The Lakshmi Vilas Bank Ltd., CHENNAI V. JCIT, Trichy

ITA 1406/CHNY/1999

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 61188 (ITAT-CHENNAI)
• Duration Of Justice: 12 year(s) 7 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-05-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 15-05-2012
• Assessment Year: 1995-1996
• Appeal Filed On: 01-10-1999
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANIRUDH RAI
• Assessee Lawyers: G SEETHARAMAN
• Keywords: Depreciation

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI CHALLA NAGENDRA PRASAD, JUDICIAL MEMBER I.T.A. NO. 1406/MDS/99 ASSESSMENT YEAR : 1995-96 & I.T.A. NO. 631/MDS/2000 ASSESSMENT YEAR : 1996-97 M/S THE LAKSHMI VILAS BANK LTD., SALEM ROAD, KATHAPARAI, KARUR. (APPELLANT) V. THE JOINT COMMISSIONER OF INCOME TAX/ THE DEPUTY COMMISSIONER OF INCOME TAX, SPECIAL RANGE, TRICHY. (RESPONDENT) APPELLANT BY : SHRI G. SEETHARAMAN, CA RESPONDENT BY : SHRI ANIRUDH RAI, CIT- DR DATE OF HEARING : 15.05.2012 DATE OF PRONOUNCEMENT : 25.05.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : THESE ARE RECALLED MATTERS. VIDE ORDER DATED 9 TH MARCH, 2012 IN M.P. NOS. 150 TO 153/MDS/2005 FOR ASSESSMENT YEARS 1992-93, 1995-96 AND 1996-97, FILED BY THE ASSESSEE WHICH, INTER ALI A, INCLUDED PLEA FOR RECALL OF ORDERS OF THIS TRIBUNAL IN I.T.A. NO. 140 6/MDS/99 AND I.T.A. NO. 631/MDS/2000, THIS TRIBUNAL HAD RECALLED THE LATTER ORDERS FOR THE 2 I.T.A. NO. 1406/MDS/99 I.T.A. NO. 631/MDS/2000 IMPUGNED ASSESSMENT YEARS, FOR THE LIMITED PURPOSE OF DECIDING THE ISSUES RELATING TO FALL IN MARKET VALUE OF SECURITI ES, LOSS ON SALE OF GOVERNMENT SECURITIES AND LEASE RENT OF SAFETY LOCK ERS, WHICH WERE OMITTED TO BE CONSIDERED. 2. ASSESSMENT YEAR 1995-96 IS TAKEN UP FIRST FOR DI SPOSAL. TWO ISSUES ARE INVOLVED FOR THIS ASSESSMENT YEAR. ONE IS DISALLOWANCE OF LEASE CHARGES OF ` 6,00,795/- AND THE OTHER IS CLAIM FOR FALL IN MARK ET VALUE OF SECURITIES ` 3,61,25,550/-, WHICH DISALLOWANCES WERE CONFIRMED BY THE CIT(APPEALS). 3. WHEN THE MATTER CAME UP BEFORE US, LEARNED A.R. SUBMITTED THAT THE TRIBUNAL IN ITS ORIGINAL ORDER DATED 10 TH MARCH, 2006, HAD CONSIDERED THE ISSUES IN A GROUP OF APPEALS OF THE ASSESSEE WH ICH, INTER ALIA, INCLUDED BOTH I.T.A. NO. 631/MDS/2000 AND I.T.A. NO . 1406/MDS/99, BUT HAD OMITTED TO MENTION THE RELEVANT APPEAL NUMBERS WHILE ADJUDICATING SUCH ISSUES. INSOFAR AS LEASE CHARGES FOR SAFETY L OCKERS ARE CONCERNED, LEARNED A.R. SUBMITTED THAT THE ISSUE STOOD DECIDED BY THIS TRIBUNAL AT PARA 33 OF ITS ORDER DATED 10 TH MARCH, 2006 (SUPRA). INSOFAR AS THE ISSUE RELATING TO CLAIM OF FALL IN MARKET VALUE OF SECURI TIES, LEARNED A.R. SUBMITTED THAT THIS STOOD COVERED BY PARA 29 OF THE SAME ORDER. 3 I.T.A. NO. 1406/MDS/99 I.T.A. NO. 631/MDS/2000 4. PER CONTRA, LEARNED D.R. SUBMITTED THAT THE DECI SION OF THE TRIBUNAL ON THESE ISSUES, HAS NOT BEEN ACCEPTED AND THE DEPA RTMENT IS IN THE PROCESS OF APPEALING BEFORE HONBLE JURISDICTIONAL HIGH COURT. 5. WE HAVE HEARD RIVAL CONTENTIONS. INSOFAR AS CLA IM OF LEASE CHARGE RECEIPT ON SAFETY LOCKERS, IT WAS DEALT BY THIS TRI BUNAL IN ITS ORDER DATED 10 TH MARCH 2006 AT PARA 33, AS UNDER:- 33. THE NEXT ISSUE ARISES FOR CONSIDERATION FOR THE AS SESSMENT YEAR 1995-96 AND 1996-97 IN I.T.A. NOS. 1542(MDS)/99 AND 767(MDS)/2000 IS REGARDING LEASE CHARGE. WE HEARD THE LEA RNED D.R. AND LEARNED REPRESENTATIVE FOR THE ASSESSEE. THE ASSESSEE OWNED THE SAFETY LOCKERS. SUBSEQUENTLY, THE SAFETY LOCKERS WERE SOLD TO ITC CLASSIC FINANCE LTD. FOR CONSIDERATION OF RS.67,50,000/- ON 20.3.1995. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF LEASE CHARGES ON THE GROUND THAT THE SALE AND LEASE BACK TRANSACTION WAS ARRANGED FOR TAX AVOIDANCE. THE CIT(A) AFTER EXAMIN ING THE FACTUAL SITUATION FOUND THAT IF THE LEASE AND SALE TRANSACT ION ARRANGEMENT WAS NOT MADE, THE ASSESSEE WOULD HAVE BEEN ENTITLED TO DEPRECIATION AT THE RATE OF 25% ON RS.67,50,000/- WHICH WORKS OUT TO RS.16,87,500/-. BECAUSE OF LEASE BACK TRANSACTION, THE ASS ESSEE HAS CLAIMED ONLY RS.7,51,950/-. THEREFORE, THE CIT(A) FOUND THAT THE ASSESSEE HAS NOT GAINED OR SAVED ANYTHING BECAUSE O F LEASE AND SALE BACK TRANSACTION. IF THE ASSESSEE, IN OUR OPINION, WANTED TO AVOID PAYMENT OF TAX, IT WOULD HAVE CONTINUED TO OWN THE S AFETY LOCKERS AND CLAIMED DEPRECIATION TO THE EXTENT OF RS.16,87,500/-. THE VERY FACT THAT THE ASSESSEE IS CLAIMING AN EXPENDITURE OF RS.7,51,950/- TOWARDS QUARTERLY RENT AND LEASE MANAGEMENT FEE, IN OUR OPINION, IT CANNOT BE SAID THAT THE ARRANGEMENT WAS TO AVOID TA X. THE LEASE TRANSACTION, IN OUR OPINION, IS A GENUINE, THEREFOR E, NO MOTIVE COULD BE ATTRIBUTED IN THE SALE AND LEASE BACK TRANSACTION. DURING THE COURSE OF HEARING, THE LEARNED REPRESENTATIVE FOR THE ASSE SSEE SUBMITTED THAT IN CASE THE LEASE CHARGES COULD NOT BE ALLOWED FOR THIS ASSESSMENT YEAR, IT HAS TO BE ALLOWED IN THE SUBSEQ UENT ASSESSMENT YEARS. IF THE ASSESSEE USED THE SAFETY LOCKER FOR PART OF THE ASSESSMENT YEAR AND THE OTHER PART FALLS IN THE NEXT ASSESSMENT 4 I.T.A. NO. 1406/MDS/99 I.T.A. NO. 631/MDS/2000 YEAR, THE LEASE CHARGES PAID BY THE ASSESSEE HAS TO BE NECESSARILY ALLOWED IN THE NEXT ASSESSMENT YEAR SINCE WE UPHOLD THE GENUINENESS OF THE SALE AND LEASE BACK TRANSACTION. ACCORDINGL Y, WE DIRECT THE ASSESSING OFFICER TO VERIFY THE DETAILS OF LEASING TRANSACTION AND THEREAFTER ALLOW THE LEASE CHARGES IN THE RESPECTIV E ASSESSMENT YEARS. 6. INSOFAR AS THE CLAIM OF FALL OF MARKET VALUE OF GOVERNMENT SECURITIES IS CONCERNED, IT IS HELD BY THIS TRIBUNA L AT PARA 29 OF THE ORDER MENTIONED SUPRA, AS UNDER:- 29. NOW LET US TAKE DEPARTMENTS APPEAL IN I.T.A. NO. 1068(MDS)/98 FOR THE ASSESSMENT YEAR 1994-95. THE FIRST ISS UE ARISES FOR CONSIDERATION IS REGARDING DEPRECIATION ON INVESTMENT. WE HEARD THE LEARNED D.R. AND THE LEARNED REPRESENTATI VE FOR THE ASSESSEE. IT IS BROUGHT TO OUR NOTICE THAT IN THE ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 1990-91 IN I.T.A. NO. 1342(MDS)/95 , THIS TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE ASS ESSEE. LIKEWISE, FOR THE ASSESSMENT YEARS 1988-89 AND 1992-93 IN I.T.A. NOS . 552(MDS)/92 AND 379(MDS)/96, THIS TRIBUNAL HELD THAT ON THE B ASIS OF THE VALUE OF THE INVESTMENT AT THE CLOSE OF THE ACCOUNTING PERIOD, DEPRECIATION IS ALLOWABLE IN THE HANDS OF THE ASSES SEE. IT IS ALSO BROUGHT TO OUR NOTICE THAT THE APEX COURT IN THE CAS E OF UNITED COMMERCIAL BANK V. CIT (1999) (240 ITR 355) CONSIDERED SIMILA R ISSUE AND IT WAS HELD THAT THE ASSESSEE CAN VALUE T HE INVESTMENT EITHER AT COST OR MARKET VALUE WHICHEVER IS LOWER F OR VALUING ITS STOCK-IN-TRADE (INVESTMENT) FOR INCOME TAX PURPOSES. IN VIEW OF THE ABOVE FACTUAL ASPECT, IN OUR OPINION, THE CIT(A) HA S RIGHTLY ALLOWED THE CLAIM OF THE ASSESSEE. WE DO NOT FIND ANY INFI RMITY IN THE ORDER OF THE LOWER AUTHORITY. ACCORDINGLY, WE CONFIRM TH E SAME. 7. NO DOUBT, THIS TRIBUNAL HAD OMITTED TO MENTION T HE RELEVANT APPEAL NUMBERS, BUT, NEVERTHELESS, THE FACT SITUATION BEIN G THE SAME, THE ISSUES STOOD COVERED BY THE TRIBUNAL ORDERS MENTIONED SUPR A. CLAIM OF FALL IN MARKET VALUE OF SECURITIES IS THE SAME AS DEPRECIAT ION ON INVESTMENT. 5 I.T.A. NO. 1406/MDS/99 I.T.A. NO. 631/MDS/2000 8. IN THE RESULT, CLAIM OF THE ASSESSEE BOTH REGARD ING LEASE CHARGES AND FALL IN MARKET VALUE OF SECURITIES ARE DIRECTED TO BE ALLOWED. APPEAL OF THE ASSESSEE IN I.T.A. NO. 1406/MDS/99, INSOFAR AS THE RECALLED ISSUES ARE CONCERNED, STANDS ALLOWED. 9. NOW, WE TAKE UP I.T.A. NO. 631/MDS/2000. THE TW O ISSUES, WHICH ARE TO BE DECIDED, ARE CLAIM ON ACCOUNT OF DEPRECIA TION IN MARKET VALUE OF GOVERNMENT SECURITIES ` 14,43,58,085/- AND CLAIM FOR LOSS IN SALE OF GOVERNMENT SECURITIES ` 2,00,11,346/-. BOTH WERE DISALLOWED BY THE ASSESSING OFFICER AND SUCH DISALLOWANCES WERE CONFI RMED BY THE CIT(APPEALS). 10. LEARNED A.R. SUBMITTED THAT BOTH THE ISSUES STA ND COVERED BY THE DECISION OF TRIBUNAL IN ASSESSEE'S OWN CASE MENTION ED SUPRA. ONCE AGAIN, RELIANCE WAS PLACED IN PARA 29 OF THE ORDER OF THIS TRIBUNAL DATED 10 TH MARCH, 2006 (SUPRA). ACCORDING TO HIM, ONCE IT IS ACCEPTED THAT GOVERNMENT SECURITIES WERE TO BE TREATED AS STOCK-I N-TRADE, THE LOSS IN SUCH GOVERNMENT SECURITIES ARE TO BE ALLOWED. 11. PER CONTRA, LEARNED D.R. SUPPORTED THE ORDER OF CIT(APPEALS). 12. WE HAVE HEARD THE RIVAL CONTENTIONS. ISSUE REG ARDING CLAIM FOR DEPRECIATION IN MARKET VALUE OF GOVERNMENT SECURITI ES STANDS RESOLVED 6 I.T.A. NO. 1406/MDS/99 I.T.A. NO. 631/MDS/2000 IN FAVOUR OF THE ASSESSEE BY THE DECISION OF THIS T RIBUNAL VIDE ORDER DATED 10 TH MARCH, 2006, RELEVANT PART OF WHICH HAS BEEN REPRO DUCED BY US AT PARA 6 ABOVE. ONCE IT IS FOUND THAT GOVERNME NT SECURITIES WERE HELD AS STOCK-IN-TRADE, WITHOUT DOUBT, LOSS ARISING ON SALE OF SUCH GOVERNMENT SECURITIES ALSO OUGHT TO BE ALLOWED. 13. IN THE RESULT, I.T.A. NO. 631/MDS/2000 SO FAR A S THE ISSUES RECALLED, IS ALLOWED. 14. TO SUMMARIZE THE RESULT, APPEALS OF THE ASSESSE E IN I.T.A. NO. 1406/MDS/99 FOR ASSESSMENT YEAR 1995-96 AND IN I.T. A. NO. 631/MDS/2000 FOR ASSESSMENT YEAR 1996-97 INSOFAR AS IT CONCERNS THE ISSUES THAT WERE RECALLED, STAND ALLOWED. THE ORDER WAS PRONOUNCED IN THE COURT ON FRIDAY, TH E 25 TH OF MAY, 2012, AT CHENNAI. SD/- SD/- (CHALLA NAGENDRA PRASAD) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 25 TH MAY, 2012. KRI. COPY TO: APPELLANT/RESPONDENT/CIT(A)-XI, CHENNAI/ CIT, TRICHY/D.R./GUARD FILE