9911796707
TMI Blog2016 (11) TMI 1302X X X X Extracts X X X X X X X X Extracts X X X X ..... er of the Ld. CIT(A), to the extent the latter had upheld the order of the A.0 treating remittances to the extent of US $ 6,60,000/- by the assessee company to its 'AE', i.e M/s Taurian CISA at Abdidjan Ivory Coast of South Africa (the 'WOS' of the assessee company) towards 'Share application' money, as loans and advances, and on the said basis had thus sustained the consequent adjustment/addition towards impugned interest computed @14% p.a w.r.t the said amount in the hands of the assessee company. That the order of the Ld. CIT(A), to the extent relatable to remittance of US $ 2,00,000 to its aforesaid 'WOS', and the consequent adjustment/addition as regards the same is however sustained, however the A.O/TPO is herein directed to work out and restrict the said adjustment/addition by adopting rate of interest as 6 months LIBOR plus 150 basis point for the delayed receipt of the payments by the assessee company from its aforesaid WOS/AE. Disallowance of 'lease rentals' - whether the 'lease transaction' executed by the assessee company was a Finance lease' and not an 'Operating lease'? - Held that:- We herein set aside the order of the Ld. CIT(A) to the extent the latter had uphe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... einafter referred to as the 'Act'), raising the following grounds of appeal :- Ground No. 1: Validity of assessment order: 1. On the facts and circumstances of the case and in law, the CIT(A) erred in confirming the action of the Additional Commissioner of Income tax, Range 4(3), Mumbai ( the AO ) of passing the assessment order u/s 143(3) of the Act beyond the limitation prescribed under the Act. 2. The Appellant prays that the action of the lower authorities be deleted by holding that : (i) the assessment order is passed beyond the limitation period specified under the Act and as such is illegal, invalid, bad in law and be quashed; and (ii) the order passed by the Transfer Pricing Officer ( TPO') be treated as illegal, invalid, bad in law and be quashed. Without prejudice to above ground : Ground No. 2 : Reference to Transfer Pricing Officer ( TPO ): 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the AO of making a reference to the TPO without satisfying the conditions as to what are necessary or expedient circumstances existed in the Appellant's case for such a ref ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd in the circumstances of the ease and in law, the CIT(A) erred in confirming the action of the AO of disallowing lease rentals on the ground that the lease transaction executed by the appellant is a finance lease transaction and not operating lease transaction. 2. The Appellant prays that the action of the lower authorities be deleted and the treatment given by the Appellant in its return of income be accepted. Without prejudice to above 3. If at all the action of the lower authorities is upheld then, in that case, the Appellant be allowed finance charges incurred during the year under consideration and depreciation on the assets under lease transaction in accordance with section 32 of the Act. Ground No. 7: Disallowance of loss on forward exchanje contract- ₹ 2,62,65,930/-. 1. On the facts and in the circumstances of the case and in law, the CIT(A) erred in confirming the action of the A. 0 of disallowing ₹ 2,62,65,9301- being the difference in value of the forward contracts as on the date on which the contract was entered into and the rate prevailing as at the end of the financial year, on the ground that the same represents notional loss. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the foregoing grounds of appeal. 2. The assessee is a private limited company engaged in the business of trading and processing of iron ore, mining activity of iron ore on contract basis at Jharkhand and generation of wind power. The processed iron ore is sold by the assessee company both in the domestic and international market. The assessee company had e-filed its 'Return of income' on 29.09.2008, declaring income of ₹ 23,66,78,000/-, which was processed as such u/s 143(1) of the Income tax act, 1961 (hereinafter referred to as the 'Ace). The case of the assessee company was taken up for scrutiny proceedings and Notices u/ss. 143(2) and 142(1) of the 'Act' were served on the assessee company. During the course of the assessment proceedings the A.O after perusing the 'Audit report' filed by the assessee company in 'Form 3CEB', referred the computation of the 'Arms length price' ('ALP') as regards the International transactions of the assessee company relating to advance of share application money to its 'Associated Enterprise' (AE), and incurring of expenses in relation to pre and post incorporation of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ₹ 67,500/- Total Income Rs.39,24,44,127/- GROUND OF APPEAL 1: 3. The Ld. A.R of the assessee company had at the very outset challenged the validity of the assessment framed by the A.O, by claiming that as the assessment order was passed beyond the period of limitation contemplated under Sec. 153(1) of the 'Act', therefore the same was non est in the eyes of law and thus could not be sustained as such. The Ld. A.R fortifying his contention that the assessment framed by the A.0 u/s 143(3) of the 'Act' was time barred, therein referred to the Second proviso of Sec. 153(1) of the 'Act' and averred that though the A.0 remained under a statutory obligation to frame assessment in the hands of the assessee company within a period of 33 months from the end of the relevant assessment year, i.e latest by 31.12.2011, however the same having been framed only as on 19.01.2012, therefore the same was barred by limitation and was thus liable to be struck down on the said count itself. The Ld. A.R further rebutting the observations of the Ld. CIT(A)-8, Mumbai, w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... be retrospective in its application, should not be given an extended meaning and should be strictly confined to its clearly defined limits. (ii). Law relating to forum and limitation is procedural in nature, whereas law relating to right of action and right of appeal even though remedial is substantive in nature. (iii,). Every litigant has a vested right in substantive law but nosuch right exists in procedural law. (iv). A procedural statute should not generally speaking be applied retrospectively where the result would be to create new disabilities or obligations or to impose new duties in respect of transactions already accomplished. (v). A statute which not only changes the procedure but also creates new rights and liabilities shall be construed to be prospective in operation, unless otherwise provided, either expressly or by necessary implication 4. Thus the Ld. A.R taking support of the aforesaid judgment of the Hon'ble Apex Court, therein submitted that as Sec. 144C which was made available on the statute vide the 'Finance Act, 2012, w.r.e.f 01.04.2009, though may at first blush appear to be procedural in nature, as the same provides for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The Ld. A.R further referring to the Ileydons rule of interpretation', therein submitted that by taking cognizance of the 'Mischief' which was intended to be plugged by the legislature by making Sec. 144C available on the statute, therein further fortified his contention that the provisions of Sec. 144C could not be made applicable to years prior to A.Y. 2010-11, and as such the A.0 had erred in extending the same to the case of the present assessee company. 6. That during the course of hearing of the appeal, the Ld. A.R further supporting his contention that the provisions of Sec. 144C were applicable w.e.f A.Y. 2010-11, therein drew the attention of the bench to CBDT Circular No. 5 of 2010; dated. 03.06.2010 (Para 45.5), which read as under: - 45.5.Applicability - These amendments have been made applicable with effect from 1st October, 2009, and will accordingly apply inrelation to assessment year 2010-11 and subsequent years. The Dispute Resolution Panel Rules have been notified by S.O. No. 2958(E); dated. 20th November, 2009. 7. The Ld. A.R thus relying on the aforesaid Circular No. 5 of 2010 issued by the CBDT, therein submitted that a bare perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r CBDT Circular No. 9; Pt. 19.11. 2013, wherein the anomaly as had crept in Para 45.5 of the Circular No. 5; Pt. 03.06.2010, as regards the date of applicability of the provisions of Sec. 144C was removed by the CBDT by substituting the aforesaid Para 45.5 (supra), and therein clarifying that the provisions of Sec. 144C would be applicable to any order which proposes to make any variation in income or loss returned by an 'eligible assessee' on or after October 1, 2009, irrespective of the assessment year to which it pertains, therein submitted that as the aforesaid CBDT Circular No. 9 (supra) had been issued only as on 19.11.2013, and as such was not available at the time of passing of the assessment order, therefore the A.0 was bound by the Circular No. 5 (supra), which was in force as on the date of framing of the assessment in the hands of the assessee company. It was thus averred by the Ld. A.R that as the A.0 had erred in not following the binding Circular No. 5 (supra), , the same therein had led to surfacing of a view on his part which was glaringly found to be in conflict with the view adopted by the CBDT in its Circular No.5 (supra), as a result whereof the view ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat there was nothing in the 'Act' from where it could be gathered that Sec. 144C of the 'Act' was to be made applicable only w.e.f A.Y. 2010-11. 11. We have considered the rival submissions of either side and perused the relevant materials on record, including the orders of the authorities below and are of the considered opinion that the genesis of the controversy as to whether the assessment framed by the A.O is within the period of limitation contemplated under the 'Act' or not, mainly revolves around the issue of the period of applicability of Sec. 144C of the 'Act'. In this regard it would be relevant and pertinent to point out that the adjudication of the issue as to whether the assessment framed by the A.0 vide his order u/s 143(3), dt. 19.01.2012, is within the period of limitation as contemplated under the 'Act' or not, has to be carried out in background of the fact that the A.0 in the present case had applied the provisions of Sec. 144C of the 'Act' and issued 'draft assessment' order to the assessee company, as provided u/s 144C(1) of the 'Act', and the assessee company vide its letter dt. 20.12.2011 (Pa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment (hereafter in this section referred to as the draft order) to the eligible assessee if he proposes to make, on or after the r day of October, 2009, any variation in the income or loss returned which is prejudicial to the interest of such assessee , and find our self to be persuaded by the observations of the Ld. CIT(A), and in agreement with the contention of the Ld. DR that the 'Cut off' date of 01.10.2009 provided in Sec. 144C(1) had been used in context of and in reference to the date on which the A.0 consequent to the order of the TPO u/s 92C(3) of the 'Act', proposes to make any variation in the income or loss returned, which is prejudicial to the interest of the assessee, independent of the assessment year involved therein. There is nothing provided for in the aforesaid statutory provision from where it could be gathered that the 'Cut off' date of 01.10.2009 is to be construed to mean that that the statutory provisions contemplated u/s 144C of the 'Act' are to be made applicable w.e.f A.Y. 20 10 11, and are not to be made applicable to the preceding years. We though find our self principally in agreement with the contention of the L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Sec. 144C were not applicable to A.Y. 2008-09 involved in its case, had thereafter been rectified by the CBDT vide its Circular No. 9; 19.11.2013, wherein the Para 45.5 had been substituted, and therein reads as under: 2. Explanatory Circulars for the Finance (No. 2) Act, 2009, i.e Circular No. 5 of 2010 ,dated. 03.062010, in Para 45 has explained the said new section 144C and the consequential amendments made in other sections ofIncome tax Act. Para 45.5. of the Circular No. 5 of 2010, dated. 03-06-2010 reads as under:- 45.5 Applicability - These amendments have been made applicable with effect from Ft October, 2009, and will accordingly apply in relation to assessment year 2010-11 and subsequent assessment years. The Dispute Resolution Panel rules have been notified by S. 0 No. 2958 (E), dated. 20th November, 2009. In the above extracted para 45.5 there has been an inadvertent error in stating the applicability of the provisions of section 144C inserted vide Finance (No. 2) Act, 2009 that amendments will apply in relation to the assessment year 2010-11 and subsequent assessment years. Accordingly, para 45.5 is replaced with the following:- 45.5. A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Circular No. 5 of 2010, dated 3rd June, 2010 by the CBDT, and are surprised to find that such a serious infirmity in the circular had been allowed to perpetuate and remain as such for a long period of about 3 1/2 years by the CBDT. We herein direct the CBDT to be careful as regards drafting of the Circulars/Instructions and carry out thorough vetting of the same before putting up the same in the public domain. 14. Thus in light of our aforesaid observations, now when in the present case, the A.O on receipt of the order of the TPO u/s 92CA(3) of the 'Act', dated: 15.03.2011, had thereafter passed a 'draft assessment' order as on 28.11.2011 (i.e subsequent to the 'Cut off' date of 01.10.2009), therefore no infirmity as regards the applicability of the provisions of Sec. 144C of the 'Act' can be related with the case of the present assessee company. 16. We now in light of our aforesaid observations that the provisions of Sec. 144C had rightly been applied by the A.0 in the case of the assessee company, thus now advert to the issue as to whether the assessment framed by the A.O u/s 143(3) of the 'Act', vide his order dated.19.01.201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the A.O within the stipulated time period from the assessee; (iv). The 'DRP' in case of receipt of objections to the proposed variations from the assessee, shall within a period of 'Nine months' from the end of the month in which the 'draft assessment' order had been forwarded to the eligible assessee, issue 'directions' for the guidance of the A.O, which the latter has to follow while completing the assessment; (v). The A.O shall within a period of 'One month' from the end of the month in which 'direction' had been received from the 'DRP', frame assessment in the hands of the assessee, though without affording any opportunity of being heard to the latter. is thus found to be substantially more time consuming, pursuant whereto the legislature in all its wisdom had provided for a separate and distinct period of limitation for framing of assessments in cases where the provisions of Sec. 144C of the 'Act' had been invoked. In this regard it would be relevant to point out that the overriding and superseding effect of the 'time limits' for framing of assessments in the cases where the provisions of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, within one month from the end of the month in which such direction is received. 17. Thus in the background of the aforesaid clear position of law, wherein it stands inescapably gathered that in a case where the provisions of Sec. 144C had been invoked, there the 'time limitation' for framing of assessment shall be regulated by that as provided in Sec. 144C itself, thus now when in the case of the present assessee company, which on receipt of 'draft assessment' order, had therein intimated to the A.O that as the proposed additions/disallowances made in the draft order' were not acceptable to it, and were to be challenged by way of filing of an appeal u/s 246A of the 'Act' before the CIT(A), therefore the final assessment order be passed, it can safely be gathered that the assessee company had not filed any objections to the proposed variations with the 'DRP and the A.O, pursuant whereto the period of limitation for framing of assessment in its case, is regulated by Sec. 144C(2)(b) r.w Sec. 144C(3)(b), which on the basis of facts involved in the case of the assessee company, is reckoned as under:- Date Partic ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... period of delay involved in allotment of shares and receipt of the payments by the assessee company from its aforesaid WOS/AE. 21. That at the very outset it was submitted by the Ld. A.R that the assessee company had remitted an amount aggregating to US $ 8,60,000 (rupee equivalent of ₹ 1,51,18,263/-) by way of 'Share application' money to its wholly owned subsidiary company (for short 'WOS') viz, Taurian CISA at Abdidjan Ivory Coast of West Africa under the automatic route of 'Foreign Exchange Management Act, 1999' (for short TEMA') for overseas direct investment in terms of Notification No. FEMA 1201RB- 2004; dt. 07/07/2004 r.w Clause (a) of Sub-section (3) of Sec. 6 of the TEMA'. It was further submitted by the Ld. A.R that as against the aforesaid amount of US $ 8,60,000 (supra), an amount aggregating to US $ 2,00,000 was refunded by the 'WOS' as under :- Date USD INR 30.12.2009 US $ 1,00,000 ₹ 46,62,428/- 25.01.2010 US $ 1,00,000 ₹ 45,97,506/- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wing money between two cross border AE's comes within the ambit of International transaction and it has to be considered as to whether the same is at ALP, when interest free loan is given to an overseas AE, income on account of interest cannot be excluded from the arms length consideration . , and thus concluded that the issue regarding the conversion of loan into equity does not preclude the TPO to determine the arm's length interest on the loans given to the AE's. The TPO referring to and taking cognizance of the manifold factors, Le the various varieties of risks involved in advancing of the amounts, loss of opportunity to the assessee company to earn income on the amount advanced, coupled with the fact that if the said amounts would had been advanced as loans to unrelated parties in the similar circumstances, then interest would had accrued to the assessee company, thus on the basis of conjoint perusal of the aforesaid circumstances, in light of the fact that the assessee company had borrowed funds @12% p.a, therein adopted the rate of interest @14% p.a and applying the same to the period starting from the date of remittance made by the assessee company during ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ances report issued by the dealer viz., State Bank Of India, wherein it was mentioned that the remittances for the year under consideration were towards additional share capital of WOS/AE (Page 136, 139, 142, 145, 150, 153 and 155 of the 'APB'), as well as referred to the details of the remittances aggregating to US $ 8,60,000 made by the assessee company, against which 32,120 shares worth US $ 6,60,000 were issued, while for the balance amount of US $ 2,00,000 was refunded by the WOS/AE to the assessee company (Page 126 of 'APB'), and still further drew our attention to the 'Share Certificates' issued by the WOS/AE (Page 127-128 of 'APB'). It was thus submitted by the Ld. A.R that as against the remittance of US$ 8,60,000 the assessee company was allotted 31,120 shares worth US $6,60,000, which therein represented 77% of the total remittances. It was thus averred by the Ld. A.R that in light of the aforesaid factual background, the TPO/A0 had erred in treating the remittance made by the assessee company towards share application money, as a loan transaction, and in light of the said factual background so averred by him, therein submitted that the sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... therein held as under:- There is no fault with the finding of the Tribunal. There were not at the relevant time, and even today there are no thin capitalization rules in force. 27. The Ld. A.R further addressing the issue under consideration on a different footing, therein submitted that as the business of a 'WOS' is to be treated as the business of the 'Holding company', therefore going by the said position of law, as the fruits of the investment by the assessee company in its 'WOS' were solely to belong to the assessee company (i.e the 'Holding company'), as the latter remained the sole and absolute owner of the 'WOS', therefore for the said reason, on giving of money to the 'WOS' and on use of the said money by the latter, the assessee company in its status as that of being the sole owner of the subsidiary company, is beneficiary of all the gains of the subsidiary company, therefore non allotment of the shares to the assessee company during the period of payment of the share application money till the actual date of allotment, would therefore not go to prejudice the position of the assessee company in any way. The Ld. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the nature as that of remittance towards share application money, but rather even otherwise, the very fact that the remittances made by the assessee company to its WOS/AE were clearly stated to be for the purpose of obtaining of mining contracts by the WOS/AE in Africa, which funds as per the arrangements made between the assessee company and its WOS/AE were to remain in the latters bank account till the finalization of the mining contracts, and it was only thereafter the amounts which were not required by the WOS for the aforesaid purpose were to be refunded to the assessee company, thus submitted that in the backdrop of the aforesaid factual position, wherein not only the allotment and refund of the impugned share application money was beyond the parameters contemplated under the statutory provisions as had duly been taken note of and appreciated by the Ld. CIT(A) in the body of his order, but rather the peculiar arrangement entered into between the assessee company and the WOS/AE, wherein in order to facilitate obtaining of mining contracts by the WOS/AE in Africa, there was a specific purpose oriented remittance of funds by the assessee company to its WOS/AE, as per which arran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ide and perused the relevant materials on record, including the orders of the authorities below and are of the considered opinion that though it is claimed that amounts aggregating to US $ 8,60,000 had been remitted by the assessee company by way of 'Share application' money to its wholly owned subsidiary company (for short `WOS') viz, Taurian CISA at Abdidjan Ivory Coast of West Africa under the automatic route of 'Foreign Exchange Management Act, 1999' (for short TEMA') for overseas direct investment in terms of Notification No. FEMA 120/RB-2004, dt. 07/07/2004 r.w Clause (a) of Sub-section (3) of Sec. 6 of the TEMA', after due compliance of the statutory provisions contemplated under law, however it also remains a matter of fact that as against the remittance of US $ 8,60,000 (rupee equivalent of ₹ 1,51,18,263/-), shares numbering 31,120 worth US $ 6,60,000 only were allotted to the assessee company, while for the balance amount of US $ 2,00,000 (supra) was refunded by the 'AMOS' to the assessee company. Thus the adjudication as regards the color and character of the remittance by the assessee company to its AE/WOS has to be gathered in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to its `WOS', and the refunding of the same by the `WOS' after enjoying the said amounts, as such, would safely fall within the realm of a simpliciter advance, which therein would render the color and character to such transaction, as that of being a 'loan transaction'. In this regard it would be relevant and pertinent to point out that the host of decisions/orders of different benches of the Tribunals so relied upon by the Ld. A.R of the assessee company to support his contention that re- characterizing of the share application money remitted by the assessee company to its 'WOS', even to the extent where no shares had been allotted against the same and amounts had been refunded to the assessee company, is found to be absolutely misconceived, because a bare perusal of the said orders/decisions therein reveals that in the said cases, shares had been allotted to the respective assesses, while for in the case of the present assessee company, the fact as it so remains is that to the extent remittance of US $ 2,00,000 had been made by the assessee company to its 'WOS', no shares were allotted to the assessee company, but rather after a substantial delay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee company on the judgments of the Hon'ble High Courts, is found to be misconceived, as the same are found to be delivered in context of Sec. 36(1)(iii) of the 'Act' and in reference of the issue under consideration in the present case. 33. That in light of our aforesaid observations, we herein set aside the order of the Ld. CIT(A), to the extent the latter had upheld the order of the A.0 treating remittances to the extent of US $ 6,60,000/- by the assessee company to its 'AE', i.e M/s Taurian CISA at Abdidjan Ivory Coast of South Africa (the 'WOS' of the assessee company) towards 'Share application' money, as loans and advances, and on the said basis had thus sustained the consequent adjustment/addition towards impugned interest computed @14% p.a w.r.t the said amount in the hands of the assessee company. That the order of the Ld. CIT(A), to the extent relatable to remittance of US $ 2,00,000 to its aforesaid 'WOS', and the consequent adjustment/addition as regards the same is however sustained, however the A.O/TPO is herein directed to work out and restrict the said adjustment/addition by adopting rate of interest as 6 months LIBOR ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... support of its aforesaid contention relied upon the CBDT Circular No. 2; dated. 09/02/2001, which therein provided that as per the new 'Accounting standards' issued by the ICAI, the lessees were required to carry out capitalization of the assets in lease transactions. The assessee company in order to drive home its contention that the lease transaction was in the nature as that of an 'Operating lease' and not a 'Finance lease' transaction, therein during the course of the assessment proceedings referred to certain articles provided for in the 'Lease agreement' with M/s SREI Infrastructure Finance Ltd., who as per the assessee company was the sole and absolute owner of the wagons. The assessee company in its attempt to further fortify its contention therein submitted before the A.0 that in the period relevant to A.Y. 2006-07 they had entered into a similar transaction for one wagon and had given same treatment in the 'Books of accounts' and the 'Return of income', as was so done by it during the year under consideration, which after thorough perusal was accepted by the A.0 while framing the assessment u/s 143(3) for A.Y. 2006-07 in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mplication on the allowance of depreciation on assets under the provisions of the Income tax act, however the same could not be stretched to mean that in case of a 'Finance lease' the payments made would be allowed as a revenue expenditure. Thus the A.0 observing that the lease transaction of the assessee company, as per the various clause of the 'lease agreement', disclosures made by the assessee company in its 'Financial statements' etc., proved beyond any scope of doubt that the same was a 'Finance lease', which finding of his predecessor in A.Y. 2007-08 had also been upheld by the Ld. CIT(A), therefore proceeded with and disallowed the amount of ₹ 9,70,34,749/- so claimed by the assessee company as a revenue expenditure. That as regards the 'depreciation' and 'Interest' of ₹ 2,68,14,392/- and ₹ 73,67,890/-, respectively, as had been claimed by the assessee company in its `13 Loss a/c', the A.0 refused to take cognizance of the same for the reason that the assessee company itself had given up the said claim. The A.0 while declining to consider the entitlement of the assessee company towards 'depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... submitted that in the immediately preceding year, i.e A.Y. 2007-08, the A.O had taken a similar view on the issue under consideration, which thereafter was upheld by the Ld. CIT(A), and following the said order of his predecessor, the Ld. CIT(A) while disposing of the appeal of the assessee company for the year under consideration, had taken the same view and dismissed the appeal of the assessee company as regards the issue under consideration. It was thus submitted by the Ld. D.R that the order of the Ld. CIT(A) be upheld and the ground of appeal of the assessee company as regards the issue under consideration be dismissed. 39. We have considered the rival submissions of either side and perused the relevant materials on record, including the orders of the authorities below and after perusing the material on record find ourselves to be in agreement with the findings of the lower authorities that as the assessee company as per various articles of the 'Lease agreement', Schedules to the 'Balance sheet' of the assessee company [Schedule 3, Schedule 19 - Note 5 Note 1(h), Schedule II of the 'Balance sheet', i.e Note to the annexures of 'Fixed assets' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 'Act' provides that the provisions of sub-section (1) of Sec. 32 shall apply, whether or not the assessee has claimed the deduction in respect of depreciation at the time of computing his total income, or not. Now when in the present case the A.0 had disallowed the claim of the assessee company towards 'lease rentals' of ₹ 9,70,34,749/-, by holding that as the assessee company was the sole and absolute owner of the wagons and thus the lease transaction was in the nature as that of a 'finance lease' and not an 'operating lease', therefore as a consequence thereto, it was obligatory on the part of the AO to have allowed 'depreciation' on the wagons owned by the assessee company and used by the latter for the purpose of its business. 40. We are further not impressed by the order of the Ld. CIT(A) who vide his observations recorded at Page 42 -Para 9.3 of his order, had upheld the disallowance by the A.0 of the 'Lease rentals' of ₹ 9,70,34,749/- so claimed by the assessee company, by holding that the 'lease transaction' was a 'Finance lease' and not an 'Operating lease', and while so concluding had ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... oetz India Ltd.(supra), it would be relevant and pertinent to point out that the Hon'ble Supreme Court had clearly held that the observations in the said judgment were in context of the powers of the A.0 and the same were not to impinge on the powers of the Tribunal, and had held as under:- We make it clear that the issue in this case is limited to the powers of the Assessing authority and does not impinge on the powers of Tribunal under S. 254 of the Income tax act, 1961. 41. Thus in light of our aforesaid observations, we herein set aside the order of the Ld. CIT(A) to the extent the latter had upheld the order of the A.0 who despite holding the lease transaction as that being in the nature as that of a 'Finance lease', had however declined to allow the claim of the assessee company towards 'depreciation' and 'Interest', and herein direct the A.0 to verify the amount of loan and the amounts of interest payments made by the assessee company during the year under consideration towards such loans taken for purchase of railway wagons through finance lease method and allow the claim of interest payment accordingly. Still further the A.O is directed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Ld. A.R and in the background of the said factual position, going by the statement of the Ld. A.R that as the impugned loss had been allowed by the A.0 while framing assessment in the hands of the assessee company for A.Y. 2009-10, therefore the same may not be allowed in the year under consideration, the said ground of appeal is dismissed as not pressed by the assessee company, in terms of our aforesaid observations. GROUND OF APPEAL 8: 45. The assessee company during the year under consideration had made a provision of leave salary of ₹ 1,97,087/-, out of which an amount of ₹ 1,01,903/- had been paid before the 'due date' of filing of the 'Return of income'. The A.0 being of the view that the assessee company by relying on the judgment of the Hon'ble High Court of Calcutta in the case of : Exide Industries Ltd. Vs. UO1 (292 ITR 470)(Cal), had thus not disallowed the provision on leave encashment, therein observed that as the said judgment of the Hon'ble Calcutta High Court had been assailed by the Revenue/department before the Hon'ble Supreme Court and was pending on the date of assessment, he therefore disallowed the amount of S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al, pay tax as if Section 43B(f) is on the statute book but at the same time would be entitled to make a claim in its returns. thus we are of the considered view that in light of the fact that the issue under consideration is pending before the Hon'ble Supreme Court, therefore the issue involved in the present appeal of the assessee company is restored to the file of the A.O with a 'direction' that the same be disposed of in conformity with the judgment of the Hon'ble Supreme Court which is pending adjudication as on date. Thus the aforesaid ground of appeal of the assessee company is disposed of in light of our aforesaid observations. GROUND OF APPEAL 9: 48. The Ld. A.R of the assessee company during the course of hearing of the appeal had therein submitted that in light of the smallness of amount involved as regards the issue under consideration, the same is not being pressed, as a result whereof the same is dismissed as being not pressed. GROUND OF APPEAL 10: 49. That a perusal of the assessment order reveals recording of a clear direction by the A.O as regards charging of Interest ui's 234B and 234C of the 'Act'. Thus in light of the ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
