Cholamandalam Investment and Finance Company Limited, CHENNAI V. ACIT, CHENNAI

ITA 1179/CHNY/2014

• Counselvise Citation: 117921714 RSA 2014
• Duration Of Justice: 1 year(s) 6 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-11-2015
• Appeal Filed By: Assessee
• Order Result: Dismissed
• Bench Allotted: D
• Next Hearing Date: 15-09-2015
• Assessment Year: 1997-1998
• Appeal Filed On: 05-05-2014
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: DR MILIND MADHUKAR BHUSARI
• Assessee Lawyers: MILIND S KOTHARI
• Keywords: Depreciation

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI . . . , . !'# ! , % !& BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI A. MOHAN ALANKAMONY, ACCOUNTANT MEMBER ./ ITA NO.1179/MDS/2014 ( )( / ASSESSMENT YEAR : 1997-98 M/S CHOLAMANDALAM INVESTMENT AND FINANCE COMPANY LTD., DARE HOUSE, NO.2, N.S.C. BOSE ROAD, CHENNAI - 600 001. PAN : AAACC 1206 H V. THE ASSISTANT COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), CHENNAI - 600 034. (+,/ APPELLANT) (-.+,/ RESPONDENT) +, / 0 / APPELLANT BY : SHRI MILIND S. KOTHARI, CA -.+, / 0 / RESPONDENT BY : DR. MILIND MADHUKAR BHUSARI, CIT 1 / 2% / DATE OF HEARING : 14.09.2015 3') / 2% / DATE OF PRONOUNCEMENT : 13.11.2015 / O R D E R PER N.R.S. GANESAN, JUDICIAL MEMBER: THIS APPEAL OF THE ASSESSEE IS DIRECTED AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) I, CHENN AI, DATED 20.01.2014 AND PERTAINS TO ASSESSMENT YEAR 1997-98. 2 I.T.A. NO.1179/MDS/14 2. THE ONLY ISSUE ARISES FOR CONSIDERATION IS WITH REGARD TO DEPRECIATION ON THE BOILERS AND WINDMILL LEASED OUT BY THE ASSESSEE. 3. SHRI MILIND S. KOTHARI, THE LD. REPRESENTATIVE F OR THE ASSESSEE, SUBMITTED THAT THE ASSESSEE IS ENGAGED IT SELF IN THE BUSINESS OF FINANCE AND LEASING. IN THE COURSE OF ITS BUSINESS ACTIVITY, THE ASSESSEE LEASED OUT BOILERS TO M/S KO THARI SUGARS AND CHEMICALS LIMITED. THE ASSESSEE ALSO LEASED OUT WI NDMILL AND BOILER TO M/S MOOKAMBIKAI SPINNING MILLS LTD. THE ASSESSEE CLAIMED DEPRECIATION AT THE RATE OF 100%. HOWEVER, THE ASSESSING OFFICER RESTRICTED THE SAME TO 50% ON THE GROUND TH AT THE ASSET, NAMELY, BOILERS AND WINDMILL ARE PUT TO USE FOR LES S THAN 180 DAYS. REFERRING TO THE ORDER OF THIS TRIBUNAL IN THE FIRS T ROUND OF LITIGATION, THE LD. REPRESENTATIVE SUBMITTED THAT THIS TRIBUNAL REMITTED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER TO FIND OUT THE DATE ON WHICH THE ASSET WAS DELIVERED TO THE LESSEE AND THEREAFTER DETERMINE THE DEPRECIATION ALLOWABLE TO THE ASSESSE E. INSPITE OF THIS DIRECTION OF THE TRIBUNAL, THE ASSESSING OFFIC ER AS WELL AS THE CIT(APPEALS) PROCEEDED ON THE PRESUMPTION THAT THE ASSET WAS NOT PUT TO USE. ACCORDING TO THE LD. REPRESENTATIVE, T HE ASSESSEE IS ENGAGED ITSELF IN THE BUSINESS OF LEASING OF ASSET, THEREFORE, THE 3 I.T.A. NO.1179/MDS/14 MOMENT IT HANDS OVER TO THE LESSEE, IT WOULD AMOUNT TO PUT TO USE OF THE ASSET FOR THE PURPOSE OF ASSESSEES BUSINESS. ACCORDING TO THE LD. REPRESENTATIVE, IT IS IMMATERIAL WHETHER THE LE SSEE HAS ACTUALLY PUT TO USE THE MACHINERY/ASSET FOR TRIAL RUN AND US AGE. IT IS FOR THE LESSEE EITHER TO USE THE ASSET IN THEIR BUSINESS OR TO KEEP THE SAME FOR THE REASONS BEST KNOWN TO THEM. AS FAR AS THE ASSESSEE IS CONCERNED, ACCORDING TO THE LD. REPRESENTATIVE, THE MOMENT THE ASSET WAS DELIVERED TO THE LESSEE, IT WOULD AMOUNT TO PUT TO USE, THEREFORE, THE ASSESSEE WAS ENTITLED FOR DEPRECIATI ON. SINCE THE ASSET WAS DELIVERED TO THE LESSEE, ACCORDING TO THE LD. REPRESENTATIVE, THE ASSESSEE WAS ENTITLED FOR DEPRE CIATION AT THE RATE OF 100%. 4. ON THE CONTRARY, DR. MILIND MADHUKAR BHUSARI, TH E LD. DEPARTMENTAL REPRESENTATIVE, SUBMITTED THAT NO DOUB T, THE ASSESSEE IS ENGAGED IN THE BUSINESS OF LEASING, THE REFORE, WHEN THE ASSET WAS DELIVERED TO THE LESSEE, IT WOULD AMOUNT TO PUT TO USE THE MACHINERY/ASSET. IN THE CASE BEFORE US, WHAT WAS L EASED OUT IS THE BRAND NEW BOILER AND BRAND NEW WINDMILL. IT IS A C OMMON KNOWLEDGE THAT BOILER AND WINDMILL ARE NOT AVAILABL E IN THE MARKET IN A READY BUILT CONDITION. THEREFORE, THE ASSESSEE C ANNOT PURCHASE 4 I.T.A. NO.1179/MDS/14 BOILER AND WINDMILL ON OUTRIGHT BASIS AND LEASE OUT THE SAME INSTANTLY. THE SPECIFIC CASE OF THE ASSESSEE IS TH AT THE ASSESSEE PURCHASED NEW BOILER AND WINDMILL AND THEREAFTER IT WAS LEASED OUT. THEREFORE, THE ASSESSEE HAS TO PURCHASE VARIOUS COM PONENTS WHICH CONSTITUTE BOILER AND WINDMILL AND IT HAS TO BE ASSEMBLED AND INSTALLED TO CALL THE ASSET AS A BOILER OR WINDMILL . IF THE VARIOUS PARTS OF THE BOILER AND WINDMILL ARE NOT ASSEMBLED TO CON STITUTE BOILER AND WINDMILL, IT CANNOT BE CONSTRUED AS BOILER AND WIND MILL AT ALL. THEREFORE, MERE DELIVERY OF VARIOUS COMPONENTS OF B OILER AND WINDMILL CANNOT BE CONSTRUED AS DELIVERY OF THE ASS ET. SINCE THE ASSESSEE CLAIMS THAT WHAT WAS LEASED OUT IS BOILER AND WINDMILL, THE ASSESSEE HAS TO NECESSARILY PROVE BEFORE THE AUTHOR ITIES BELOW THAT VARIOUS COMPONENTS, WHICH CONSTITUTE BOILER AND WIN DMILL, WERE PURCHASED AND ASSEMBLED BEFORE THE SAME WAS DELIVER ED TO THE LESSEE. THESE ASPECTS WERE NOT ESTABLISHED BY THE ASSESSEE BEFORE THIS TRIBUNAL EVEN THOUGH THERE WAS A SPECIF IC DIRECTION BY THIS TRIBUNAL TO FIND OUT THE DATE OF DELIVERY. TH EREFORE, THE AUTHORITIES BELOW FOUND OUT THAT THE ASSESSEE IS EN TITLED FOR DEPRECIATION AT THE RATE OF 50%. REFERRING TO THE ORDER OF THE CIT(APPEALS), THE LD. D.R. POINTED OUT THAT EVEN TH OUGH THE PARTS OF THE MACHINERY WERE DELIVERED ON THE DAY PRIOR TO 9. 10.1996, THE 5 I.T.A. NO.1179/MDS/14 ASSET ITSELF CAN BE CONSTRUED TO HAVE BEEN DELIVERE D ON 9.10.1996 ON WHICH THE VARIOUS COMPONENTS WERE ASSEMBLED AND THE ASSET WAS BROUGHT INTO EXISTENCE. ACCORDING TO THE LD. D .R., UNLESS THE ASSET, NAMELY, BOILER AND WINDMILL, WAS BROUGHT INT O EXISTENCE, THE SAME CANNOT BE DELIVERED TO LESSEE. THEREFORE, ON THE BASIS OF THE INVOICES FOR PURCHASE OF VARIOUS COMPONENTS, THE AS SESSEE CANNOT CLAIM ANY DEPRECIATION. 5. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS ON EITH ER SIDE AND PERUSED THE RELEVANT MATERIAL ON RECORD. THIS IS T HE SECOND ROUND OF LITIGATION BEFORE THIS TRIBUNAL. IN THE FIRST R OUND OF LITIGATION, THE TRIBUNAL FOUND THAT EVEN THOUGH THERE WAS A REFEREN CE IN THE SCHEDULE OF AGREEMENT THAT THE ASSET WAS ALREADY DE LIVERED, THE DATE OF DELIVERY WAS NOT MENTIONED. THEREFORE, BOT H THE REPRESENTATIVES FOR ASSESSEE AND THE REVENUE HAD AG REED BEFORE THIS TRIBUNAL TO REMIT THE MATTER TO THE FILE OF TH E ASSESSING OFFICER TO ASCERTAIN THE CORRECT DATE OF DELIVERY TO THE LESSE E AND ON THAT BASIS, DEPRECIATION ALLOWABLE HAS TO BE DETERMINED. THE ASSESSING OFFICER ON THE BASIS OF THE DIRECTION OF THIS TRIBU NAL, FOUND THAT THE ASSESSEE LEASED OUT THE BOILER SAID TO BE ACQUIRED FROM M/S THERMAX LTD. THE LESSEE ADMITTED BEFORE THE ASSESS ING OFFICER BY 6 I.T.A. NO.1179/MDS/14 LETTERS DATED 31.01.2000 AND 13.03.2000 THAT THE IN STALLATION OF BOILERS WAS COMPLETED IN THE PREMISES ON 09.10.1996 . THE ASSESSING OFFICER ALSO FOUND THAT THE COMPONENTS AN D ACCESSORIES OF THE BOILER WERE DELIVERED IN THE PREMISES ON 21. 03.1997. IN RESPECT OF THE WINDMILL, THE AUTHORITIES BELOW FOUN D THAT EVEN THOUGH VARIOUS COMPONENTS AND ACCESSORIES WERE DELIVERED O N 28.08.1996, THE ASSEMBLING OF THE COMPONENTS COMPLETED ONLY ON 31.01.1997 AND THEREAFTER THE WINDMILL WAS DELIVERED TO THE AS SESSEE AND IT WAS STARTED COMMISSIONING. 6. IT IS NOT IN DISPUTE THAT IN THE CASE OF LEASING BUSINESS, THE MOMENT THE ASSET WAS DELIVERED TO THE LESSEE, IT HA S TO BE CONSTRUED THAT THE ASSET WAS PUT TO USE BY THE LESS OR. IN THE CASE BEFORE US, IT IS NOT IN DISPUTE THAT THE BOILER AND WINDMILL ARE NOT AVAILABLE IN THE MARKET AS SUCH. IT IS AN ADMITTED FACT THAT THE ASSESSEE HAS TO PURCHASE VARIOUS COMPONENTS AND ACC ESSORIES OF BOILER AND WINDMILL AND IT HAS TO BE ASSEMBLED AND INSTALLED TO MAKE IT AS AN ASSET, NAMELY, BOILER AND WINDMILL SO AS T O ENABLE THE SAME TO LEASE OUT TO THE LESSEE. THEREFORE, MERE PURCHA SE OF COMPONENTS AND ACCESSORIES OF BOILER AND WINDMILL C ANNOT BE CONSTRUED AS DELIVERY OF ASSET. IT IS FOR THE ASSE SSEE TO BRING INTO 7 I.T.A. NO.1179/MDS/14 EXISTENCE THE ASSET, NAMELY, BOILER AND WINDMILL. THE MATERIAL AVAILABLE ON RECORD CLEARLY SHOWS THAT EVEN THOUGH THE COMPONENTS AND ACCESSORIES OF BOILER AND WINDMILL WERE DELIVER ED IN THE MONTH OF AUGUST, 1996, THE ASSEMBLING AND INSTALLATION WE RE COMPLETED IN THE MONTHS OF JANUARY, 1997 AND MARCH, 1997 RESPECT IVELY. THEREFORE, THE BOILER COULD HAVE BEEN DELIVERED TO THE LESSEE ONLY IN THE MONTH OF JANUARY, 1997 AND THE WINDMILL IN THE MONTH OF MARCH, 1997. IN OTHER WORDS, UNLESS VARIOUS COMPONENTS AN D ACCESSORIES OF THE BOILER AND WINDMILL ARE ASSEMBLED AND CONSTI TUTED TO FULL- FLEDGED BOILER AND WINDMILL, THIS TRIBUNAL IS OF TH E CONSIDERED OPINION THAT THERE CANNOT BE ANY DELIVERY OF THE AS SET, NAMELY, BOILER AND WINDMILL. THEREFORE, FULL-FLEDGED ASSET , NAMELY, BOILER AND WINDMILL CAME INTO EXISTENCE ONLY ON 21.03.1997 AND 31.03.1997 RESPECTIVELY. THEREFORE, THIS TRIBUNAL DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LOWER AUTHORITY. ACC ORDINGLY, THE SAME IS CONFIRMED. 7. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS DISMISSED. 8 I.T.A. NO.1179/MDS/14 ORDER PRONOUNCED ON 13 TH NOVEMBER, 2015 AT CHENNAI. SD/- SD/- (. !'# ! ) ( . . . ) (A. MOHAN ALANKAMONY) (N.R.S. GANESAN) % / ACCOUNTANT MEMBER /JUDICIAL MEMBER /CHENNAI, 5 /DATED, THE 13 TH NOVEMBER, 2015. KRI. / -267 87)2 /COPY TO: 1. +, /APPELLANT 2. -.+, /RESPONDENT 3. 1 92 () /CIT(A)-I, CHENNAI 4. 1 92 /CIT I, CHENNAI 5. 7: -2 /DR 6. ( ; /GF.