COMMISSIONER OF INCOME TAX-II V. GUJARAT STATE FINANCIAL SERVICES LTD., WING-B, 3RD FLOOR,

TAXAP/1048/2010

AI Insights

The case involves multiple Tax Appeals by the Commissioner of Income Tax-II against Gujarat State Financial Services Ltd., concerning the disallowance of depreciation on assets involved in sale and lease back transactions. The primary legal question was whether the Appellate Tribunal was correct in law and on facts in confirming the order passed by CIT (A) in deleting the disallowance of depreciation. The Tribunal had previously allowed the depreciation claim, citing judicial consistency and referencing the explanation 4A to section 43(1) of the Income-tax Act, 1961, which pertains to lease transactions. The High Court of Gujarat, referencing a similar case and the Supreme Court's decision in I.C.D.S. Ltd., upheld the Tribunal's decision, dismissing the appeals.

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 727952 (HC-GUJARAT)
• Appeal Type: Others
• Pronouncement Date: 17-02-2014
• Assessment Year: misc
• Other Referred Cases: I.C.D.S. Ltd. v. Commissioner of Income-tax and another
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Others
• Court: HIGH COURT
• Department Lawyers: MANISH SHAH
• Assessee Lawyers: M R BHATT; MAUNA BHATT
• Keywords: Colorable device; Depreciation; Higher rate of depreciation; Judicial Consistency; Sale & lease back transaction; Leased out assets
• Section: 43(1)

Judgement Text

"O/TAXAP/1048/2010 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL NO. 1048 of 2010 With TAX APPEAL NO. 1049 of 2010 With TAX APPEAL NO. 1068 of 2010 With TAX APPEAL NO. 1069 of 2010 With TAX APPEAL NO. 898 of 2010 With TAX APPEAL NO. 937 of 2011 With TAX APPEAL NO. 564 of 2013 With TAX APPEAL NO. 1334 of 2009 FOR APPROVAL AND SIGNATURE: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI ============================================================ ==== 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the Constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? Page 1 of 8 O/TAXAP/1048/2010 JUDGMENT ================================================================ COMMISSIONER OF INCOME TAX-II....Appellant(s) Versus GUJARAT STATE FINANCIAL SERVICES LTD., WING-B, 3RD FLOOR,....Opponent(s) ================================================================ Appearance: MR MR BHATT, LD.SENIOR COUNSEL WITH MRS MAUNA M BHATT, ADVOCATE for the Appellant(s) No. 1 MR MANISH J SHAH, ADVOCATE for the Opponent(s) No. 1 ================================================================ CORAM: HONOURABLE MR.JUSTICE AKIL KURESHI and HONOURABLE MS JUSTICE SONIA GOKANI Date : 17/02/2014 COMMON ORAL JUDGMENT (PER : HONOURABLE MS JUSTICE SONIA GOKANI) 1. Since all the Tax Appeals raise common question of law and facts, by a common judgment, they are being decided. However, for the purpose of adjudication, the facts contained in Tax Appeal No.1048 of 2010, wherever necessary shall be referred. 2. The Tax Appeals arise from the order of the Income­tax Appellate Tribunal (hereinafter referred to as ‘the Tribunal’) dated September Page 2 of 8 O/TAXAP/1048/2010 JUDGMENT 11, 2009. The Revenue had raised initially two questions as substantial questions of law for our determination for the assessment year 2000­2001. However, at the time of admission, the present appeal has been admitted for consideration of Question ‘A’ alone, which is as follows : “(A) Whether the Appellate Tribunal is right in law and on facts in confirming the order passed by CIT (A) in deleting the disallowance of depreciation on assets of sale & lease back transaction ?” 3. Tax Appeal No.1048 of 2010 arises in the following factual background : 3.1 The assessee­company is a State owned enterprise engaged in the business of providing financial assistance to the industrial units. For lease transactions, depreciation has been claimed by the assessee which relates to the assets on sale and lease back of buses to Gujarat State Road Transport Corporation and plant and machinery etc. to Gujarat Electricity Board and other industries. Such lease back Page 3 of 8 O/TAXAP/1048/2010 JUDGMENT transactions on which depreciation has been claimed, as per the assessee’s case, were arranged in earlier years. Total sum of depreciation claimed was Rs.6.52 crore (rounded off). The Assessing Officer found such transaction as colourable device and accordingly, disallowed the entire sum by a detailed order. 3.2 Aggrieved by such disallowance, challenge was taken before the CIT (Appeals). The CIT (Appeals) observed that “The claim of the appellant could not be disallowed lightly by superfluous observation that expenses and interest credits (lease rentals) would off set each other.. .. .. However, lease transactions were there for several years and unless a uniform stand is taken, any disjoined attempt midway could be against the reasoning and law.” It, accordingly, directed the Assessing Officer to allow the same considering the explanation 4A to section 43(1) of the Income­tax Act, 1961 (hereinafter referred to as ‘the Act’), which Page 4 of 8 O/TAXAP/1048/2010 JUDGMENT takes care of lease transaction with effect from October 01, 1996. 3.3 The Revenue challenged the same before the Tribunal and the Tribunal following its own findings in the assessee’s own case in respect of similar transactions with identical facts allowed the claim of the assessee by holding that the transactions of the present year were regular transactions from earlier years and when the view on this subject has already been expressed, the judicial consistency is required to be maintained by the Revenue between itself and the tax­payer and accordingly, the present appeals raising aforementioned question of law for our consideration. 4. We have heard learned Senior Counsel Mr.M.R. Bhatt appearing with Mrs.Mauna Bhatt for the appellant­Revenue and learned counsel Mr.M.J. Shah for the respondent­assessee. 5. Mr.Bhatt has fairly submitted that the very issue in the earlier year has travelled to this Court Page 5 of 8 O/TAXAP/1048/2010 JUDGMENT in Tax Appeal No.566 of 2013 in the case of Commissioner of Income­tax­II v. Gujarat State Financial Services Ltd. This Court has upheld the version of the Tribunal relying on the decision of the Apex Court in the case of I.C.D.S. Ltd. v. Commissioner of Income­tax and another, reported in (2013) 350 ITR 527. The relevant portion of the order of this Court on the said issue deserves reproduction which reads as under : “3. Though learned counsel for the Revenue pointed out that the Revenue’s appeal in the earlier years being Tax Appeal No.937 of 2011 has been admitted by this Court, on similar question, we notice that the issue of claiming higher rate of depreciation on leased out assets is now finally governed by the decision of the Supreme Court in the case of I.C.D.S. Ltd. vs. Commissioner of Income­Tax and another reported in [2013] 350 ITR 527 (SC). 4. In that view of the matter, this question need not detain us any longer. In the said judgment, the Supreme Court held that for claiming higher rate of depreciation, there is no requirement under the Act of usage of Page 6 of 8 O/TAXAP/1048/2010 JUDGMENT the assets by the assessee himself. The vehicles were purchased by the assessee from manufacturer and leased out to customers. Such vehicles were used in the course of leasing business. The Supreme Court allowed the assessee’s appeal reversing the judgment of the High Court rejecting the Revenue’s argument that the assessee not being the owner and only a lessor cannot claim the depreciation. 5. Since facts are similar in the present case, the said ratio would, therefore, apply. There is nothing on record even otherwise to suggest that the transaction itself was sham or bogus. In that view of the matter, question is not required to be considered.” 6. Without assigning any separate reasonings in the present appeals, as the substantial question of law raised is identical, these Tax Appeals also on the similar line, deserve no further entertainment and are, accordingly, dismissed. (AKIL KURESHI, J.) Page 7 of 8 O/TAXAP/1048/2010 JUDGMENT (MS SONIA GOKANI, J.) Aakar Page 8 of 8 "