Cisco Systems Capital (India) Pvt Ltd , Bangalore V. Assistant Commissioner of Income Tax Circle-2(1)(1), Bangalore

ITA 1215/BANG/2017

• Counselvise Citation: [2020] 111 COUNSELVISE.COM (IT) 2969 (ITAT-BANGALORE)
• Duration Of Justice: 2 year(s) 9 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-03-2020
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2010-2011
• Appeal Filed On: 29-05-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation; Opportunity of being heard; Wrong claim; Set aside
• Section: 143(3); 250; 13; 32; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL B BENCH : BANGALORE BEFORE SHRI A. K. GARODIA, ACCOUNTANT MEMBER AND SMT. BEENA PILLAI, JUDICIAL MEMBER ITA NO. 1 215 /BANG/201 7 ASSESSMENT YEAR : 20 1 0 - 1 1 MS. CISCO SYSTEM CAPITAL (INDIA) PRIVATE LIMITED , DIVYASHREE CHAMBER B WING, NO.11, OSHOUGNESSEY ROAD , BENGALURU 560 0 25 . PAN : A A CCC 4552 A VS. PRINCIPAL COMMISSIONER OF INCOME TAX , BENGALURU - 2, BENGALURU . APPELLANT RESPONDENT ASSESSEE BY : SHRI. RAJAN VORA , CA REVENUE BY : SHRI. MUZAFFAR HUSSAIN, CIT (DR)(ITAT), BENGALURU DATE OF HEARING : 0 5 . 0 2 .20 20 DATE OF PRONOUNCEMENT : 13 . 0 3 .20 20 O R D E R PER A.K. GARODIA, ACCOUNTANT MEMBER T H I S APPEAL IS FILED BY THE ASSESSEE AND THE SAME IS DIRECTED AGAINST THE ORDER OF LEARNED P CIT(A), BENGALURU - 2, BENGALURU, DATED 1 0 . 0 3 .201 7 FOR THE A SSESSMENT Y EAR 20 1 0 - 1 1 . 2. THE GROUNDS RAISED BY THE ASSESSEE ARE AS UNDER: 1. THE LEARNED PCIT HAS ERRED IN LAW AND IN FACT BY INITIATING THE PROCEEDINGS UNDER SECTION 263 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE PROCEEDINGS UNDER SECTION 263 OF THE ACT CAN BE INITIATED, IF AND ONLY IF, THE ORDER PASSED BY THE ASSESSING ITA NO. 1215/BANG/2017 PAGE 2 OF 6 OF FICER ('AO') IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE. 2. THE LEARNED PCIT HAS ERRED IN LAW AND IN FACT BY INITIATING THE PROCEEDINGS UNDER SECTION 263 OF THE ACT, WITHOUT APPRECIATING THE FACT THAT THE AO HAS ALREADY APPLIED HIS MIND ON AL LOWABILITY OF DEPRECIATION TO APPELLANT ON FINANCE LEASE ARRANGEMENT & ADOPTED A PARTICULAR VIEW, RENDERING THE PROCEEDINGS UNDER SECTION 263 BEING BAD IN LAW. 3. THE LEARNED PCIT HAS ERRED IN LAW AND IN FACT BY NOT CONSIDERING THE SUBMISSIONS MADE BY THE APP ELLANT AND SETTING ASIDE THE COMPLETED ASSESSMENT WITH A DIRECTION TO THE AO TO REFRAME THE ASSESSMENT. WITHOUT CONSIDERING THE DECISION OF THE HON'BLE SUPREME COURT IN THE CASE OF M/S I CDS LTD. VS. CIT (CIVIL APPEAL NO. 3282 OF 2008) THEREBY VIOLATING THE PRINCIPLES OF JUDICIAL DISCIPLINE. 4. WITHOUT PREJUDICE TO THE ABOVE, THE LEARNED PCIT HAS ERRED IN LAW AND IN FACT BY QUESTIONING THE ELIGIBILITY OF CISCO CAPITAL (BEING THE LESSOR) TO CLAIM DEPRECIATION UNDER THE ACT ON NETWORKING EQUIPMENTS LEASED OUT UND ER FINANCE LEASE ARRANGEMENT. 5. WITHOUT PREJUDICE TO THE OTHER GROUNDS OF APPEAL, THE LEARNED PCIT HAS ERRED IN LAW AND IN FACT, BY NOT ALLOWING DEPRECIATION ON THE OPENING WRITTEN DOWN VALUE ('WDV') OF THE BLOCK OF ASSETS LEASED OUT UNDER FINANCE LEASE A RRANGEMENT, PURSUANT TO ALLOWANCE OF DEPRECIATION ON THE SAME BLOCK OF ASSETS FOR PRIOR YEARS. 3. IN THE COURSE OF HEARING, IT WAS SUBMITTED BY LEARNED AR OF THE ASSESSEE THAT THE ISSUE INVOLVED IN THIS APPEAL IS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE BY THE TRIBUNAL ORDER IN THE ASSESSEES OWN CASE FOR THE IMMEDIATELY PRECEDING YEAR I.E., IN ASSESSMENT YEAR 2008 - 09 IN ITA NO.849/BANG/2015 DATED 07.09.2018 , C OPY AVAILABLE ON PAGES 248 TO 267 OF THE PAPER BOOK. HE POINTED OUT THAT IN THAT YEAR ALSO, THIS WAS THE ALLEGATION OF THE CIT(A) THAT NO ENQUIRY WAS MADE BY THE AO WITH REGARD TO ALLOWABILITY OF DEPRECIATION ON LEASED NETWORKING EQUIPMENT S AND AUDIO STREAMLINING EQUIP MENTS WITHOUT ASCERTAINING WHETHER THE ASSESSEE COULD BE CONSIDERED TO BE THE O WNER OF THE ASSETS AS IS REQUIRED IN SECTION 32 OF THE IT ITA NO. 1215/BANG/2017 PAGE 3 OF 6 ACT, 1961. HE POINTED OUT THAT IN THE PRESENT YEAR ALSO, AS PER THE IMPUGNED ORDER PASSED BY LEARNED PCIT UNDER SECTION 263, THE ALLEGATION IS SAME AS CAN BE NOTED IN PARA NO.6 OF THE IMPUGNED ORDE R THAT THE ASSESSMENT ORDER HAS BEEN PASSED BY THE AO WITHOUT ANY ENQUIRY WITH REGARD TO ALLOWABILITY OF DEPRECIATION IN THE HANDS OF THE ASSESSEE AND WITHOUT ASCERTAINING WHETHER THE ASSESSEE CAN BE CONSIDERED TO BE THE OWNER OF THE ASSETS AS IS REQUIRED UNDER SECTION 32 OF THE IT ACT, 1961. HE ALSO SUBMITTED THAT NOTICE ISSUED BY THE AO UNDER SECTION 142 OF THE IT ACT, 1961 IN THE COURSE OF ASSESSMENT PROCEEDINGS IS AVAILABLE ON PAGES 287 TO 289 OF THE PAPER BOOK AND IT WAS POINTED OUT THAT IN THE SAID N OTICE, THIS WAS THE SPECIFIC QUERY OF THE AO THAT THE ASSESSEE HAS TO PROVIDE BREAKUP OF LEASED AMOUNTS UNDER FINANCE LEASE AS WELL AS OPERATING LEASE AND THE CORRESPONDING CONTRACTS AND ASSETS AND REPLY TO THE SAME WAS SUBMITTED TO THE AO ALONG WITH LETTE R DATED 07.03.2014 ON PAGE NO.287 OF THE PAPER BOOK. LEARNED DR OF THE REVENUE SUPPORTED THE IMPUGNED ORDER OF THE PCIT PASSED BY HIM UNDER SECTION 263 OF THE IT ACT, 1961. 4. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. FIRST OF ALL, WE REPRODUCE PARA NO.6 OF THE IMPUGNED ORDER OF PCIT PASSED BY HIM UNDER SECTION 263 OF THE IT ACT, 1961 TO TAKE NOTE OF THE OBJECTIONS OF THE PCIT. THIS PARA READS AS UNDER: 6 . IN VIEW OF THE ABOVE POSITION, BY VIRTUE OF THE POWERS CONFERRED UPON ME BY SECTION 263, I HAVE TO HOLD THAT THE ASSESSMENT ORDER UNDER EXAMINATION, DATED 30/01/2015 WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE SAME HAS BEEN PASSED W ITHOUT ANY ENQUIRY WITH REGARD TO THE ELIGIBILITY OF DEPRECIATION IN THE HANDS OF THE ASSESSEEE, AND WITHOUT ASCERTAINING WHETHER THE ASSESSEE COULD BE CONSIDERED TO BE THE OWNER OF THE ASSETS AS IS REQUIRED IN SECTION 32. THE ASSESSMENT SO ITA NO. 1215/BANG/2017 PAGE 4 OF 6 COMPLETED IS TH EREFORE SET ASIDE TO BE REDONE AFRESH DE NOVO, IN THE LIGHT OF THE ABOVE OBSERVATIONS, AFTER EXAMINATION OF THE ISSUES DISCUSSED ABOVE AND TO COME TO THE CORRECT POSITION, AS PER LAW AND FACTS, AFTER AFFORDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE A SSESSEE . 5 . NOW WE REPRODUCE PARA NO.3 FROM THE TRIBUNAL ORDER IN ASSESSEES OWN CASE FOR ASSESSMENT YEAR 2008 - 09 AVAILABLE ON PAGES 249 AND 250 OF THE PAPER BOOK WHEREIN IT IS NOTED BY THE TRIBUNAL THAT IN THAT YEAR ALSO, SHOW CAUSE NOTICE UNDER SECTION 263 OF THE IT ACT, 1961 WAS ISSUED BY P CIT FOR THAT YEAR CALLING UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT ORDER PASSED BY THE AO UNDER SECTION 143(3) OF THE IT ACT, 1961 SHALL NOT BE REVISED AND THE GROUND GIVEN BY THE P CIT IN THAT YEAR WAS TH E SAME THAT THE ASSESSMENT ORDER IS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF WRONG CLAIM OF DEPRECIATION ON LEASED ASSETS AND IT WAS FURTHER STATED BY THE PCIT IN THE SAID ORDER THAT AO HAS WRONGLY ALLOWED DEPRE CIATION ON ASSETS WITHOUT APPRECIATING DIFFERENCE IN FACTS IN THE PROVISIONS OF SECTION 32 OF THE IT ACT. THIS PARA READS AS UNDER: 3. THER EAFTER, THE PR. CIT, BANGALORE HAS ISSUED SHOW CAUSE NOTICE U/S 263 OF THE IT ACT, 1961 DATED 05.03.2015 AND CALLED UPON THE ASSESSEE TO EXPLAIN AS TO WHY THE ASSESSMENT ORDER PASSED BY THE A.O U/S 143(3) OF THE IT ACT, 1961 SHALL NOT BE REVISED. THE PR.CIT, PROPOSED TO REVISED ASSESSM ENT ORDER U/S 263 OF THE IT ACT, ON THE GROUND THAT THE ASSESSMENT ORDER PASSED BY THE A.O IS ERRONEOUS IN SO FAR IT IS PREJUDICIAL TO THE INTEREST OF THE REVENUE ON ACCOUNT OF WRONG CLAIM OF DEPRECIATION ON LEASED ASSETS. THE PR. CIT, FURTHER STATED THAT THE A.O HAS WRONGLY ALLOWED DEPRECIATION ON ASSET LEASED UNDER FINANCE LEASE WITHOUT APPRECIATING FACTS IN THE LIGHT OF PROVISIONS OF SEC. 32 OF THE IT ACT, 1961 WHICH RESULTED IN PREJUDICE TO THE INTEREST OF THE REVENUE AND ACCORDINGLY, ISSUED A SHOW CAUS E NOTICE. ITA NO. 1215/BANG/2017 PAGE 5 OF 6 7 . HENCE, IT IS SEEN THAT THE FACTS ARE SIMILAR IN THE PRESENT YEAR AND IN ASSESSMENT YEAR 2008 - 09. WE ALSO FIND THAT IN THE COURSE OF ASSESSMENT PROCEEDINGS FOR THE PRESENT YEAR , NOTICE UNDER SECTION 142 (1) OF THE IT ACT WAS ISSUED TO THE ASS ESSEE BY THE AO IN WHICH APART FROM OTHER QUERIES, THIS WAS ONE OF THE QUERIES THAT THE ASSESSEE HAS TO PROVIDE BREAKUP OF LEASE AMOUNTS UNDER FINANCE LEASE AS WELL AS OPERATING LEASE BY THE AO WHICH IS HELD TO BE ERRONEOUS BY LEARNED PCIT. COPY OF THIS I S AVAILABLE ON PAGES 178 TO 193 OF THE APPEAL MEMO AND THIS IS VERY MUCH NOTED BY THE AO IN PARA 4 OF THE ASSESSMENT ORDER THAT THE ASSESSEE HAD CLAIMED DEPRECIATION OF RS.13.31 CRORES UNDER THE COMPANIES ACT, WHEREAS DEPRECIATION CLAIMED UNDER THE IT ACT WAS AT RS.135.77 CRORES AND THE SAID DIFFERENCE WAS NOTED BY THE AO WITH REGARD TO 3 REASONS AND IN THOSE REASONS OF DIFFERENCES NOTED BY THE AO, IT IS NOTED BY THE AO THAT ON ACCOUNT OF SUBSTANTIAL PART OF THE LEASE TRANSACTIONS CONDUCTED BY THE ASSESSEE BEING CLAIMED AS FINANCE LEASE ON WHICH THE LESSEE IS CLAIMING DEPRECIATION UNDER THE COMPANIES ACT INSTEAD OF LESSOR CLAIMING THE DEPRECIATION. HENCE, IT IS SEEN THAT THIS FACT WAS VERY MUCH IN THE ORDER OF ASSESSMENT THAT THE ASSESSEE IS CLAIMING DEPREC IATION ON ASSETS LEASED OUT BY IT UNDER FINANCE LEASE AND AFTER MAKING ENQUIRY, THE SAID DEPRECIATION WAS ALLOWED BY THE AO IN THE ASSESSMENT ORDER AND HENCE , THE ISSUE INVOLVED IN THE PRESENT YEAR IS SQUARELY COVERED BY THE TRIBUNAL ORDER IN ASSESSEES OW N CASE FOR EARLIER ASSESSMENT YEAR I.E. 2008 - 09 IN WHICH IT WAS HELD BY THE TRIBUNAL THAT THE ASSESSMENT ORDER PASSED BY THE AO IS NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AS THE FINANCE LEASE TRANSACTION HAS BEEN THOROUGHLY EXAMINE D BY THE AO IN THE LIGHT OF EVIDENCE FILED BY THE ASSESSEE. LEARNED DR OF THE REVENUE COULD NOT POINT OUT ANY DIFFERENCE IN THE FACTS IN THAT YEAR AND IN THE PRESENT YEAR AND THEREFORE , RESPECTFULLY FOLLOWING TH IS TRIBUNAL ORDER, WE HOLD THAT IN THE PRESE NT YEAR ALSO , THE ASSESSMENT ORDER IS NEITHER ERRONEOUS ITA NO. 1215/BANG/2017 PAGE 6 OF 6 NOR PREJUDICIAL TO THE INTEREST OF THE REVENUE AND HENCE , LEARNED PCIT HA D NO JURISDICTION TO REVISE THE SAID ASSESSMENT ORDER UNDER SECTION 263 OF THE IT ACT AND THEREFORE, WE SET ASIDE THE ORDER OF THE PCIT PASSED UNDER SECTION 263 OF THE IT ACT, 1961 AND RESTORE THE ASSESSMENT ORDER PASSED BY THE AO UNDER SECTION 143(3) OF THE IT ACT, 1961. 8 . IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . PRONOUNCED IN THE OPEN COURT ON TH E DATE MENTIONED ON THE CAPTION PAGE . SD/ - SD/ - ( BEENA PILLAI ) (A.K. GARODIA) JUDICIAL MEMBER ACCOUNTANT MEMBER BANGALORE, DATED : MARCH , 20 20 . /NS/ * COPY TO: 1. APPELLANTS 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT, BANGALORE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR, ITAT, BANGALORE.