M/S. INDUSTRIAL DEVELOP,MENT BANK OF INDIA, MUMBAI V. THE DY CIT RG 3(1), Mumbai

ITA 3370/MUM/2004

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84005 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 5 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 15-07-2014
• Assessment Year: 1996-1997
• Appeal Filed On: 05-05-2004
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PREETAM SINGH
• Keywords: Depreciation; Principle of natural justice
• Section: 244A; 32

Judgement Text

B IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH D, MUMBAI BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUDICIAL MEMBER . : . : . : . : 1839 1839 1839 1839/ // / / // / 2004, !' 1994-95 ITA NO. :1839/MUM/2004 AY 1994-95 . : . : . : . : 3369 3369 3369 3369/ // / / // / 2004, !' 1995-96, 1996-97 ITA NO. :3369/MUM/2004 AY 1995-96 . : . : . : . : 3370 3370 3370 3370/ // / / // / 2004, !' 1996-97 ITA NO. :3370/MUM/2004 AY 1996-97 . : . : . : . : 1951 1951 1951 1951, , , , 3922 3922 3922 3922, , , , 3923 3923 3923 3923/ // / / // / 2006, !' 1994-95, 1995-96, 1996-97 ITAS NO. :1951, 3922 & 3923/MUM/2006 AYS 94-95, 95- 96 & 96-97 INDUSTRIAL DEVELOPMENT BANK OF INDIA, TAXATION CELL, 3 RD FLOOR, IDBI TOWER, WTC COMPLEX, CUFFE PARADE, MUMBAI -400 005 )* +, .: PAN: AAACI 1105 R VS DCIT RANGE -3(1), 6 TH FLOOR, ROOM NO. 623, AAYAKAR BHAVAN, M. K. ROAD, MUMBAI -400 020 *- (APPELLANT) ./*- (RESPONDENT) APPELLANT BY : SHRI ARVIND SONDE SHRI SATISH B MODY RESPONDENT BY : SHRI PREETAM SINGH !012, /DATE OF HEARING : 16-10-2014 34' 012,/ DATE OF PRONOUNCEMENT 29.10.2014 5+ 6 5+ 6 5+ 6 5+ 6 O R D E R 7 7 7 7 8!!+ 8!!+ 8!!+ 8!!+ ! ! ! ! , . . . . . .. . PER VIVEK VARMA, J.M. : THE INSTANT APPEALS ON QUANTUM, ARE FILED AGAINST T HE ORDERS OF CIT(A) XII, MUMBAI, DATED 07.01.2014, 06.02.2014 & 11.02,2004 FOR AYS 1994-95, 1995-96 & 1996-97 RESPECTIVELY. 2. SINCE ALL THE THREE APPEALS HAVE ONE COMMON GROU ND OF APPEAL, WE, FOR THE SAKE OF CONVENIENCE AND BREVITY ARE DIS POSING OFF THE APPEALS THROUGH COMMON AND CONSOLIDATED ORDER. WE A RE TAKING ITA INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 2 NO. 1839/MUM/2004, PERTAINING TO ASSESSMENT YEAR 19 94-95 AS THE LEAD YEAR. ITA NO. 1839/MUM/2004 : ASST. YEAR 1994-95 : 3. THE FOLLOWING GROUNDS HAVE BEEN TAKEN: AGGRIEVED BY THE ORDER U/S 250 OF THE INCOME TAX AC T, 1961 DATED 7.1.2004 PASSED BY THE COMMISSIONER OF INCOME TAX (APPEALS) XII, MUMBAI HEREINAFTER REFERRED TO AS THE CIT(A)] FOR THE ASSE SSMENT YEAR 1994-95, THE APPELLANT BEGS TO FILE THIS APPEAL AND RAISE THE FO LLOWING GROUNDS OF APPEAL WHICH ARE INDEPENDENT OF AND WITHOUT PREJUDICE TO E ACH OTHER. 1. THE LEARNED CIT(A) ERRED IN CONFIRMING THE DISALLOW ANCE OF DEPRECIATION AMOUNTING TO RS. 36,42,67,385/-, CLAIMED BY THE APPE LLANT UNDER SECTION 32 OF THE ACT IN RESPECT OF ASSETS GIVEN ON LEASE BY THE APPELLANT BY HOLDING THEM AS PURE FINANCE TRANSACTIONS. THE HON BLE TRIBUNAL MAY HOLD THAT THE APPELLANT IS ENTITLED TO DEPRECIATION AS CLAIMED, U/S 32 OF THE ACT IN RESPECT OF ASSETS GIVEN ON LEASE BY THE A PPELLANT. 2. THE LEARNED CIT(A) ERRED IN HOLDING THAT INTEREST A MOUNTING TO RS. 14,03,63,220/- ON REFUND FOR AY 1992-93 RECEIVED UND ER SECTION 244A OF THE ACT AT TIME OF SUMMARY ASSESSMENT U/S 143(1), WA S LIABLE TO TAX IN AY 1994-95 ON RECEIPT BASIS, ALTHOUGH THIS REFUND HA S BEEN WITHDRAWN BY THE AO AT THE TIME OF REGULAR ASSESSMENT U/S 143( 3). THE HONBLE TRIBUNAL MAY HOLD THAT THE AMOUNT OF RS. 14,03,63,22 0/- ARISING U/S 244A UNDER SUMMARY ASSESSMENT, IS NOT LIABLE TO TAX IN THE HANDS OF THE APPELLANT. THE APPELLANT CRAVES LEAVE TO ADD TO, AMEND, ALTER, MODIFY, DELETE AND/OR SUBSTITUTE ALL OR ANY OF THE GROUNDS OF APPEAL TILL FINAL DISPOSAL OF THE APPEAL. 4. AT THE TIME OF HEARING, THE AR SUBMITTED THAT G ROUND NO. 2 IS NOT PRESSED. HENCE, GROUND NO. 2 IS REJECTED AS NOT PRESSED. 5. GROUND NO. 1 PERTAINS TO CLAIM OF DEPRECIATION I N RESPECT OF ASSETS GIVEN ON LEASE. 6. THE ASSESSEE INDUSTRIAL DEVELOPMENT BANK OF INDI A (IDBI) IS A GOVERNMENT OWNED FINANCIAL INSTITUTION, ENGAGED IN PROVIDING LONG TERM LEASE, REFINANCE AND LEASE. THE SCOPE OF THIS LINE OF BUSINESS OF THE ASSESSEE IS, 1. OWNERSHIP OF EQUIPMENT VESTS WITH IDBI. 2. THE LEASE PERIOD HAS BEEN SPECIFIED (GENERAL LY 5 YEARS) 3. THE COMMENCEMENT AND TERMINATION OF LEASES IS SPECIFIED. THE ASSETS HAVE BEEN IDENTIFIED AND BOTH THE INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 3 LESSOR AND LESSEE ARE CLEAR AS TO WHICH PARTICULAR EQUIPMENT BELONGS TO IDBI. 4. THE AGREEMENTS PROVIDE FOR RETURN OF EQUIPMENT O N THE EXPIRY OF THE LEASE. 5. THE AGREEMENTS PROVIDE THAT LESSEE HAS NO RIGHT TO TRANSFER OR ASSIGN OR MORTGAGE THE ASSET IN FAVOUR OF ANY OTHER PARTY. 6. THE RENTAL STRUCTURE IS UNIFORM AND HAS BEEN LAI D DOWN IN THE RESPECTIVE AGREEMENTS. 7. THE AGREEMENTS PROVIDE FOR INSURANCE OF THE ASSE TS. 7. THE AO, WHILE EXAMINING THE BOOKS AND SCOPE OF B USINESS OF THE ASSESSEE, IDENTIFIED THAT, TRANSACTION CONDUCTED WI TH THE FOLLOWING PARTIES WERE LOANS AND NOT LEASE . A) GUJARAT ELECTRICITY BOARD B) EMPEE DISTILLIERS LTD. C) BILLARY STEELS & ALLOY LTD. D) KEDIA GROUP E) REPL ENGINEERING LTD F) PATHEJA BROS FORGING & STAMPINGS LTD G) PADMA ALLOYS CASTINGS LTD. 8. AT THE TIME OF HEARING, THE AR SUBMITTED THAT TH E ISSUE INVOLVES TWO TYPES OF INDULGENCE, I.E. TRANSACTIONS HELD TO BE LOAN, AFTER CONSIDERATION AND TRANSACTIONS HELD TO BE LOAN, WIT HOUT ANY SPECIFIC REASON. 9. THE AR PROVIDED THE BREAK UP AS FOLLOWS: CASES CLASSIFIED AS FINANCE TRANSACTION SR. NO. NAME OF LESSEE 1 GUJARAT ELECTRICITY BOARD (ASSET PERTAINING TO TRANS ACTION IN EARLIER FINANCIAL YEAR) 2 GUJARAT ELECTRICITY BOARD (TRANSACTION ENTERED DURI NG THE YEAR) 3 EMPEE DISTILLERIES LTD. 4 BELLARY STEELS & ALLOYS LTD. CASES NOT CLASSIFIED AS FINANCE TRANSACTION SR. NO. NAME OF LESSEE 1 KEDIA GROUP COMPANIES 2 REPL ENGINEERING LTD. INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 4 3 PATHEJA BROS. FORGING & STAMPINGS LTD. 4 PADMA ALLOYS CASTINGS LTD. 10. THE AR SUBMITTED THAT IN SO FAR AS ITEMS 1 TO 4 IN THE CATEGORY CASES CLASSIFIED AS FINANCE TRANSACTIONS ARE CONCERNED, THE ISSUE OF DEPRECIATION IS SQUARELY COVERED BY THE VARIOUS DEC ISIONS OF THE MUMBAI ITAT AND BY OTHER DECISIONS OF HONBLE HIGH COURTS AS FOLLOWS: S.NO. PARTICULARS COURT CITATION 1 ICICI LTD. VS JCIT ITAT, MUMBAI [2014] ITA NO. 1881 & 3708/M/2000; ITA NO. 3535/M/2004 AND ITA 3827/M/2005 2 ICICI BANK LTD. VS JCIT ITAT, MUMBAI [2014] ITA NO. 3643, 3644/M/2001 3 M/S LARSEN & TOUBRO LTD. VS. JCIT ITAT, MUMBAI [2013] ITA NO. 2200/M/2000 AND ITA 2890/M/2001 4 DEVELOPMENT CREDIT BANK VS DCIT ITAT, MUMBAI [2013] 40 TAXMAN.COM 532 5 SICOM LIMITED VS JCIT ITAT, MUMBAI [2013] 40 TAXMAN.COM 469 6 UTI BANK LTD VS ACIT ITAT, AHMADABAD ITA NO. 2572/AHD/2006, 4386 & 4388/AHD/2008 AND 790/AHD/2012 7 ICICI LTD. VS JCIT ITAT, MUMBAI [2008] 115 ITD 25 8 M/S ICDS LTD. VS CIT, MYSORE SUPREME COURT [2013] 40 TAXMAN.COM 129 9 CIT VS COSMO FILMS LTD. DELHI HIGH COURT [2011] 12 TAXMAN.COM 217 10 FIRST LEASING COMPANY OF INDIA LTD. VS. ACIT MADRAS HIGH COURT [2013 ] 38 TAXMAN.COM 213 11 DCIT VS GUJARAT NARMADA VALLEY FERTILIZERS CO LTD GUJARAT HIGH COURT [2013] 33 TAXMAN.COM 117 12 CIT V GUJARAT GAS CO LTD GUJARAT HIGH COURT [2009] 308 ITR 243 13 CIT VS ZUARI FINANCE LTD BOMBAY HIGH COURT [2005] 144 TAXMAN 113 1 4 CIT VS. PUNJAB STATE ELECTRICITY BOARD PUNJAB & HARYANA HIGH COURT [2009] 183 TAXMAN 419 15 INDUSTRIAL DEV. CORP OF ORISSA LTD VS CIT ORISSA HIGH COURT [2004] 137 TAXMAN 556 INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 5 AND THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF ICDS LTD VS CIT, REPORTED IN 29 TAXMAN.COM 129, WHEREIN IT WAS HELD (IN THE CATCH NOTE) , WHERE ASSESSEE, ENGAGED IN BUSINESS OF HIRE PURCHA SE, LEASING ETC., HAVING PURCHASED VEHICLES FROM MANUFACTURERS, LEASED OUT THOSE VEHICLES TO CUSTOMERS, IT WAS ENTITLED TO CLA IM DEPRECIATION IN RESPECT OF VEHICLES SO LEASED OUT. 11. THE AR, THEREFORE, SUBMITTED THAT THE DEPRECIAT ION AS CLAIMED BY THE ASSESSEE, BE ALLOWED ON THE ABOVE TRANSACTION. 12. THE AR FURTHER SUBMITTED THAT IN SO FAR AS CASES NOT CLASSIFIED AS TRANSACTION FINANCE TRANSACTIONS , THE REVENUE AUTHORITIES DID NOT ACCORD REASONABLE OPPORTUNITY TO THE ASSESSEE TO SU BSTANTIATE ITS CASE ON THE CLAIM MADE FOR ALLOWANCE OF DEPRECIATION. TO SHOW AS TO HOW THE PRAYER MADE BY THE ASSESSEE WAS NOT ADHERED TO BY THE REVENUE AUTHORITIES, THE AR REFERRED TO THE SOF (TAKING UP ONE CASE TO EXPLAIN THE FACTS) AND SUBMITTED, REPL ENGINEERING : THE LEARNED AO HAS NOT PROPERLY APPRECIATED THE EVID ENCE ON RECORD. REPL IS A WELL KNOWN ENGINEERING CONCERN. IDBI HAS G IVEN UNDER LEASE CERTAIN EQUIPMENT, DETAILS OF WHICH ARE SET OUT AT PAGE 30 OF THE ASSESSMENT ORDER. THE AO HAS SOUGHT TO DERIVE SUPPOR T FOR DISALLOWING THE CLAIM OF THE BASIS OF A SURVEY MADE BY IT DEPAR TMENT AND A STATEMENT RECORDED AT THAT TIME. IN RESPONSE TO AOS LETTER THE APPELLANT FILED A DE TAILED REPLY ENCLOSING LETTER OF REPL DT. 10/3/97 CLARIFYING THE DOUBTS CRE ATED BY IT SURVEY. ALONG WITH OUR LETTER, REPL FURNISHED A COPY OF THE LETTER DT. 22/1/97 WRITTEN BY THEM TO IT DEPT. THE LETTER MAKES THE WH OLE POSITION CLEAR. WE SUBMIT THAT WE HAD ENCLOSED A COPY OF THE REPLS LETTER DT. 10/3/97 WITHOUT REPLY DT. 14/3/97. IN ANY CASE THE IT DEPARTMENT HAD ON ITS RECORD THE LETTER OF REPL DT. 22/1/97 ADDRESS ED TO ADI(INV) UNIT II(3) RECONCILING THE ASSETS LEASED BY IDBI WITH TH E OBSERVATIONS OF THE SURVEY CONDUCTED BY THE IT DEPT. FURTHER, IDBI HAD SUGGESTED IN ITS LETTER OF 14/3/97 THAT IF THE AO CONSIDERS IT NECESS ARY, IDBI WAS PREPARED FOR A JOINT INSPECTION OF THE ASSETS BY IT DEPT. AND IDBI. IT IS SUBMITTED THAT THE TRANSACTION IS A GENUINE L EASING TRANSACTION ENTERED INTO IN THE NORMAL COURSE OF IDBIS LEASING BUSINESS. THE APPELLANTS CLAIM FOR DEPRECIATION BE ALLOWED. THE AR SUBMITTED THAT SIMILAR TREATMENT HAD BEEN GI VEN TO THE OTHER TRANSACTIONS. INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 6 13. THE AR SUBMITTED THAT THOUGH THE CASE OF THE AS SESSEE WAS STRONG ENOUGH TO SUBSTANTIATE THE CLAIM, BUT IT IS PREPARED TO GO BACK TO THE AO, TO SATISFY ITS CLAIM, BEFORE THE AR BY H AVING JOINT INSPECTION AND RECONCILIATION OF THE FACTS AND TRANSACTIONS. 14. THE DR ON THE OTHER HAND SUBMITTED THAT THERE I S NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES, BUT IF IN CA SE PART OF THE TRANSACTIONS ARE BEING RESTORED TO THE AO, THEN IT WOULD BE BETTER THAT ALL THE TRANSACTIONS ARE RESTORED TO THE AO. 15. WE HAVE HEARD THE ARGUMENTS AND PERUSED THE ORD ERS OF THE REVENUE AUTHORITIES AND THAT SHOWING DISTINCTION DR AWN BY THE ASSESSEE ON THE SIMILAR TRANSACTIONS, WHICH THE DR COULD NOT NEGATE. HENCE, THE CHART, READ WITH SOF ARE CONSIDERED TO B E CORRECT. IN SUCH A CIRCUMSTANCES, WE HOLD THAT TRANSACTIONS CLASSIFI ED AS FINANCE TRANSACTIONS IN THE FIRST TABLE ARE SQUARELY COVERE D BY OUR OWN ORDER IN THE CASE OF ICICI LTD VS JCIT, ITA NO. 1881/MUM/200 0 AND THE CASE OF ICDS LTD. VS CIT ( SUPRA ) BY THE HONBLE SUPREME COURT AND VARIOUS OTHER DECISIONS, AS MENTIONED IN THE PRE PARA. 16. IN SO FAR AS THE SECOND CATEGORY OF CASES, WE F IND THAT DESPITE THE FACT THAT THE ASSESSEE HAD PRAYED FOR JOINT INS PECTION OF LEASED ASSETS AND EVIDENCES THERE OFF, THE REVENUE AUTHORI TIES BRUSHED ASIDE THE REQUESTS MADE. THIS, ACCORDING TO US IS AGAINS T THE PRINCIPALS OF NATURAL JUSTICE, WHICH CAN ONLY BE REMEDIED BY REST ORING THE ISSUES/TRANSACTIONS TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 17. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) AND DIRECT THE AO TO EXAMINE THE TRANSACTIONS WITH KEDIA GROUP OF COM PANIES, REPL ENGINEERING LTD., PATHEJA BROS FORGING & STAMPINGS LTD., AND PADMA ALLOYS CASTINGS LTD. AFRESH, FOR THE ALLOWANCE AND CLAIM OF DEPRECIATION AS PER LAW AND JUDICIAL DECISIONS AS MENTIONED IN P RE PARA. INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 7 18. GROUND NO.1 IS THEREFORE ALLOWED FOR STATISTICA L PURPOSES. 19. IN THE RESULT, APPEAL OF THE ASSESSEE IN ITA 18 39/MUM/2004 FOR AY 1994-95 IS PARTLY ALLOWED. ITA NO. :3369/MUM/2004 : AY 1995-96 : 20. THE FOLLOWING GROUNDS HAVE BEEN TAKEN: AGGRIEVED BY THE ORDER U/S 250 OF THE INCOME TAX ACT , 1961 DATED 7.1.2004 PASSED BY THE COMMISSIONER OF INCOME TAX ( APPEALS) XII, MUMBAI HEREINAFTER REFERRED TO AS THE CIT(A)] FOR T HE ASSESSMENT YEAR 1994- 95, THE APPELLANT BEGS TO FILE THIS APPEAL AND RAIS E THE FOLLOWING GROUNDS OF APPEAL WHICH ARE INDEPENDENT OF AND WITHOUT PREJUDI CE TO EACH OTHER. 1.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT LEASE TRAN SACTIONS ENTERED INTO BY THE APPELLANT ARE IN THE NATURE OF LOAN TRANSACT IONS. HE OUGHT TO HAVE ALLOWED THE DEPRECIATION CLAIM MADE BY THE APPELLAN T IN RESPECT OF ALL THE LEASE TRANSACTIONS ENTERED INTO BY THE APPELLANT IN ACCORDANCE WITH THE LAW AND CIRCULARS ISSUED BY THE CBDT. IN ACCORDANCE WIT H THE PROVISIONS OF SECTION 32 OF THE IT ACT, DEPRECIATION ON ASSETS GIV EN ON LEASE SHOULD HAVE BEEN ALLOWED TO THE APPELLANT, BEING THE OWNER OF T HE ASSETS IN THE SAID LEASE TRANSACTIONS. 1.2 THE LEARNED CIT(A) COMMITTED A GROSS ERROR OF LAW A ND FACTS IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION IN RESP ECT OF ASSETS GIVEN ON LEASE IN THE EARLIER YEARS. 2. DEDUCTION U/S 80M : THE LEARNED CIT(A) COMMITTED A GROSS ERROR OF LAW A ND FACTS IN NOT ACCEPTING THE CLAIM OF APPELLANT U/S 80M IN THE MAN NER IN WHICH IT WAS CLAIMED. THE LEARNED CIT(A) ERRED IN NOT GIVING A F INDING ON THIS ISSUE AND ALSO NOT FOLLOWING THE DECISION OF THE ITAT IN APPEL LANTS CASE IN AY 1992- 93 AND 1993-94. THE APPELLANT SUBMITS THAT ITS CLAI M U/S 80M SHOULD BE ACCEPTED IN TOTALITY. THE APPELLANT CRAVES TO ADD TO, AMEND, ALTER, MODIF Y, DELETE AND/OR SUBSTITUTE ALL OR ANY OF THE ABOVE GROUNDS OF APPEA L TILL THE FINAL DISPOSAL OF THE APPEAL. 21. GROUND NO. 1 PERTAINS TO CLAIM OF DEPRECIATION IN RESPECT OF ASSETS GIVEN ON LEASE. 22. THE ASSESSEE INDUSTRIAL DEVELOPMENT BANK OF IND IA (IDBI) IS A GOVERNMENT OWNED FINANCIAL INSTITUTION, ENGAGED IN PROVIDING LONG INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 8 TERM LEASE, REFINANCE AND LEASE. THE SCOPE OF THIS LINE OF BUSINESS OF THE ASSESSEE IS, 1. OWNERSHIP OF EQUIPMENT VESTS WITH IDBI.(NO LESS EE HAS EVER CLAIMED THAT HE IS THE DE-FACTO OR DE-JURE OWN ER OF THE ASSET GIVEN ON LEASE AND THEREFORE, NO LESSEE H AS CLAIMED DEPRECIATION IN HIS INCOME TAX ASSESSMENT I N RESPECT OF ASSETS GIVEN ON LEASE BY IDBI. 2. THE COMMENCEMENT AND TERMINATION OF LEASES IS SPECIFIED AND THE LEASE PERIOD HAS ALSO BEEN SPECIF IED. 3. THE ASSETS HAVE BEEN IDENTIFIED AND BOTH THE LES SOR AND LESSEE ARE CLEAR AS TO WHICH PARTICULAR EQUIPMENT BELONGS TO IDBI. 4. THE AGREEMENTS PROVIDE FOR RETURN OF EQUIPMENT O N THE EXPIRY OF THE LEASE. 5. THE AGREEMENTS PROVIDE THAT LESSEE HAS NO RIGHT TO TRANSFER OR ASSIGN OR MORTGAGE THE ASSET (GIVEN ON LEASE BY IDBI) IN FAVOUR OF ANY OTHER PARTY. 6. THE RENTAL STRUCTURE HAS BEEN LAID DOWN IN THE R ESPECTIVE AGREEMENTS. 7. THE AGREEMENTS PROVIDE FOR INSURANCE OF THE ASSE TS. THESE FEATURES OF OUR LEASE AGREEMENTS ARE IN LINE WITH THE OBSERVATIONS ON THE ASPECTS IN THE DEPARTMENTAL PUB LICATION ON LEASING TITLED STUDY OF LEASING COMPANIES 23. THE AO, WHILE EXAMINING THE BOOKS AND SCOPE OF BUSINESS OF THE ASSESSEE, IDENTIFIED THAT, TRANSACTION CONDUCTED WI TH CERTAIN PARTIES WERE LOANS AND NOT LEASE . 24. AT THE TIME OF HEARING, THE AR SUBMITTED THAT T HE ISSUE INVOLVES TWO TYPES OF INDULGENCE, I.E. TRANSACTIONS HELD TO BE LOAN, AFTER CONSIDERATION AND TRANSACTIONS HELD TO BE LOAN, WIT HOUT ANY SPECIFIC REASON. 25. THE AR PROVIDED THE BREAK UP AS FOLLOWS: CASES CLASSIFIED AS FIN ANCE TRANSACTION SR. NO. NAME OF LESSEE 1 GUJARAT STATE FERTILIZER 2 PETROFILS AR) 3 GODREJ SOAPS 4 SHRIRAM TRANSPORT 5 SHRIR AM INVESTMENT 6 SHIPPING CORPORATION 7 APS STAR INDUSTRIES INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 9 8 SELVEL ADVERTISING 9 WIPRO GE 10 BOROSIL GLASS WORKS 11 MCDOWELL 12 SIRIS 13 LIBRA FILAMENTS 14 GARWAR MARINE 15 SANDUR MANGANESE (TWO) 16 SALGAOCAR MINING 17 STERLING STRIPS 18 UCAL FUEL 19 KORES INDIA 20 ANAND BAZAR PATRIKA 21 LLYOD STEEL IND. 22 RELIANCE GRANITE 23 PUNJ LLYOD 24 IMOTECJ 25 TATA ELECTRIC CO. 26 MAFATLAL INDUSTRIES 27 SIRPUR 28 SRI JAYAJYOTHI & CO. LTD. 29 ATLAS AUTOMOTIVE COMPONENTS PVT LTD 30 MARUTI PLA STICS LTD CASES NOT CLASSIFIED AS FINANCE TRANSACTION SR. NO. NAME OF LESSEE 1 TRIDENT STEELS 2 NATHANI STEELS 3 PATHEJA BRO THERS 4 KEDIA DISTILLERIES 26. THE AR SUBMITTED THAT IN SO FAR AS ITEMS 1 TO 3 0 IN THE CATEGORY CASES CLASSIFIED AS FINANCE TRANSACTIONS ARE CONCERNED, THE ISSUE OF DEPRECIATION IS SQUARELY COVERED BY THE VARIOUS DEC ISIONS OF THE MUMBAI ITAT INCLUDING OUR ORDER IN ITA NO. 1839/MUM /2004, AS ABOVE AND BY OTHER DECISIONS BY THE HIGHER FORA: S.NO. PARTICULARS COURT CITATION 1 ICICI LTD. VS JCIT ITAT, MUMBAI [2014] ITA NO. 1881 & 3708/M/2000; ITA NO. 3535/M/2004 AND ITA 3827/M/2005 2 ICICI BANK LTD. VS JCIT ITAT, MUMBAI [2014] ITA NO. 3643, 3644/M/2001 3 M/S LARSEN & TOUBRO LTD. VS. JCIT ITAT, MUMBAI [2013] ITA NO. 2200/M/2 000 AND ITA 2890/M/2001 4 DEVELOPMENT CREDIT BANK VS DCIT ITAT, MUMBAI [2013] 40 TAXMAN.COM 532 INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 10 5 SICOM LIMITED VS JCIT ITAT, MUMBAI [2013] 40 TAXMAN.COM 469 6 UTI BANK LTD VS ACIT ITAT, AHMADABAD ITA NO. 2572/AHD/2006, 4386 & 4388/AHD/2008 AND 790/AHD/2012 7 ICICI LTD. VS JCIT ITAT, MUMBAI [2008] 115 ITD 25 8 M/S ICDS LTD. VS CIT, MYSORE SUPREME COURT [2013] 40 TAXMAN.COM 129 9 CIT VS COSMO FILMS LTD. DELHI HIGH COURT [2011] 12 TAXMAN.COM 2 17 10 FIRST LEASING COMPANY OF INDIA LTD. VS. ACIT MADRAS HI GH COURT [2013] 38 TAXMAN.COM 213 11 DCIT VS GUJARAT NARMADA VALLEY FERTILIZERS CO LTD GUJARAT HIGH COURT [2013] 33 TAXMAN.COM 117 12 CIT V GUJARAT GAS CO LTD GUJARAT HIGH COURT [2009] 308 ITR 243 13 CIT VS ZUARI FINANCE LTD BOMBAY HIGH COURT [2005] 144 TAXMAN 113 14 CIT VS. PUNJAB STATE ELECTRICITY BOARD PUNJAB & HARYANA HIGH COURT [2009] 183 TAXMAN 419 15 INDUSTRIAL DEV. CORP OF ORISSA LTD VS CIT ORISSA HIGH COURT [2004] 137 TAXMAN 556 AND THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF ICDS LTD VS CIT, REPORTED IN 29 TAXMAN.COM 129, WHEREIN IT WAS HELD (IN THE CATCH NOTE) , WHERE ASSESSEE, ENGAGED IN BUSINESS OF HIRE PURCHA SE, LEASING ETC., HAVING PURCHASED VEHICLES FROM MANUFACTURERS, LEASED OUT THOSE VEHICLES TO CUSTOMERS, IT WAS ENTITLED TO CLA IM DEPRECIATION IN RESPECT OF VEHICLES SO LEASED OUT. 27. THE AR, THEREFORE, SUBMITTED THAT THE DEPRECIAT ION AS CLAIMED BE ALLOWED ON THE ABOVE TRANSACTION. 28. THE AR FURTHER SUBMITTED THAT IN SO FAR AS CASES NOT CLASSIFIED AS TRANSACTION FINANCE TRANSACTIONS , THE REVENUE AUTHORITIES DID NOT ACCORD REASONABLE OPPORTUNITY TO THE ASSESSEE TO SU BSTANTIATE ITS CASE ON THE CLAIM MADE FOR ALLOWANCE OF DEPRECIATION AS SUBMITTED BY THE AR IN THE PRECEDING YEAR AND ALSO REFERRED TO IN TH E SOF INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 11 THE AR SUBMITTED THAT SIMILAR TREATMENT HAD BEEN GI VEN TO THE OTHER TRANSACTIONS IN THE CURRENT YEAR AS WELL TO THE TRA NSACTIONS FALLING IN CASH NOT CLASSIFIED AS FINANCE TRANSACTIONS . 29. THE AR SUBMITTED THAT THOUGH THE CASE OF THE AS SESSEE WAS STRONG ENOUGH TO SUBSTANTIATE THE CLAIM, BUT IT IS PREPARED TO GO BACK TO THE AO, TO SATISFY ITS CLAIM, BUT IT IS PREPARED TO GO BACK TO THE AO, TO SATISFY ITS CLAIM BEFORE THE AR BY HAVING JOINT INSPECTION AND RECONCILIATION OF THE FACTS AND TRANSACTIONS. 30. THE DR ON THE OTHER HAND SUBMITTED THAT THERE I S NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES, BUT IF IN CA SE PART OF THE TRANSACTIONS ARE BEING RESTORED TO THE AO, THEN IT WOULD BE BETTER THAT ALL THE TRANSACTIONS ARE RESTORED TO THE AO. 31. WE HAVE HEARD THE ARGUMENTS AND PERUSED THE ORD ERS OF THE REVENUE AUTHORITIES AND THAT SHOWING DISTINCTION DR AWN BY THE ASSESSEE ON THE SIMILAR TRANSACTIONS, WHICH THE DR COULD NOT NEGATE. HENCE, THE CHART, READ WITH SOF ARE CONSIDERED TO B E CORRECT. IN SUCH A CIRCUMSTANCES, WE HOLD THAT TRANSACTIONS CLASSIFI ED AS FINANCE TRANSACTIONS IN THE FIRST TABLE ARE SQUARELY COVERE D BY OUR OWN ORDER IN THE CASE OF ICICI LTD VS JCIT, ITA NO. 1881/MUM/200 0 AND THE CASE OF ICDS LTD. VS CIT ( SUPRA ) BY THE HONBLE SUPREME COURT AND VARIOUS OTHER DECISIONS IN THE PRE PARA AND OUR OWN ORDER I N ITA NO. 1839/MUM/2004. ACCORDINGLY WE DIRECT THE AO TO DELE TE THE DISALLOWANCE AND ALLOW THE CLAIM OF DEPRECIATION. 32. IN SO FAR AS THE SECOND CATEGORY OF CASES, WE F IND THAT DISPUTE THE FACT THAT THE ASSESSEE HAD PRAYED FOR JOINT INS PECTION OF LEASED ASSETS AND EVIDENCES THERE OFF, THE REVENUE AUTHORI TIES BRUSHED ASIDE THE REQUESTS MADE. THIS, ACCORDING TO US IS AGAINS T THE PRINCIPALS OF INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 12 NATURAL JUSTICE, WHICH CAN ONLY BE REMEDIED BY REST ORING THE ISSUES/TRANSACTIONS TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 33. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) AND DIRECT THE AO TO EXAMINE THE TRANSACTIONS WITH KEDIA DISTILLERIES , TRIDENT STEELS, PATHEJA BROS FORGING & STAMPINGS LTD., AND NATHANI STEELS AFRESH, FOR THE ALLOWANCE AND CLAIM OF DEPRECIATION AS PER LAW AND JUDICIAL DECISIONS AS MENTIONED IN PRE PARA. 34. GROUND NO.1 IS THEREFORE ALLOWED FOR STATISTICA L PURPOSES. 35. GROUND NO. 2 RELATES TO DEDUCTION UNDER SECTION DEDUCTION U/S 80M. 36. AS ARGUED AND RELIED UPON BY THE AR BEFORE US I N THE DEPARTMENTAL APPEAL IN THE CASE OF DCIT VS M/S INDU STRIAL DEVELOPMENT BANK OF INDIA FOR AY 1992-93 VIDE ITAT MUMBAI I BENCH ORDER DATED 24 TH DECEMBER, 2002 IN ITA NO. 3249/BOM/1995 AND RELEVANT PORTION OF THE ORDER COVERING THE IMPUGNED ISSUE READS AS UNDER: THE ASSESSEE BANK ADVANCES LOANS TO ENTREPRENEURS AND THUS HELPS IN THE INDUSTRIAL DEVELOPMENT OF THE COUNTRY. DURING T HE YEAR UNDER APPEAL IN ADDITION TO EARNING INCOME FROM BANK OPERATIONS, IT EARNED DIVIDEND INCOME. FOR ALLOWING U/S 80M OF THE INCOME TAX ACT, 1961, THE ASSESSING OFFICER DISALLOWED PROPORTIONATE EXPENSES FOR EARNING DIVIDEND INCOME AS PER PARA 19 OF PAGE 18 OF THE AS SESSMENT ORDER. THE ASSESSEE APPEALED TO THE LEARNED CIT(A) AND SUB MITTED THAT PROPORTIONATE EXPENSES ESTIMATED BY THE ASSESSING OF FICER WERE ON THE HIGH SIDE. THE LEARNED CIT(A) CONCURRED WITH THE FI NDINGS OF THE ASSESSING OFFICER AND HELD THAT THE ASSESSEE MUST HA VE INCURRED EXPENDITURE FOR EARNING DIVIDEND, BUT THE PROPORTIO NATE EXPENSES DISALLOWED BY THE ASSESSING OFFICER WERE ON THE HIGH SIDE. FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ICICI L TD. IN WHICH 1% DIVIDEND INCOME IS DEDUCTIBLE WHILE DETERMINING THE DEDUCTION U/S 80M OF THE ACT, THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 1% ONLY. 3. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE ASSESSEE EARNED SUBSTANTIAL DIVIDEND INCOME, IT DID INCUR EXPENDITURE ON STAFF, STATIONERY ETC. FOR EARNING SUCH DIVIDEND AND WHILE THE LEARNED CIT(A) HAS UPHELD IN PRINCIPLE THE INCURRENCE OF SU CH EXPENSES, HIS INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 13 DIRECTION FOR DISALLOWANCE OF ONLY 1% GROSS DIVIDEN D INCOME AS EXPENSES IS NOT JUSTIFIED AS IT IS ON THE LOWER SID E. 4. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN 1% DISALLOWANCE UPHELD BY THE LEARNED CIT(A) IS ON THE HIGHER SIDE BECAUSE THE ASSESSEES BUSINESS WAS NOT TO EARN DIV IDEND INCOME AND THE MAIN ACTIVITY IS TO GIVE LOANS AND AS THE NAME ITSELF SUGGESTS, THE BANK IS ENGAGED IN THE INDUSTRIAL DEVELOPMENT OF TH E COUNTRY BY ADVANCING THOUSANDS OF CRORES TO THE ENTREPRENEURS. THE LOANS ADVANCED BY THE BANK DURING THE YEAR UNDER APPEAL S TOOD OVER 20,000 CRORES. HE SUBMITTED THAT BANK HAS AN INVESTMENT DE PARTMENT WHICH IS MANNED ENDED BY A SKELETON STAFF. HE PLACED RELIANC E ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ICICI LTD. (SUPRA). 5. AFTER HEARING BOTH THE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). IN OUR VIEW, THE L EARNED CIT(A) HAS TAKEN A CORRECT VIEW WHICH IS IN CONSONANCE WITH TH E ORDER OF THE TRIBUNAL IN THE CASE OF ICICI LTD., REFERRED TO SUP RA. ACCORDINGLY, WE DECLINE TO INTERFERE. 37. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND C ASE LAWS CITED BY THE AR, IN ITA 3429/BOM/1996 ( SUPRA), WHICH SQUARELY COVERS THE IMPUGNED ISSUE, AND ACCORDINGLY RESPECTFULLY FOLLOW ING THE SAME WE SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE AD DITION AS MADE BY HIM AND ALLOW GROUND NO. 2 IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE. 38. IN THE RESULT, THE ASSESSEES APPEAL IN ITA NO. 3369/MUM/2004 FOR AY 1995-96 IS TREATED AS ALLOWED. ITA NO. 3370/MUM/2004 : AY 1996-97 : 39. THE FOLLOWING GROUNDS HAVE BEEN TAKEN: AGGRIEVED BY THE ORDER U/S 250 OF THE INCOME TAX ACT , 1961 DATED 7.1.2004 PASSED BY THE COMMISSIONER OF INCOME TAX ( APPEALS) XII, MUMBAI HEREINAFTER REFERRED TO AS THE CIT(A)] FOR T HE ASSESSMENT YEAR 1994- 95, THE APPELLANT BEGS TO FILE THIS APPEAL AND RAIS E THE FOLLOWING GROUNDS OF APPEAL WHICH ARE INDEPENDENT OF AND WITHOUT PREJUDI CE TO EACH OTHER. 5.1 THE LEARNED CIT(A) ERRED IN HOLDING THAT LEASE TRAN SACTIONS ENTERED INTO BY THE APPELLANT ARE IN THE NATURE OF LOAN TRANSACT IONS. HE OUGHT TO HAVE ALLOWED THE DEPRECIATION CLAIM MADE BY THE APPELLAN T IN RESPECT OF ALL THE LEASE TRANSACTIONS ENTERED INTO BY THE APPELLANT IN ACCORDANCE WITH THE LAW AND CIRCULARS ISSUED BY THE CBDT. IN ACCORDANCE WIT H THE PROVISIONS OF SECTION 32 OF THE IT ACT, DEPRECIATION ON ASSETS GIV EN ON LEASE SHOULD HAVE BEEN ALLOWED TO THE APPELLANT, BEING THE OWNER OF T HE ASSETS IN THE SAID LEASE TRANSACTIONS. INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 14 5.2 THE LEARNED CIT(A) COMMITTED A GROSS ERROR OF LAW A ND FACTS IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION IN RESP ECT OF ASSETS GIVEN ON LEASE IN THE EARLIER YEARS. 6. DEDUCTION U/S 80M : THE LEARNED CIT(A) COMMITTED A GROSS ERROR OF LAW A ND FACTS IN NOT ACCEPTING THE CLAIM OF APPELLANT U/S 80M IN THE MAN NER IN WHICH IT WAS CLAIMED. THE LEARNED CIT(A) ERRED IN NOT GIVING A F INDING ON THIS ISSUE AND ALSO NOT FOLLOWING THE DECISION OF THE ITAT IN APPEL LANTS CASE IN AY 1992- 93 AND 1993-94. THE APPELLANT SUBMITS THAT ITS CLAI M U/S 80M SHOULD BE ACCEPTED IN TOTALITY. THE APPELLANT CRAVES TO ADD TO, AMEND, ALTER, MODIF Y, DELETE AND/OR SUBSTITUTE ALL OR ANY OF THE ABOVE GROUNDS OF APPEA L TILL THE FINAL DISPOSAL OF THE APPEAL. 40. GROUND NO. 1 PERTAINS TO CLAIM OF DEPRECIATION IN RESPECT OF ASSETS GIVEN ON LEASE. 41. THE ASSESSEE INDUSTRIAL DEVELOPMENT BANK OF IND IA (IDBI) IS A GOVERNMENT OWNED FINANCIAL INSTITUTION, ENGAGED IN PROVIDING LONG TERM LEASE, REFINANCE AND LEASE. THE SCOPE OF THIS LINE OF BUSINESS OF THE ASSESSEE IS, 1. OWNERSHIP OF EQUIPMENT VESTS WITH IDBI.(NO LESS EE HAS EVER CLAIMED THAT HE IS THE DE-FACTO OR DE-JURE OWN ER OF THE ASSET GIVEN ON LEASE AND THEREFORE, NO LESSEE H AS CLAIMED DEPRECIATION IN HIS INCOME TAX ASSESSMENT I N RESPECT OF ASSETS GIVEN ON LEASE BY IDBI. 2. THE COMMENCEMENT AND TERMINATION OF LEASES IS SPECIFIED AND THE LEASE PERIOD HAS ALSO BEEN SPECIF IED. 3. THE ASSETS HAVE BEEN IDENTIFIED AND BOTH THE LES SOR AND LESSEE ARE CLEAR AS TO WHICH PARTICULAR EQUIPMENT BELONGS TO IDBI. 4. THE AGREEMENTS PROVIDE FOR RETURN OF EQUIPMENT O N THE EXPIRY OF THE LEASE. 5. THE AGREEMENTS PROVIDE THAT LESSEE HAS NO RIGHT TO TRANSFER OR ASSIGN OR MORTGAGE THE ASSET (GIVEN ON LEASE BY IDBI) IN FAVOUR OF ANY OTHER PARTY. 6. THE RENTAL STRUCTURE HAS BEEN LAID DOWN IN THE R ESPECTIVE AGREEMENTS. 7. THE AGREEMENTS PROVIDE FOR INSURANCE OF THE ASSE TS. THESE FEATURES OF OUR LEASE AGREEMENTS ARE IN LINE WITH THE OBSERVATIONS ON THE ASPECTS IN THE DEPARTMENTAL PUB LICATION ON LEASING TITLED STUDY OF LEASING COMPANIES INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 15 42. THE AO, WHILE EXAMINING THE BOOKS AND SCOPE OF BUSINESS OF THE ASSESSEE, IDENTIFIED THAT, TRANSACTION CONDUCTED WI TH THE FOLLOWING PARTIES WERE LOANS AND NOT LEASE . 43. AT THE TIME OF HEARING, THE AR SUBMITTED THAT T HE ISSUE INVOLVES TWO TYPES OF INDULGENCE, I.E. TRANSACTIONS HELD TO BE LOAN, AFTER CONSIDERATION AND TRANSACTIONS HELD TO BE LOAN, WIT HOUT ANY SPECIFIC REASON. 44. THE AR PROVIDED THE BREAK UP AS FOLLOWS: CASES CLASSIFIED AS FIN ANCE TRANSACTION SR. NO. NAME OF LESSEE 1 VIDEOCON APPLICANCE 2 VIDEOCON INTERNATIONAL LTD. 3 AIGIS CHEMICALS LTD. 4 EASTERN & SUGAR INDUSTRIES (TWO) 5 TRICHI DISTILLERIES LTD. (TWO) 6 MANGALORE REFINERIES AND PETRO CHEMCIALS 7 ESSAR STEEL LTD. (THREE) 8 ALEMBIC CHEMICALS 9 DELTON CABLES LIMITED 10 KARNATAKA ELECTRICITY BOARD 11 M ESCO AIRLINES LTD. 12 UNITECH LTD. (TWO) 13 SIMBHAOLI SUGAR MILLS 14 BETA NAPTHOL LTD. (TWO) 15 NOIDA MEDICARE CENTRE LTD. 16 V M JOG ENGINEERING LT D. 17 UMA PARMESHWARI MILLS 18 DIWAN STEEL LTD. 19 JAY YUSHIN LTD. 20 MARUTI UDYOG LTD. 21 SHRIRAM INVESTMENT LTD. 22 SHRIRAM TRANSPORT FINANCE 23 MC. DOWELL (TWO) 24 SELVEL ADVERTISING LTD. 25 ANAND BAZAR PATRIKA LTD. 26 TATA ELECTRIC COMPANY LT D. 27 SOYA UDYOG 28 KITTY STEELS LTD. CASES NOT CLASSIFIED AS FINANCE TRANSACTION SR. NO. NAME OF LESSEE INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 16 1 SUMAN MOTELS LTD. 2 KEDIA GALLEON LTD. 3 TRIDENT STEEL LTD. 45. THE AR SUBMITTED THAT IN SO FAR AS ITEMS 1 TO 2 8 IN THE CATEGORY CASES CLASSIFIED AS FINANCE TRANSACTIONS ARE CONCERNED, THE ISSUE OF DEPRECIATION IS SQUARELY COVERED BY THE VARIOUS DEC ISIONS OF THE MUMBAI ITAT AND BY OUR OWN ORDER IN ITA NO. 1839/MU M/2004, IN ASSESSMENT YEARS 1994-95, AND BY OTHER DECISIONS OF HIGHER FORA: S.NO. PARTICULARS COURT CITATION 1 ICICI LTD. VS JCIT ITAT, MUMBAI [2014] ITA NO. 1881 & 3708/M/2000; ITA NO. 3535/M/2004 AND ITA 3827/M/2005 2 ICICI BANK LTD. VS JCIT ITAT, MUMBAI [2014] ITA NO. 3643, 3644/M/2001 3 M/S LARSEN & TOUBRO LTD. VS. JCIT ITAT , MUMBAI [2013] ITA NO. 2200/M/2000 AND ITA 2890/M/2001 4 DEVELOPMENT CREDIT BANK VS DCIT ITAT, MUMBAI [2013] 40 TAXMAN.COM 532 5 SICOM LIMITED VS JCIT ITAT, MUMBAI [2013] 40 TAXMAN.COM 469 6 UTI BANK LTD VS ACIT ITAT, AHMADABAD ITA NO. 2572/AHD/2006, 4386 & 4388/AHD/2008 AND 790/AHD/2012 7 ICICI LTD. VS JCIT ITAT, MUMBAI [2008] 115 ITD 25 8 M/S ICDS LTD. VS CIT, MYSORE SUPREME COURT [2013] 40 TAXMAN.COM 129 9 CIT VS COSMO FILMS LTD. DELHI HIGH COURT [2011] 12 TAXMAN.COM 217 10 FIRST LEASING COMPANY OF INDIA LTD. VS. ACIT MADRAS HIGH COURT [2013] 38 TAXMAN.COM 213 11 DCIT VS GUJARAT NARMADA VALLEY FERTILIZERS CO LTD GUJARAT HIGH COURT [2013] 33 TAXMAN.COM 117 12 CIT V GUJARAT GAS CO LTD GUJARAT HIGH COURT [2009] 308 ITR 243 13 CIT VS ZUARI FINANCE LTD BOMBAY HIGH COURT [2005] 144 TAXMAN 113 14 CIT VS. PUNJAB STATE ELECTRICITY BOARD PUNJAB & HARYANA HIGH COURT [2009] 183 TAXMAN 419 15 INDUSTRIAL DEV. CORP OF ORISSA LTD VS CIT ORISSA HIGH COURT [2004] 137 TAXMAN 556 AND THE DECISION OF HONBLE SUPREME COURT IN THE CA SE OF ICDS LTD VS CIT, REPORTED IN 29 TAXMAN.COM 129, WHEREIN IT WAS HELD (IN THE CATCH NOTE) , INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 17 WHERE ASSESSEE, ENGAGED IN BUSINESS OF HIRE PURCHA SE, LEASING ETC., HAVING PURCHASED VEHICLES FROM MANUFACTURERS, LEASED OUT THOSE VEHICLES TO CUSTOMERS, IT WAS ENTITLED TO CLA IM DEPRECIATION IN RESPECT OF VEHICLES SO LEASED OUT. 46. THE AR, THEREFORE, SUBMITTED THAT THE DEPRECIAT ION AS CLAIMED BE ALLOWED ON THE ABOVE TRANSACTION. 47. THE AR FURTHER SUBMITTED THAT IN SO FAR AS CASES NOT CLASSIFIED AS TRANSACTION FINANCE TRANSACTIONS , THE REVENUE AUTHORITIES DID NOT ACCORD REASONABLE OPPORTUNITY TO THE ASSESSEE TO SU BSTANTIATE ITS CASE ON THE CLAIM MADE FOR ALLOWANCE OF DEPRECIATION AS SUBMITTED BY THE AR IN ASSESSMENT YEAR 1994-95 AND ALSO AS REFERRED TO IN THE SOF. THE AR SUBMITTED THAT SIMILAR TREATMENT HAD BEEN GI VEN TO THE OTHER TRANSACTIONS. 48. THE AR SUBMITTED THAT THOUGH THE CASE OF THE AS SESSEE WAS STRONG ENOUGH TO SUBSTANTIATE THE CLAIM, BUT IT IS PREPARED TO GO BACK TO THE AO, TO SATISFY ITS CLAIM, BUT IT IS PREPARED TO GO BACK TO THE AO, TO SATISFY ITS CLAIM BEFORE THE AR BY HAVING JOINT INSPECTION AND RECONCILIATION OF THE FACTS AND TRANSACTIONS IN THE CURRENT YEAR AS WELL, TO THE TRANSACTIONS FALLING IN CASES NOT CLASSIFIED AS FINANCE TRANSACTIONS . 49. THE DR ON THE OTHER HAND SUBMITTED THAT THERE I S NO INFIRMITY IN THE ORDERS OF THE REVENUE AUTHORITIES, BUT IF IN CA SE PART OF THE TRANSACTIONS ARE BEING RESTORED TO THE AO, THEN IT WOULD BE BETTER THAT ALL THE TRANSACTIONS ARE RESTORED TO THE AO. 50. WE HAVE HEARD THE ARGUMENTS AND PERUSED THE ORD ERS OF THE REVENUE AUTHORITIES AND THAT SHOWING DISTINCTION DR AWN BY THE ASSESSEE ON THE SIMILAR TRANSACTIONS, WHICH THE DR COULD NOT NEGATE. HENCE, THE CHART, READ WITH SOF ARE CONSIDERED TO B E CORRECT. IN SUCH A CIRCUMSTANCES, WE HOLD THAT TRANSACTIONS CLASSIFI ED AS FINANCE INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 18 TRANSACTIONS IN THE FIRST TABLE ARE SQUARELY COVERE D BY OUR OWN ORDER IN THE CASE OF ICICI LTD VS JCIT, ITA NO. 1881/MUM/200 0 AND THE CASE OF ICDS LTD. VS CIT ( SUPRA ) BY THE HONBLE SUPREME COURT AND VARIOUS OTHER DECISIONS IN THE PRE PARA AND OUR OWN ORDER I N ITA NO. 1839/MUM/2004. ACCORDINGLY WE DIRECT THE AO TO DELE TE THE DISALLOWANCE AND ALLOW THE CLAIM OF DEPRECIATION. 51. IN SO FAR AS THE SECOND CATEGORY OF CASES, WE F IND THAT DISPUTE THE FACT THAT THE ASSESSEE HAD PRAYED FOR JOINT INS PECTION OF LEASED ASSETS AND EVIDENCES THERE OFF, THE REVENUE AUTHORI TIES BRUSHED ASIDE THE REQUESTS MADE. THIS, ACCORDING TO US IS AGAINS T THE PRINCIPALS OF NATURAL JUSTICE, WHICH CAN ONLY BE REMEDIED BY REST ORING THE ISSUES/TRANSACTIONS TO THE FILE OF THE AO FOR FRESH ADJUDICATION. 52. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A ) AND DIRECT THE AO TO EXAMINE THE TRANSACTIONS WITH GALLEON LTD, TRIDE NT STEELS LTD., AND SUMAN MOTELS LTD. AFRESH, FOR THE ALLOWANCE AND CLA IM OF DEPRECIATION AS PER LAW AND JUDICIAL DECISIONS AS MENTIONED IN P RE PARA. 53. GROUND NO.1 IS THEREFORE ALLOWED FOR STATISTICA L PURPOSES. 54. GROUND NO. 2 RELATES TO DEDUCTION UNDER SECTION DEDUCTION U/S 80M. 55. AS ARGUED AND RELIED UPON BY THE AR BEFORE US I N THE DEPARTMENTAL APPEAL IN THE CASE OF DCIT VS M/S INDU STRIAL DEVELOPMENT BANK OF INDIA FOR AY 1992-93 VIDE ITAT MUMBAI I BENCH ORDER DATED 24 TH DECEMBER, 2002 IN ITA NO. 3249/BOM/1995 AND RELEVANT PORTION OF THE ORDER COVERING THE IMPUGNED ISSUE READS AS UNDER: THE ASSESSEE BANK ADVANCES LOANS TO ENTREPRENEURS AND THUS HELPS IN THE INDUSTRIAL DEVELOPMENT OF THE COUNTRY. DURING T HE YEAR UNDER APPEAL IN ADDITION TO EARNING INCOME FROM BANK OPERATIONS, IT EARNED DIVIDEND INCOME. FOR ALLOWING U/S 80M OF THE INCOME TAX ACT, 1961, THE INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 19 ASSESSING OFFICER DISALLOWED PROPORTIONATE EXPENSES FOR EARNING DIVIDEND INCOME AS PER PARA 19 OF PAGE 18 OF THE AS SESSMENT ORDER. THE ASSESSEE APPEALED TO THE LEARNED CIT(A) AND SUB MITTED THAT PROPORTIONATE EXPENSES ESTIMATED BY THE ASSESSING OF FICER WERE ON THE HIGH SIDE. THE LEARNED CIT(A) CONCURRED WITH THE FI NDINGS OF THE ASSESSING OFFICER AND HELD THAT THE ASSESSEE MUST HA VE INCURRED EXPENDITURE FOR EARNING DIVIDEND, BUT THE PROPORTIO NATE EXPENSES DISALLOWED BY THE ASSESSING OFFICER WERE ON THE HIGH SIDE. FOLLOWING THE DECISION OF THE TRIBUNAL IN THE CASE OF ICICI L TD. IN WHICH 1% DIVIDEND INCOME IS DEDUCTIBLE WHILE DETERMINING THE DEDUCTION U/S 80M OF THE ACT, THE LEARNED CIT(A) DIRECTED THE ASSESSING OFFICER TO RESTRICT THE DISALLOWANCE TO 1% ONLY. 7. THE LEARNED DEPARTMENTAL REPRESENTATIVE SUBMITTED T HAT THE ASSESSEE EARNED SUBSTANTIAL DIVIDEND INCOME, IT DID INCUR EXPENDITURE ON STAFF, STATIONERY ETC. FOR EARNING SUCH DIVIDEND AND WHILE THE LEARNED CIT(A) HAS UPHELD IN PRINCIPLE THE INCURRENCE OF SU CH EXPENSES, HIS DIRECTION FOR DISALLOWANCE OF ONLY 1% GROSS DIVIDEN D INCOME AS EXPENSES IS NOT JUSTIFIED AS IT IS ON THE LOWER SID E. 8. THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT EVEN 1% DISALLOWANCE UPHELD BY THE LEARNED CIT(A) IS ON THE HIGHER SIDE BECAUSE THE ASSESSEES BUSINESS WAS NOT TO EARN DIV IDEND INCOME AND THE MAIN ACTIVITY IS TO GIVE LOANS AND AS THE NAME ITSELF SUGGESTS, THE BANK IS ENGAGED IN THE INDUSTRIAL DEVELOPMENT OF TH E COUNTRY BY ADVANCING THOUSANDS OF CRORES TO THE ENTREPRENEURS. THE LOANS ADVANCED BY THE BANK DURING THE YEAR UNDER APPEAL S TOOD OVER 20,000 CRORES. HE SUBMITTED THAT BANK HAS AN INVESTMENT DE PARTMENT WHICH IS MANNED ENDED BY A SKELETON STAFF. HE PLACED RELIANC E ON THE DECISION OF THE TRIBUNAL IN THE CASE OF ICICI LTD. (SUPRA). 9. AFTER HEARING BOTH THE PARTIES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE LEARNED CIT(A). IN OUR VIEW, THE L EARNED CIT(A) HAS TAKEN A CORRECT VIEW WHICH IS IN CONSONANCE WITH TH E ORDER OF THE TRIBUNAL IN THE CASE OF ICICI LTD., REFERRED TO SUP RA. ACCORDINGLY, WE DECLINE TO INTERFERE. 56. AFTER GOING THROUGH THE RIVAL SUBMISSIONS AND C ASE LAWS CITED BY THE AR, IN ITA 3429/BOM/1996 ( SUPRA), WHICH SQUARELY COVERS THE IMPUGNED ISSUE, AND ACCORDINGLY RESPECTFULLY FOLLOW ING THE SAME, WE, SET ASIDE THE ORDER OF THE CIT(A) AND DELETE THE AD DITION AS MADE BY HIM AND ALLOW GROUND NO. 2 IN FAVOUR OF THE ASSESSE E AND AGAINST THE REVENUE. 57. IN THE RESULT, THE APPEAL OF THE ASSESSEE IN IT A 3369/MUM/2004 TREATED AS ALLOWED. INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 20 ITAS NO. :1951, 3922 & 3923/MUM/2006 AYS 94-95, 95- 96 & 96-97 : 58. THE INSTANT APPEALS ARE FILED AGAINST THE ORDER S OF CIT(A) XXVII, MUMBAI, DATED 23.12.2015, 23.02.2006 & 23.02.2006 FOR AYS 1994- 95, 1995-96 & 1996-97 RESPECTIVELY, SUSTAINING THE PENALTY, AS LEVIED BY THE AO U/S 271(1)(C) OF THE INCOME TAX ACT, 1961 . 59. SINCE ALL THE THREE APPEALS HAVE COMMON GROUNDS OF APPEAL, WE FOR THE SAKE OF CONVENIENCE AND BREVITY ARE DISPOSI NG OFF THE APPEALS THROUGH COMMON AND CONSOLIDATED ORDER. 60. SINCE WE HAVE DELETED THE ADDITIONS AND/OR SET ASIDE VARIOUS ISSUES INVOLVED IN THE APPEALS IN QUANTUM IN ASSESS MENT YEARS 1994- 95, 1995-96 AND 1996-97, THE PENALTIES AS LEVIED DO NOT HAVE ANY LEGS TO STAND. CONSIDERING THE ABOVE FACTS, WE SET ASIDE THE ORDERS OF THE CIT(A) IN THE THREE IMPUGNED YEARS AND DIRECT THE A O TO CANCEL THE PENALTIES AS LEVIED. 61. SINCE WE HAVE DELETED THE ADDITIONS AND/OR SET ASIDE VARIOUS ISSUES INVOLVED IN THE APPEALS IN QUANTUM, THE PENA LTIES AS LEVIED DO NOT HAVE ANY LEGS TO STAND. CONSIDERING THE ABOVE F ACTS, WE SET ASIDE THE ORDERS OF THE CIT(A) IN THE THREE IMPUGNED YEAR S AND DIRECT THE AO TO CANCEL THE PENALTIES AS LEVIED. 62. IN THE RESULT, APPEALS AS FILED BY THE ASSESSEE AGAINST THE LEVY OF PENALTY ARE ALLOWED. TO SUM-UP THE RESULTS OF THE ASSESSEES APPEALS: ITA NO. : 1839/MUM/2004 FOR AY 1994-95 STANDS ALLOW ED AS PER THE TERMS DIRECTED IN THE ORDER ITA NO. : 3369/MUM/2004 FOR AY 1995-96 STANDS ALLOW ED AS PER THE TERMS DIRECTED IN THE ORDER INDUSTRIAL DEVELOPMENT BANK OF INDIA ITA NO. 1839/MUM/2004 ITAS NO. 3369 TO 3370/MUM/2004 & ANOTHER THREE GROUP APPEALS 21 ITA NO. : 3370/MUM/2004 FOR AY 1996-97 STANDS ALLOW ED AS PER THE TERMS DIRECTED IN THE ORDER PENALTY APPEALS IN : ITA NO. : 1951/M/2006 AY 1994-95 IS ALLOWED ITA NO. : 3922/M/2006 AY 1995-96 IS ALLOWED ITA NO. : 3923/M/2006 AY 1996-97 IS ALLOWED ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH OCTOBER, 2014. SD/- SD/- (N.K. BILLAIYA) (VIVEK VARMA) ACCOUNTANT MEMBER JUDICIAL MEMBER MUMBAI, DATE: 29 TH OCTOBER, 2014 .1/ COPY TO:- 1) *-/ THE APPELLANT. 2) ./*-/ THE RESPONDENT. 3) THE CIT (A)-XII / XXVII, MUMBAI. 4) 9 III/CONCERNED___, MUMBAI / THE CIT-III/ CONCERNED ____,MUMBAI. 5) 8!:;.1 D , THE D.R. D BENCH, MUMBAI. 6) ;< = COPY TO GUARD FILE. 5+6 / BY ORDER [ >/?@ , DY. / ASSTT. REGISTRAR I.T.A.T., MUMBAI *BC? !.. * CHAVAN, SR. PS