,39,334 has been disallowed on the assets which were leased earlier and the depreciation has been allowed. These assets are also forming part of the "block of assets". Not only this, the depreciation has also been allowed in the subsequent assessment years wherein the Department is not in contest. Once these assets have found to be a part of the block of assets and depreciation has been allowed in the earlier years, the depreciation on some assets cannot be disallowed on the opening written down value by taking a new stand on exactly similar nature of transaction. Though the principle of res judicata does not apply in income tax proceedings, however, if the similar facts are permeate through all assessment years and both parties have accepted a particular stand, then the principle of consistency has to be followed. In this case, out of total disallowance of depreciation for sums aggregating to Rs. 22,76,84,378, depreciation on opening written down value on normal lease transactions and sale and leaseback transactions comes to Rs. 15,58,39,334 and it is only with resp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e from the findings of the learned Commissioner (Appeals) that the depreciation on the asset has to be disallowed which is claimed on normal lease transactions. Moreover, the Department has also accepted similar nature of normal lease transactions from the assessment year 1999-2000 onwards. Thus, the disallowance on normal lease transaction is set aside and is decided in favour of the assessee. 21. Coming to the sale and leaseback transactions, the learned Commissioner (Appeals) has confirmed the disallowance of depreciation in Maharashtra Esters and Keytones P. Ltd. and Konkan Railway Corp. Ltd., mainly on the ground that there was no physical delivery of the assets as it already belong to them and therefore the transactions itself was not genuine. In case of the other two parties, namely, Fujitsu ICIM Ltd. and Datar Switchgear Ltd., he has allowed the same mainly on the ground that sale transactions and leaseback after the purchase are genuine transactions. In case of Maharashtra Esters and Keytones P. Ltd., it is seen that this transaction of sale and leaseback took place in the earlier previous year and the depreciation has been allowed in respect of such leased assets. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... appeal in I. T. A. No. 7955/Mum./2003, for the assessment year 1997-98. 23. In ground No. 1, the Revenue has challenged the deletion of disallowance of Rs. 36,59,755, on account of renovation expenses out of the total amount disallowed by the Assessing Officer of Rs. 73,19,509. 24. The assessee had incurred an expenditure of Rs. 77,66,359, for renovating its office premises at Mumbai, Nasik and Chiplon. The Assessing Officer disallowed the same as capital expenditure. It was submitted by the assessee that out of total expenditure of Rs. 77,66,359, it has capitalised an amount of Rs. 4,46,850, and the balance amount of Rs. 73,19,509, was claimed as revenue expenditure. It was also submitted that all these expenses were incurred on the rented premises which could not have been shifted by the assessee. 25. Before the learned Commissioner (Appeals), the assessee filed details of such expenditure along with the copy of bills and vouchers relating to such expenditure. Reliance was also placed on various case law for the proposition that such a claim of expenses on a rented premises is a revenue expenditure. The learned Commissioner (Appeals), on a perusal of the details found that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... isallowed as capital expenditure, we do not find any reason to deviate from such findings, as allowance of 50 per cent. of revenue expenditure actually meet the ends of justice in these facts and circumstances. Thus, ground No. 1, is treated as dismissed. 29. In ground No. 2, the Department has challenged the allowance of depreciation on various leased assets by the assessee. This issue has already been discussed in detail while discussing the assessee's appeal in ground No. 2 raised by the assessee in I. T. A. No. 7901/Mum/2003, wherein we have directed the Assessing Officer to examine the issue of depreciation of assets which were procured during the year in case of sale and leaseback transaction and in so far as allowance of depreciation on normal lease transaction is concerned, the same has been allowed by us in the assessee's appeal cited supra. Hence, the findings of the learned Commissioner (Appeals) on the issue of allowance of depreciation are confirmed. On the issue of sale and leaseback transaction, in the assessee's appeal cited supra, the matter has been restored to the file of the Assessing Officer who shall decide the issue de novo in the light of the ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urred during the course of carrying on the business are allowable as deduction while computing the business income, these expenditures cannot once again be deducted from the dividend income for the purpose of computing deduction under section 80M and the deduction has to be granted with reference to the gross dividend. Thus, we do not find any merit in the grounds raised by the Department and the same stands dismissed. 35. Grounds Nos. 4 and 5, being general in nature, no separate adjudication is required. 36. In the result, the Revenue's appeal for the assessment year 1997-98 is treated as partly allowed for statistical purposes. We now take up the assessee's appeal in I. T. A. No. 2337/Mum./2004 for the assessment year 1998-99. 37. Ground No. 1, relates to disallowance out of exemption claimed under section 10(23G). 38. Learned counsel for the assessee contended before us that he did not wish to press this ground. The learned Departmental representative also did not object to the submissions made by learned counsel. Consequently, this ground is dismissed as "not pressed". 39. Ground No. 2, relates to disallowance of depreciation on the assets acquired under sale and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in this appeal relates to disallowance under section 14A on account of proportionate administrative expenses. 47. The Assessing Officer observed that the assessee has received dividend income of Rs. 9,18,96,361 and held that the assessee must have incurred certain establishment/administrative expenses towards earning such income. Accordingly, he worked out proportionate expenditure for earning the income and worked out the disallowance at Rs. 64,28,000 and reduced the dividend income by such amount and allowed deduction under section 10(33) of the dividend income at Rs. 8,54,68,361. 48. The learned Commissioner (Appeals) held that once the investment has been made, there is no further effort on the part of the investor to receive and realised the dividend income as it is received without any incurring of expenditure. The administrative expenditure and establishment cost cannot be held to have been incurred for earning dividend income. Accordingly, he held that no administrative expenditure are attributable or allocable to the dividend. Accordingly, the entire dividend income shown by the assessee at Rs. 9,18,96,361, was held to be allowed as exempt under section 10(33). 49. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of financing to promote such companies for industrial development in backward area, certain administrative cost has to be allocated. In our considered opinion, one percent (1 per cent.) of the administrative expenses should be disallowed and that would be a reasonable allocation of administrative expenses for the purpose of earning exempt income. Thus, the disallowance is restricted to one per cent. of administrative expenses. Thus, ground raised by the Revenue is treated as partly allowed. 52. In the result, the Revenue's appeal for the assessment year 1999-2000 is treated as partly allowed. We now take up the assessee's appeal in I. T. A. No. 5094/Mum./2004, for the assessment year 1999-00. 53. In ground No. 1, the assessee has challenged the disallowance of Rs. 15,08,000, out of exemption claimed under section 10(23G). 54. Learned counsel for the assessee contended before us that he did not wish to press this ground. The learned Departmental representative also did not object to the submissions made by learned counsel. Consequently, this ground is dismissed as "not pressed". 55. In ground No. 2, the assessee has challenged disallowance of depreciation of assets acq ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... huge dividend income, which is exempt. 62. After hearing both parties, we find that this issue had also come up for consideration in the earlier Department's appeal and this ground is similar to the ground decided in the Revenue's appeal in I. T. A. No. 4719/Mum./ 2004, wherein we have held that one per cent. of the administrative expenditure would be sufficient for allocation of expenditure which can be said to be attributable to earning of dividend income. Accordingly, we direct the Assessing Officer to disallow only one per cent. of the administrative expenditure. Thus, ground No. 1, raised by the Revenue is treated as partly allowed. 63. In ground No. 2, the Department has challenged the deletion of disallowance made on account of repairing expenses of Rs. 14,85,671, which was treated as capital expenditure. 64. The Assessing Officer noted that the assessee has incurred expenditure which were in the nature of renovation, repairs and renewals. These expenses were for rewiring, installation of light, fixture and fittings and dismantling/reinstallation of cooling tower/pump. All these expenditure were held to be in the nature of capital expenses. Accordingly, he treated ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sion, the learned Commissioner (Appeals) excluded the said provisions for bad debt and leave salary. 70. Before us, it has been admitted by both parties that now this issue stands covered by the judgment of the hon'ble Supreme Court in CIT v. HCL Comnet Systems and Services Ltd. [2008] 305 ITR 409 (SC). In view of the admitted position of law declared by the hon'ble Supreme Court in the aforesaid case, we affirm the findings given by the learned Commissioner (Appeals) and hold that the provisions for bad debt and leave salary cannot be included in the computation of book profit and the same has to be excluded. Thus, ground No. 3, is treated as dismissed. 71. Ground Nos. 4 and 5 being general in nature, hence, no separate adjudication is required. 72. In the result, the Revenue's appeal for the assessment year 2000-01 is treated as partly allowed. We now take up the assessee's appeal in I. T. A. No. 6586/Mum./2005, for the assessment year 2000-01. 73. In ground No. 1, the assessee has challenged the disallowance of exemption claimed under section 10(23G) in relation to interest income of Rs. 3,30,64,292. 74. The Assessing Officer observed that the assessee has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance under section 14A on account of proportionate administrative expenses exempt under section 10(33). 84. After hearing both parties, we find that this ground is similar to the ground decided in the Revenue's appeal in I. T. A. No. 4719/Mum./2004, for the assessment year 1999-2000. Therefore, the findings given therein will apply mutatis mutandis on this issue also wherein it has been held that one per cent. of administrative expenses would be disallowed. Consequently, ground is treated as partly allowed for statistical purposes. 85. In the result, the Revenue's appeal for the assessment year 2001-02 is treated as partly allowed for statistical purposes. We now take up the assessee's appeal in I. T. A. No. 6587/Mum./2005, for the assessment year 2001-02. 86. Ground No. 1, relates to disallowance claimed exempt under section 10(23G), which relates to interest income of Rs. 71,87,083. 87. This ground is similar to ground No. 1, raised by the assessee in its appeal in I. T. A. No. 6586/Mum./2005, for the assessment year 2000-01, wherein this issue has been restored to the file of the Assessing Officer in the wake of the fact that notification under section 10(23G) ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
