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TMI Blog2021 (4) TMI 576X X X X Extracts X X X X X X X X Extracts X X X X ..... own funds available with the assessee company in the form of share capital and reserves to meet the advance given - During the year relevant to the assessment year under consideration, the assessee has shown capital work in progress amounting to 2,32,75,003 but had not capitalized the interest on the same for the reason that the appellant had huge interest free reserves and own funds. As pointed out by the ld. CIT(A), ld. AR demonstrated during the appellate proceedings that the assessee had share capital and reserves to the tune of 145.34 crore and 63.52 crore respectively to meet the capital work in progress. Since, there is no material change in the facts of the present case, the Ld. CIT(A) has rightly deleted the addition made by the AO by following the decision of the coordinate Bench. In our considered view, the findings of the ld. CIT(A) are in accordance with the decision of the coordinate Bench rendered in the assessee s own appeals for the assessment years 2012-13 to 2015-16. Addition u/s. 14A - Sufficiency of own funds - HELD THAT:- As decided in own case [ 2020 (5) TMI 190 - ITAT CHANDIGARH] no disallowance is attracted u/s. 14A of the Act in case the assessee has not e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f ₹ 90,91,34,741/- on account of disallowance of lease rental claimed by the assessee on set top boxes taken on lease, addition of Rs. (-) 5,52,39,403/- on account of depreciation calculated on equipments procured from CISCO on lease hold basis, addition of ₹ 9,89,077/- on account of disallowance of interest attributable to work in progress and addition of ₹ 1,83,17,325/- u/s. 14A read with Rule 8D of the Income Tax Rules. 3. The assessee challenged the Assessment order before the ld. CIT(A). The ld. CIT(A) after hearing the assessee partly allowed the appeal and deleted the addition of Rs. (-) 5,52,39,403/- made on account of depreciation calculated on equipments procured from CISCO on lease hold basis, addition of ₹ 9,89,077/- on account of disallowance of interest attributable to work in progress and addition of ₹ 1,83,17,325/- u/s. 14A read with Rule 8D of the Income Tax Rules, however, confirmed the addition of ₹ 90,91,34,741/- made on account of disallowance of lease rental claimed by the assessee on set top boxes taken on lease. The Revenue is in appeal against the said findings of the ld. CIT(A). 4. The Revenue has challenged the impugn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essee's appeals for the aforesaid assessment years, there is no merit in this ground of the revenue's appeal, therefore this ground of appeal is liable to be dismissed. 7. On the other hand, the ld. Departmental Representative (DR) fairly admitted that the jurisdictional Tribunal has decided the identical issue in favour of the assessee in assessee's cases for the previous years, however, supported the action of the AO. 8. We have gone through the material on record including the decision of the coordinate Bench rendered in assessee's cases referred above. As pointed out by the ld. Counsel for the assessee, the coordinate Bench has decided this issue in favour of the assessee in ITA No. 547/Chd/2017 for AY 2013-14, ITA No. 139/Chd/2019 for AY 2012-13, ITA No. 842/Chd/2018 for AY 2014-15 and ITA No. 140/Chd/2019 for AY 2015-16. The findings of the coordinate Bench read as under: "43. Even otherwise, it is the own case of the Department that the STBs has a short life of three years. Referring to the clauses of the Master Lease Agreement with CISCO, as discussed above, it has been vehemently contended by the Department that the lease deed was so devised that t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it refunded on return of the Set Top Box As per attached Table- B 5. Installation Charges Nil 6. Activation charges Nil 7. Smart Card/Viewing Card Charges Nil 8. Repair and Maintenance Charges for three years from the date of installation Nil The Assessing Officer has observed that as per the above tariff plan adopted by the assessee with the consumers, at the end of 3 years from the date of installation of the STB in consumer's premises, the consumer becomes the owner of the property. The assessing officer in this respect has observed that if the assessee was not the owner of the equipment, how can it pass on the ownership to the consumer after 3 years from the date of installation. We have already agreed in this respect with the contention of the Department. However, as per the TRAI notification also, the life of the STBs has been taken at 3 years. As per the said notification of the TRAI, after 3 years, the consumer becomes the owner of the equipment but at the same time, the service provider (assessee herein) is also absolved of the liability of any warranty/guarantee or maintenance of the equipment, meaning thereby the assessee recovers the re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ip of the equipment and the assessee will be entitled to the deduction of the written down value of the equipment at the end of 3 years from the sale price received. However, the peculiar facts and circumstances of the case are that it is the own case of the department that the life of the equipment is 3 years and that the asset in the hands of the assessee is a capital asset, then we cannot understand, how can the department press an argument for the grant of depreciation at a lower rate which may be extended beyond the life of the asset. Under these circumstances also, the assessee, in our view, is entitled to the higher rate of depreciation which is commensurate with the life of the asset. In view of our findings given above, it is held that the assessee is entitled to deprecation @ 60% as applicable to the computers for the year under consideration. This ground is accordingly stands allowed." 9. We notice that in the present case the assessee raised additional ground before the ld. CIT(A), which reads as under: "Without prejudice, that the Ld. Assessing Officer was not justified to restrict the claim of depreciation on set of boxes at 15% whereas rightly allowabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ectively to meet the advance given of ₹ 3.20 crores. The issue is now squarely covered by the various decisions of the High Courts as well as of the apex court of the country including that of the Hon'ble Jurisdictional High Court in the case of 'Bright Enterprises Pvt. Ltd. Vs. CIT, Jalandhar' (supra), 'CIT Vs. Kapsons Associates' (2016) 381 ITR 204 (P&H) and the latest decision of the Coordinate Bench of the Tribunal in the case of 'ACIT Vs. Janak Global Resources Pvt. Ltd.' ITA No. 470/Chd/2018 order dated 16.10.2018, holding that if the assessee is possessed of sufficient own interest free funds to meet the investments/interest free advances, then, under the circumstances, presumption will be that interest free advances/investments have been made by the assessee out of own funds/interest free funds. Reliance in this respect can also be placed on the decision of the Hon'ble Supreme Court in the case of 'Hero Cycles (P) Ltd. Vs. CIT' 379 ITR 347 (SC) and also on the latest decision of the Hon'ble Supreme Court in the case of 'CIT (LTU) Vs. Reliance Industries Ltd.' [2019] 410 ITR 466 (SC). Thus, as per the settled law no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion. We notice that this issue came up before the coordinate Bench for consideration in assessee's appeals for the assessment years 2014-15 and 2015-16 and the Bench deleted the addition made u/s. 14A of the Act holding as under: "76. Ground No. 11: Vide ground No. 11 the assessee has agitated the confirmation of disallowance made by the AO u/s. 14A of the Act in respect of the expenditure incurred for earning of tax-exempt income. The Ld. Counsel for the assessee has submitted that the assessee did not earn any tax exempt income during the year. Hence, no disallowance u/s. 14A was warranted. 1. We find that the issue is now squarely covered by the various decisions of the High Courts in favour of the assessee viz. 'CIT, Faridabad Vs. Lakhani Marketing Inc.' 226 Taxman 45 (P&H), 'CIT Vs. Winsome Textiles' (2009) 319 ITR 204 (P&H), 'Cheminvest Ltd. vs. ITO' (2015) 378 ITR 33 (Delhi), 'Corrtech Energy P. Ltd.' (2014) 45 Taxman.com 116 (Gujarat High Court) 'CIT Vs. M/s. Shivam Motors (P) Ltd.' (2014) 272 CTR (All) 277. In all the above referred to case laws, the Hon'ble High Courts have been unanimous to hold that no disallowa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed in question and in the light of proposition settled through various decisions of the higher courts and highest court of the country that when the terms of the contract looked into with the relevant circumstances that are determinative of the nature of the such contracts, we have no hesitation to hold that the transaction in the present case is that of a loan/Finance. After going through the various terms of the deed, we find that the only role of the lessor in the present arrangement is to finance the transaction of purchase of equipment, with the lessee selecting the equipment to be supplied by the dealer, using it for its expected economic life, paying back the entire cost of the equipment over the lease tenure and exercising all rights of ownership over the asset and also bearing the risks of losses, damages, etc. associated with the ownership of the asset and no option to the lessee to terminate the lease and return the asset before the end of the lease term. Thus, it is neither a lease, nor a hire purchase agreement, but a loan/finance arrangement between the parties. So far as the contention of the Ld. Counsel for the assessee that the title of the asset remains with the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are not fully owned by the assessee, even then the provisions of section 32 will be attracted as it provides for claim of depreciation on assets owned fully or partly by an assessee. The contention of the Ld. Counsel that the Ld. CIT(A) himself has mentioned, "there is no doubt about the genuineness of the lease agreement", in our view, is of no help to the assessee. The impugned order is to be read as a whole, and a single line or word cannot be chosen to interpret a different meaning. What the Ld. CIT(A) has conveyed is that though the execution of the lease deed is not doubted but the real intention behind the deed is to be gathered from the various clauses of the deed and facts and circumstances of the case. Thus, we have no hesitation in holding that the arrangement in the present case was a loan/finance arrangement in the guise of a lease agreement. 28. However, the controversy does not end here. Though the assessee is held to be the owner of the asset, however, the next question that arise is whether the asset is held by the assessee as business/trading asset or as a capital asset. The assessee, admittedly, further gives on hire the STBs to various consumers ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to 5 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2016-17. Since there is no material change in the facts of the present case except the addition made by the AO, we do not find any reason to take a different view. Hence, consistent with our findings in Revenue's appeal for the AY 2016-17 we dismiss ground No. 1 to 4 of the present appeal for the same reasons. 2. Similarly, Ground No. 5 this appeal is identical to Ground No. 6 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2015-16. Since there is no change in the facts of the present case except the addition made by the AO, we dismiss ground No. 5 of the present appeal for the same reasons. 3. Further, Ground No. 6 of this appeal is identical to Ground No. 7 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2015-16. Since there is no change in the facts of the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X
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