Gujarat State Financial Services Ltd., Ahmedabad V. The ACIT.,Circle-4, Ahmedabad

ITA 2176/AHD/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 6823 (ITAT-AHMEDABAD)
• Duration Of Justice: 3 year(s) 10 month(s) 30 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 21-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: C
• Next Hearing Date: 30-03-2011
• Assessment Year: 2004-2005
• Appeal Filed On: 22-05-2007
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHELLEY JINDAL
• Keywords: Depreciation; Opportunity of being heard; Rule of consistency
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH C AHMEDABAD BEFORE SHRI D.K.TYAGI, HONBLE JUDICIAL MEMBER, AND SHRI D. C. AGRAWAL, HONBLE ACCOUNTANT MEMBER ITA NO.2176 & 2763/AHD/2007 & C.O. NO.211/AHD/2007 (ARISING OUT ITA NO.2763/AHD/2007) ASSESSMENT YEAR:2004-05 DATE OF HEARING:30.3.11 DRAFTED:8.4.11 GUJARAT STATE FINANCIAL SERVICES LTD., GMDC HOUSE, 132 FT RING ROAD, NR. HELMET CROSS ROAD, VASTRAPUR, AHMEDABAD PAN NO.AAACG5581B DCIT, CIRCLE-4, 1 ST FLOOR, NAVJIVAN TRUST BUILDING, OFF. ASHRAM ROAD, AHMEDABAD-14 GUJARAT STATE FINANCIAL SERVICES LTD. KHANIJ BHAVAN, 3 RD FLOOR, 132 FT. RING ROAD, NR. GUJ. UNIVERSITY GROUND, VASTRAPUR, AHMEDABAD- 52 V/S . V/S . V/S . ASSTT. COMMISSIONER OF INCOME-TAX, CIRCLE-4, AHMEDABAD GUJARAT STATE FINANCIAL SERVICES LTD., AHMEDABAD DY. COMMISSIONER OF INCOME-TAX, CIRCLE-4 (FORMERLY ACIT, CIRCLE- 4), AHMEDABAD (APPELLANT) .. (RESPONDENT) ASSESSE BY :- SHRI YOGESH SHAH, AR REVENUE BY:- SHRI SHELLEY JINDAL, CIT-DR O R D E R PER D.K.TYAGI, JUDICIAL MEMBER:- THESE ARE CROSS-APPEALS AND CROSS OBJECTION (CO) A RISING OUT OF ITA NO.2763/AHD/2007 BY REVENUE AGAINST THE ORDER OF COMMISSIONER OF INCOME-TAX(APPEALS)-VIII, AHMEDABAD IN APPEAL NO. C IT(A)-VIII/AC-4/237/06- 07 DATED 05-04-2007 FOR THE ASSESSMENT YEAR 2004-05 . ITA NO.2176, 2763/AHD/2007 & CO211/AHD/2007 A.Y. 2004-05 GSFS LTD. V, ACIT CIR-4, ABD PAGE 2 2. THE GROUND NO.1 OF ASSESSEES APPEAL IN ITA NO.2176/AHD/2007 READS AS UNDER:- 1. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE DISALLOWANCE UNDER SECTION 14A OF TH E ACT IN RESPECT OF INTEREST PAID ON BORROWINGS MADE FOR INVESTMENTS IN TAX FREE SECURITIES OF RS.10.31 CRORES (96.64 86.33) CRORES. IN THE F ACTS AND CIRCUMSTANCES OF THE CASE IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 14A ARE NOT APPLICABLE. IT IS SUBMITTED IT BE SO HE LD NOW. 1.2 THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) HAS ERRED IN REDUCING GROSS BLOCK OF ASSET OUT OF OWN FUNDS FOR DETERMINING OWN FUNDS AVAILABLE FOR INVESTMENT IN TAX FREE SECURITI ES. APPELLANT SUBMITS THAT IN THE FACTS AND CIRCUMSTANCES OF THE CASE NO SUCH REDUCTION WAS REQUIRED TO BE MADE. IT IS SUBMITTED THAT IT BE SO HELD NOW. 3. AT THE TIME OF HEARING BOTH THE PARTIES AGREED T HAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF ITAT IN ASSESSEES OWN C ASE IN ITA NO.403/AHD/2005 FOR ASSESSMENT YEAR 2001-02 DATED 10-03-2009, WHER EIN THE TRIBUNAL HAS SET ASIDE THE ISSUE TO THE FILE OF ASSESSING OFFICER BY OBSERVING AS UNDER:- 6. WE HAVE HEARD LEARNED DR AND LEARNED AR. WE NOT ICED THAT THE ASSESSEE ENTERED INTO FIVE LEASE TRANSACTIONS WITH GSRTC. TH EY ARE FIRST TRANSACTION WAS IN FINANCIAL YEAR 1993-94 WHEN, DEPRECIATION WA S CLAIMED AT RS.59,97,155/-. THE SECOND LEASE TRANSACTION WAS AL SO ENTERED INTO IN A.Y. 1994-95 WHEREIN DEPRECIATION OF RS.40,18,720/- WAS CLAIMED AND ALLOWED. THE THIRD LEASE TRANSACTION WAS ENTERED INTO IN F.Y . 1996-97 ON WHICH THE DEPRECIATION APPROX. OF RS.2,00,06,325/- WAS CLAIME D. FORTH TRANSACTION TOOK PLACE IN A.Y. 1998-99 IN WHICH DEPRECIATION OF RS.4 ,01,38,576/- WAS CLAIMED AND ALLOWED. FIFTH ALSO TOOK PLACE IN A.Y. 1998-99 IN WHICH THE DEPRECIATION OF RS.7,99,42,946/- WAS CLAIMED. IT IS STATED BY THE L EARNED AR OF THE ASSESSEE THAT NO FRESH LEASE TRANSACTION HAS TAKEN PLACE THI S YEAR AND DEPRECIATION IN RESPECT OF OLD LEASE TRANSACTIONS HAS ONLY BEEN CLA IMED THIS YEAR. THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, AS PROPOUND ED IN CIT VS. H.P. COTTON TEXTILE MILLS LTD. 311 ITR 436, CIT VS. MALBOROUGH POLYCHEM PVT. LTD ., 309 ITR 43; CIT VS. MOONLIGHT BUILDERS AND DEVELOPERS 307 ITR 197 AND ACIT VS. GENDALAL HAZARILAL & CO. 263 ITR 679 WHEREIN IT IS HELD THAT EVEN THOUGH IN INCOME-TAX PROCEEDINGS PRINCIPLE OF RES-JUDICATA IS NOT APPLICABLE, BUT CONSISTENCY HAS TO BE MAINTAINED UNLESS THERE IS MA NIFEST DISTINGUISHABLE FACTS. IN EARLIER YEARS, CLAIM OF DEPRECIATION WAS ACCEPTED BY THE REVENUE WHICH HAS NOW BECOME FINAL, THE REVENUE CANNOT DISA LLOW THE PRESENT CLAIM, UNLESS FACTS AND CIRCUMSTANCES ARE DISTINGUISHABLE. THEREFORE, THE REVENUE IS REQUIRED TO MAINTAIN A JUDICIAL CONSISTENCY BETWEEN ITSELF AND TAXPAYERS. AS A RESULT, WE DO NOT FIND ANY MERIT IN THE CLAIM OF TH E REVENUE AND THIS GROUND OF THE REVENUE IS DISMISSED. ITA NO.2176, 2763/AHD/2007 & CO211/AHD/2007 A.Y. 2004-05 GSFS LTD. V, ACIT CIR-4, ABD PAGE 3 IN VIEW OF THE ABOVE WE SET ASIDE THIS ISSUE TO THE FILE OF ASSESSING OFFICER TO DECIDE IN TERMS OF TRIBUNALS DECISION OF ASSESSEE S OWN CASE (SUPRA) FOR ASSESSMENT YEAR 2001-02 AFTER PROVIDING REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. THIS GROUND OF ASSESSEES AP PEAL IS ALLOWED FOR STATISTICAL PURPOSES 4. THE GROUND NO. 2 IN ITA NO.2176/AHD/2007 OF ASSESSEE AND GROUND NO.2 IN ITA NO.2763/AHD/2007 BY REVENUE READ AS UNDER:- ITA NO.2176/AHD/2007 BY ASSESSEE. 2. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS ) ERRED IN CONFIRMING THE DISALLOWANCE OF RS.65000/- OUT OF AD MINISTRATIVE EXPENSES UNDER SECTION 14A OF THE ACT AS RELATING T O EARNING OF INCOME FROM TAX FREE SECURITIES. IN THE FACTS AND CIRCUMST ANCES OF THE CASE IT IS SUBMITTED THAT NO DISALLOWANCE WAS REQUIRED TO BE M ADE OUT OF THE ADMINISTRATIVE EXPENSES UNDER SECTION 14A OF THE AC T. IT IS SUBMITTED THAT IT BE SO HELD NOW. ITA NO.2763/AHD/2007 BY REVENUE. 2. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN ALLOWING RELIEF OF RS.3,46,15,129/- OUT OF DISALLOWANCE U/S .14A OF THE ACT. 5. AT THE OUTSET LD. COUNSEL FOR THE ASSESSEE AS WE LL AS LD. CIT-DR AGREED THAT IN VIEW OF DECISION OF THIS TRIBUNAL IN ASSESSEES OWN CASE (SUPRA) THE ISSUE IS SQUARELY COVERED IN ITA NO.403/AHD/2005 FOR ASSESSMENT YEAR 2001-02, WHEREIN THE TRIBUNAL HAS DISALLOWED THE PR OPORTIONATE ADMINISTRATIVE EXPENSE AT 1% BY GIVING FOLLOWING FINDING IN PARA-10 AS UNDER:- 4. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED MAT ERIAL ON RECORD AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIE S. WE ARE OF THE CONSIDERED VIEW THAT THE AUTHORITIES CONCERNED HAVE NOT CORREC TLY APPRECIATED THE FACTS AND BROUGHT RELEVANT MATERIAL ON RECORD FOR MAKING PROPORTIONATE DISALLOWANCE. IT HAS TO BE SHOWN THAT INTEREST HAS BEEN PAID ON FUNDS WHICH WERE INVESTED IN TAX FREE SECURITIES. SINCE THE ASS ESSEE IS MAKING CLAIM OF RS.28.65 CRORES, ONUS IS ON THE ASSESSEE TO PROVE T HAT INTEREST BEARING FUNDS ARE NOT INVESTED IN TAX FREE SECURITIES. IF IT IS U NABLE TO PROVE SO, THEN FOLLOWING THE DECISION OF SPECIAL BENCH ITO VS. DAGA CAPITAL MANAGEMENT PVT. LTD. 312 ITR (AT) 01, A PROPORTIONATE DISALLOWANCE AO FO R DECIDING THE ISSUE AFRESH AFTER GIVING ASSESSEE REASONABLE OPPORTUNITY OF BEING HEARD. THIS GROUND OF THE REVENUE IS ALLOWED FOR STATISTICAL PU RPOSE. ITA NO.2176, 2763/AHD/2007 & CO211/AHD/2007 A.Y. 2004-05 GSFS LTD. V, ACIT CIR-4, ABD PAGE 4 IN VIEW OF THE ABOVE, WE SET ASIDE THIS ISSUE BACK TO THE FILE OF ASSESSING OFFICER TO FOLLOW THE DECISION OF ITAT AFTER PROVID ING REASONABLE OPPORTUNITY OF BEING HEARD TO ASSESSEE. THIS GROUND OF ASSESSEE AS WELL AS REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. 6. GROUND NO.1 OF REVENUES APPEAL IN ITA NO.2763/AHD/2007 READS AS UNDER:- 1. THE LD. CIT(A) ERRED IN LAW AND ON THE FACTS OF THE CASE IN DELETING THE DISALLOWANCE OF RS.98,76,523/- BEING DEPRECIATI ON ON ASSETS OF SALE AND LEASE BACK TRANSACTION. 7. AT THE TIME OF HEARING BOTH THE PARTIES FAIRLY A GREED THAT ISSUE IS COVERED IN FAVOUR OF ASSESSEE BY THE TRIBUNALS ORDER IN AS SESSEES OWN CASE FOR THE ASSESSMENT YEAR 2000-01, WHEREIN EXACTLY ON SIMILAR TRANSACTION AND IDENTICAL FACTS, THE TRIBUNAL HAS DECIDED THE ISSUE BY OBSERV ING AS UNDER:- 3. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE FIL ED A COPY OF TRIBUNALS ORDER IN ASSESSEES OWN CASE, WHEREIN EXACTLY ON SIMILAR TRANSACTIONS AND ON EXACTLY IDENTICAL FACTS, THE TRIBUNAL HAS DECIDED T HE ISSUE BY GIVING FOLLOWING FINDING IN PARA-6 AS UNDER:- 6. WE HAVE HEARD LEARNED DR AND LEARNED AR. WE NOT ICED THAT THE ASSESSEE ENTERED INTO FIVE LEASE TRANSACTIONS WITH GSRTC. THEY ARE FIRST TRANSACTION WAS IN FINANCIAL YEAR 1993-94 WHEN, DE PRECIATION WAS CLAIMED AT RS.59,97,155/-. THE SECOND LEASE TRANSACTION WAS ALSO ENTERED INTO IN A.Y. 1994-95 WHEREIN DEPRECIATION O F RS.40,18,720/- WAS CLAIMED AND ALLOWED. THE THIRD LEASE TRANSACTION WAS ENTERED INTO IN F.Y. 1996-97 ON WHICH THE DEPRECIATION APPROX OF RS.2,00,06,325/- WAS CLAIMED. FORTH TRANSACTION TOOK PLACE IN A.Y 1998-99 IN WHICH DEPRECIATION OF RS.4,01,38,576/- WAS CLAIMED AND AL LOWED. FIFTH ALSO TOOK PLACE IN A.Y 1998-99 IN WHICH THE DEPRECIATION OF RS.7,99,42,946/- WAS CLAIMED. IT IS STATED BY THE LEARNED AR OF THE ASSESSEE THAT NO FRESH LEASE TRANSACTION HAS TAKEN PLACE THIS YEAR A ND DEPRECIATION IN RESPECT OF OLD LEASE TRANSACTIONS HAS ONLY BEEN CLA IMED THIS YEAR. THEREFORE, FOLLOWING THE PRINCIPLE OF CONSISTENCY, AS PROPOUNDED IN CIT VS. H.P. COTTON TEXTILE MILLS LTD. 311 ITR 436, CIT VS. MALBOROUGH POLYCHEM PVT. LTD. 308 ITR 43; CIT VS. MOONLIGHT BUILDERS AND DEVELOPERS 307 ITR 197 AND ACIT VS. GENDALAL HAZARILAL & CO. 263 ITR 679 WHEREIN IT IS HELD THAT EVEN THOUGH IN INCO ME-TAX PROCEEDINGS PRINCIPLE OF RES-JUDICATA IS NOT APPLICABLE, BUT CO NSISTENCY HAS TO BE MAINTAINED UNLESS THERE IS MANIFEST DISTINGUISHABLE FACTS. IN EARLIER YEARS, CLAIM OF DEPRECIATION WAS ACCEPTED BY THE RE VENUE WHICH HAS NOW BECOME FINAL, THE REVENUE CANNOT DISALLOW THE P RESENT CLAIM, ITA NO.2176, 2763/AHD/2007 & CO211/AHD/2007 A.Y. 2004-05 GSFS LTD. V, ACIT CIR-4, ABD PAGE 5 UNLESS FACTS AND CIRCUMSTANCES ARE DISTINGUISHABLE. THEREFORE, THE REVENUE IS REQUIRED TO MAINTAIN A JUDICIAL CONSISTE NCY BETWEEN ITSELF AND TAXPAYERS. AS A RESULT, WE DO NOT FIND ANY MERI T IN THE CLAIM OF THE REVENUE AND THIS GROUND OF THE REVENUE IS DISMISSED . 4. THE LD. DR HAS NOT DISPUTED THAT THE TRANSACTION S IN THE PRESENT YEAR ARE REGULAR TRANSACTION FROM EARLIER YEARS. ACCORDINGLY , WE ARE OF THE VIEW THAT ONCE THE TRIBUNAL HAS TAKE A VIEW ON FACTS OF THE C ASE, WE ALSO RESPECTFULLY FOLLOWING THE SAME, ALLOW THE CLAIM OF THE ASSESSEE AND THIS COMMON ISSUE ON BOTH THE APPEALS OF THE REVENUE IS DISMISSED . IN VIEW OF THE ABOVE THIS GROUND OF REVENUES APPEA L IS DISMISSED. NOW COMING TO ASSESSEES CO NO.211/AHD/2007. 8. THE ASSESSEE HAS FOLLOWING GROUND:- THE CROSS OBJECTION SUBMITS THAT IN THE EVENT OF T HE DEPRECIATION ON SALE AND LEASE BACK OF RS.98,76,523/- IS DISALLOWED THEN DIRECTION BE GIVEN TO EXCLUDE THE PRINCIPAL PORTION OF LEASE REN T FROM THE TOTAL INCOME. IT IS SUBMITTED THAT IT BE SO HELD NOW. IN VIEW OF OUR DECISION IN GROUND NO.1 OF REVENUES APPEAL IN ITA NO.2763/AHD/2007 THE CO HAS BECOME INFRUCTUOUS AND THE SAME IS DISMISSED AS INFRUCTUOUS. 9. IN THE RESULT, APPEAL FILED BY ASSESSEE AS WELL AS REVENUE IS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THAT OF ASSESS EES CO IS DISMISSED AS INFRUCTUOUS. ORDER PRONOUNCED IN OPEN COURT ON 21/04/2011 SD/- SD/- (D.C.AGRAWAL) (D.K. TYA GI) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 21/04/2011 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 4. THE CIT CONCERNS. 2. THE REVENUE. 5. THE DR, ITAT, AHMEDABAD 3. THE CIT(APPEALS)-VIII, AHMEDABAD 6. GUARD FIL E. BY ORDER, DEPUTY / ASSTT.REGISTRAR /TRUE COPY/ ITAT, AHMEDABAD