M/S. ICICI LTD., MUMBAI V. THE DY CIT RG 3(1) FORMERLY (JT.CIT,RG.28),

ITA 3535/MUM/2004

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 79437 (ITAT-MUMBAI)
• Duration Of Justice: 10 year(s) 2 month(s) 18 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 25-07-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: J
• Next Hearing Date: 13-05-2014
• Assessment Year: 1996-1997
• Appeal Filed On: 07-05-2004
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: S D SHRIVASTAVA
• Assessee Lawyers: ARATHI VISSANJI
• Keywords: Depreciation
• Section: 234B; 32

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL J B ENCH, MUMBAI ! , ' #$ % % % % , , #$ & BEFORE SHRI N.K. BILLAIYA, ACCOUNTANT MEMBER AND SHRI VIVEK VARMA, JUICIAL MEMBER ./ I.T.A. NO.1881/MUM/2000 ( ' ' ' ' / ASSESSMENT YEAR :1993-94 ICICI LTD.,(ERSTWHILE SCICI LTD.), ZENITH HOUSE, KESHAVRAO KHADE MARG, OPP. RACE COURSE (GATE NO.5), MAHALAXMI, MUMBAI-400 034 PAN- AAACS 7278R / VS. THE JCIT, SPECIAL RANGE-28 AAYAKAR BHAVAN, MUMBAI-400 020 ./ I.T.A. NO.3708/MUM/2000 ( ' ' ' ' / ASSESSMENT YEAR :1995-96 ICICI BANK LTD., TAXATION DEPARTMENT, LAXMI COMMERCIAL COMPLEX, BEHIND NABARD BANK, 2 ND FLOOR, C WING, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 PAN-ASAACS 7278R / VS. THE JCIT, SPECIAL RANGE-28 AAYAKAR BHAVAN, MUMBAI-400 020 ./ I.T.A. NO.3535/MUM/2004 ( ' ' ' ' / ASSESSMENT YEAR :1996-97 ICICI BANK LTD., TAXATION DEPARTMENT, LAXMI TOWERS, BEHIND NABARD BANK, 2 ND FLOOR, C WING, BANDRA KURLA COMPLEX, / VS. THE JCIT, SPECIAL RANGE-28 AAYAKAR BHAVAN, MUMBAI-400 020 ICICI BANK 2 BANDRA (E), MUMBAI-400 051 PAN-AAACS 7278R ./ I.T.A. NO.3827/MUM/2005 ( ' ' ' ' / ASSESSMENT YEAR :1998-99 ICICI BANK LTD., TAXATION DEPARTMENT, LAXMI TOWERS, 2 ND FLOOR, C WING, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400 051 PAN-AAACI 2803C / VS. THE JCIT, SPECIAL RANGE-28 AAYAKAR BHAVAN, MUMBAI-400 020 ( () / APPELLANT ) .. ( *+() / RESPONDENT ) () , / APPELLANT BY: SHRI ARATHI VISSANJI *+() - , / RESPONDENT BY: SHRI S.D. SHRIVASTAVA - ./' / DATE OF HEARING :22.07.2014 01' - ./' / DATE OF PRONOUNCEMENT :25.07.2014 #2 / O R D E R PER N.K. BILLAIYA, AM: THESE FOUR APPEALS BY THE ASSESSEE ARE PREFERRED A GAINST THE ORDER OF THE LD. CIT(A) , MUMBAI. AS COMMON ISSUES WERE INVOLVED IN ALL THESE APPEALS, THEY WERE HEARD TOGETHER AND DISPOSE OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE AND BREVITY. ITA NO. 3827/M/00 A.Y. 1998-99 2. THE ASSESSEE HAS RAISED TWO SUBSTANTIVE GROUNDS OF APPEAL. GROUND NO. 1 RELATES TO THE DISALLOWANCE OF DEPRECIATION A MOUNTING TO RS. ICICI BANK 3 1,21,17,844/- IN RESPECT OF SALE AND LEASEBACK TRAN SACTIONS AND GROUND NO. 2 RELATES TO CHARGING OF INTEREST U/S. 234B AND 234C OF THE ACT. 3. THE ASSESSEE IS A NON-BANKING FINANCIAL INSTITUT ION IN WHICH PUBLIC ARE SUBSTANTIALLY INTERESTED. DURING THE YEAR UNDE R CONSIDERATION, THE ASSESSEE CLAIMED DEPRECIATION OF RS. 2,59,23,109/- OUT OF THIS DEPRECIATION, RS. 2,54,59.134/- WAS CLAIMED ON LEAS ED ASSETS. DURING THE YEAR, THE ASSESSEE ACQUIRED ASSETS WORTH RS. 17.21 CRORES AND GAVE THEM ON LEASE TO VARIOUS CONCERNS. OUT OF THIS, ASSETS WORTH RS. 9.69 CRORES WERE INVOLVED IN SALE AND LEASE BACK TRANSACTIONS AND THE REMAINING AMOUNT OF RS. 7.51 CRORES WAS INVOLVED IN OTHER LEA SES. AFTER EXAMINING THE NATURE OF TRANSACTION, THE AO FINALLY CONCLUDED THAT DEPRECIATION OF RS. 2,54,59,134/- CLAIMED BY THE ASSESSEE IS NOT AL LOWABLE. HOWEVER, OUT OF THE LEASE RENTAL OFFERED AS INCOME, THE AO FOUND THAT CAPITAL COMPONENT WORKS OUT TO RS. 4,47,674/-, THE SAME WAS REDUCED FROM THE INCOME HAVING HELD TO BE THE TRANSACTIONS OF LEASE AS FINANCE TRANSACTIONS. 4. AGGRIEVED BY THIS, THE ASSESSEE CARRIED THE MATT ER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. 5. THE ASSESSEE IS BEFORE US AGAINST THIS FINDINGS OF THE LD. CIT(A). 6. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE SUBM ITTED THAT IDENTICAL ISSUES WERE THERE IN ASSESSMENT YEARS 1996-97 AND 1 997-98 AND THE TRIBUNAL IN ITA NOS. 3643 & 3644/M/2001 HAS CONSIDE RED SIMILAR GRIEVANCE AND WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE, THE TRIBUNAL HAS FOLLOWED THE DECISION OF THE HONBLE S UPREME COURT IN THE CASE OF ICDS VS CIT 350 ITR 527, DELHI HIGH COURT IN THE CASE OF CIT VS COSMOS FILMS 338 ITR 266 AND THE TRIBUNAL BOMBAY BENCH IN THE CASE OF DEVELOPMENT CREDIT BANK LTD. IN ITA NOS. 30 06/M/01 & ICICI BANK 4 4892/M/03 AND ALSO THE DECISION OF THE TRIBUNAL BOM BAY BENCH IN THE CASE OF SICOM VS DCIT IN ITA NOS. 7901 & 7955/M/03 AND IN THE CASE OF L&T IN ITA NO. 2200 & 2803/M/2000 AND 2890 &3533 /M/01. 7. PER CONTRA, THE LD. DEPARTMENTAL REPRESENTATIVE SUPPORTED THE FINDINGS OF THE LOWER AUTHORITIES. 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE LOWE R AUTHORITIES AND THE RELEVANT MATERIAL EVIDENCES BROUGHT ON RECORD B EFORE US. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIONS RELIED UPON BY BOTH THE PARTIES. IN SO FAR AS THE ISSUE RELATING TO THE CLAIM OF DEPRECIAT ION ON LEASED TRANSACTIONS IS CONCERNED, WE FIND FORCE IN THE SUBMISSION OF TH E LD. SR. COUNSEL THAT THE HONBLE SUPREME COURT IN THE CASE OF ICDS VS. C IT, 350 ITR 527 (SUPRA) HAD THE OCCASION TO CONSIDER THE QUESTION WHETHER THE ASSESSEE IS ENTITLED TO DEPRECIATION O N VEHICLES FINANCED BY IT WHICH IS NEITHER OWNED BY THE ASSESS EE NOR USED BY THE ASSESSEE? THE HONBLE SUPREME COURT AFTER PERUSING THE LEASE AGREEMENT AND OTHER RELATED FACTORS HELD THAT THE LESSOR IS THE OWNER O F THE VEHICLES. AS AN OWNER, IT USED THE ASSETS IN THE COURSE OF ITS BUSI NESS SATISFYING BOTH THE REQUIREMENTS OF SEC. 32 OF THE ACT AND HENCE IS ENT ITLED TO CLAIM DEPRECIATION. 9. A SIMILAR VIEW WAS TAKEN BY THE HONBLE DELHI H IGH COURT IN THE CASE OF COSMOS FILMS (SUPRA) WHEREIN THE HONBLE DE LHI HIGH COURT HAS CONSIDERED THE IMPLICATIONS OF SEC. 19 OF SALE OF G OODS ACT, 1930. 10. THE TRIBUNAL, MUMBAI BENCH IN THE CASE OF DEVE LOPMENT CREDIT BANK LTD. (SUPRA) HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME ICICI BANK 5 COURT IN THE CASE OF ICDS (SUPRA) AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF COSMOS FILMS (SUPRA) AND ALLOW ED THE CLAIM OF DEPRECIATION. 11. THE TRIBUNAL, MUMBAI BENCH, IN THE CASE OF L&T (SUPRA) HAS CONSIDERED A SIMILAR ISSUE AT PARA 27 OF ITS ORDER AND AT PARA 28 FOLLOWED THE FINDINGS OF THE HONBLE SUPREME COURT IN THE CA SE OF ICDS (SUPRA) AND ALSO OF THE CO-ORDINATE BENCH IN THE CASE OF DE VELOPMENT CREDIT BANK LTD. (SUPRA) AND ALLOWED THE CLAIM OF DEPRECIA TION ON SALE OF LEASE BACK ASSETS. RESPECTFULLY FOLLOWING THE DECISIONS MENTIONED HER EINABOVE, WE DIRECT THE AO TO ALLOW DEPRECIATION. GROUND NO. 1 IS ACCORDINGLY ALLOWED. 12. GROUND NO. 2 RELATES TO CHARGING OF INTEREST U/ S. 234B AND 234C OF THE ACT. LEVY OF INTEREST U/S. 234B OF THE ACT WOU LD BE CONSEQUENTIAL TO OUR FINDINGS GIVEN FOR GROUND NO. 1 AND IN SO FAR A S LEVY OF INTEREST U/S. 234C IS CONCERNED, WE DIRECT THE AO TO CHARGE INTER EST AS PER THE PROVISIONS OF LAW ON THE RETURNED INCOME OF THE ASS ESSEE. 13. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ITA NO. 1881/M/2000- A.Y. 1993-94 14. THE SOLE GRIEVANCE OF THE ASSESSEE RELATES TO T HE DISALLOWANCE OF DEPRECIATION ON ASSET LEASED TO GUJARAT ELECTRICITY BOARD. 15. A PERUSAL OF THE ASSESSMENT ORDER SHOWS THAT TH E CLAIM OF DEPRECIATION HAS BEEN DISALLOWED FOR SIMILAR REASON S AS THEY WERE FOR A.Y. 1998-99. WE HAVE CONSIDERED THIS ISSUE QUA IT A NO. 3827/M/05 ICICI BANK 6 WHEREIN WE HAVE DECIDED THIS ISSUE IN FAVOUR OF THE ASSESSEE FOLLOWING THE DECISIONS OF THE HONBLE SUPREME COURT AND HIGH COURTS AND ALSO THE TRIBUNAL MUMBAI BENCHES. RESPECTFULLY FOLLOWING OU R OWN FINDINGS IN ITA NO. 3827/M/05, THE AO IS DIRECTED TO ALLOW THE CLAIM OF DEPRECIATION ON ASSET LEASED TO GUJARAT ELECTRICITY BOARD. 16. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS ALLOWED. ITA NO. 3535/M/04 A.Y. 1996-97 17. THE ASSESSEE HAS RAISED THREE SUBSTANTIVE GROUN DS OF APPEAL. GROUND NO. 1 RELATES TO THE DISALLOWANCE OF PRELIMI NARY EXPENSES OF RS. 25,75,848/-. GROUND NO. 2 RELATES TO DISALLOWANCE OF EXPENSES INCURRED FOR EARNING DIVIDEND OF RS. 4,88,27,156 AND GROUND NO. 3 RELATES TO THE DISALLOWANCE OF DEPRECIATION ON LEASED ASSETS OF RS . 30,77,89,670/-. 18. WHILE SCRUTINIZING THE RETURN OF INCOME, THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 35D AMOUNTING T O RS. 25,75,848/-. THE AO NOTICED THAT ALL THESE EXPENDITURES HAVE BEE N INCURRED AFTER THE COMMENCEMENT OF THE BUSINESS. THE AO WAS OF THE OP INION THAT AS PER SEC. 35D OF THE ACT, SUCH EXPENDITURES ARE ADMISSIB LE ONLY IF INCURRED IN CONNECTION WITH EXPANSION OF INDUSTRIAL UNDERTAKING S OR SETTING UP OF NEW INDUSTRIAL UNDERTAKINGS. THE AO FOLLOWING THE DECI SION OF THE HONBLE SUPREME COURT IN THE CASE OF BROOK BOND (INDIA) LTD . 225 ITR 792 DISALLOWED THE CLAIM. 19. THE ASSESSEE CARRIED THE MATTER BEFORE THE LD. CIT(A) BUT WITHOUT ANY SUCCESS. ICICI BANK 7 20. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE FAI RLY CONCEDED THAT THIS ISSUE HAS BEEN DECIDED AGAINST THE ASSESSEE IN A.Y. 1992-93 TO 1994-95 VIDE ITA NOS. 214 & 179/M/1997. ON THIS STATEMENT OF THE LD. COUNSEL, WE CONFIRM THE FINDINGS OF THE LD. CIT(A) AND DISMI SS GROUND NO. 1. 21. GROUND NO. 2 RELATES TO DISALLOWANCE OF EXPEND ITURE INCURRED FOR EARNING DIVIDEND. 22. DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS , THE AO NOTICED THAT THE ASSESSEE HAS CLAIMED DEDUCTION U/S. 80M AM OUNTING TO RS. 7,69,28,106/- ON WHICH THE ASSESSEE CLAIMED THAT NO EXPENDITURE HAS BEEN INCURRED ON EARNING THIS DIVIDEND AND DEDUCTION U/ S. 80M IS TO BE ALLOWED ON THE GROSS DIVIDEND. 23. THE ASSESSEE SUBSTANTIATED ITS SUBMISSION BY ST ATING THAT IN EARLIER YEARS THE APPELLATE AUTHORITY HAS HELD THAT DISALL OWANCE OF RS. 1,00,000/- AS EXPENDITURE FOR THE PURPOSE OF SEC. 80M WOULD ME ET THE ENDS OF JUSTICE. THE AO DID NOT ACCEPT THE CLAIM OF THE AS SESSEE AND WENT ON TO COMPUTE THE DISALLOWANCE AT RS. 7,69,281/-. 24. AGGRIEVED, ASSESSEE CARRIED THE MATTER BEFORE T HE LD. CIT(A). THE LD. CIT(A) CONFIRMED THE DISALLOWANCE FOLLOWING THE ORDER OF ASSESSMENT YEAR 1995-96. 25. BEFORE US, THE LD. COUNSEL FOR THE ASSESSEE STA TED THAT THIS ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL FOR A.Y. 1995-96. 26. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE AUT HORITIES BELOW. WE HAVE ALSO GONE THROUGH THE DECISION OF THE TRIBUNAL FOR A.Y. 1995-96 REPORTED IN 115 ITD 25 WHEREIN WE FIND THAT THE TRI BUNAL HAS RELIED UPON ICICI BANK 8 THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF CIT VS EMRALD CO. LTD. 284 ITR 586 AND AT PARA 22 OF ITS ORDER, THE TRIBUNAL FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT HELD THAT NO DISALLOWANCE CAN BE MADE U/S. 80M OF THE ACT. AS N O DISTINGUISHING FACTS HAVE BEEN BROUGHT BEFORE US, RESPECTFULLY FOL LOWING THE FINDINGS OF THE TRIBUNAL (SUPRA), WE HOLD ACCORDINGLY. 27. GROUND NO. 3 RELATES TO DISALLOWANCE OF DEPRECI ATION ON LLOYD STEELS. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 3827/M/2000 FOR A.Y. 1998-99. FACTS AND CIRCUMSTAN CES BEING IDENTICAL, RESPECTFULLY FOLLOWING OUR OWN FINDING FOR A.Y. 199 8-99 WE DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION. ITA NO.3708/M/2000 A.Y. 1995-96 28. THE ASSESSEE HAS RAISED 5 SUBSTANTIVE GROUNDS O F APPEAL. GROUND NO. 1 RELATES TO DISALLOWANCE OF DEPRECIATION ON AS SETS LEASED TO M/S. LLOYD STEELS. 29. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO. 3827/M/2000 FOR A.Y. 1998-99. FACTS AND CIRCUMSTAN CES BEING IDENTICAL, RESPECTFULLY FOLLOWING OUR OWN FINDING FOR A.Y. 199 8-99 WE DIRECT THE AO TO ALLOW THE CLAIM OF DEPRECIATION. 30. GROUND NO. 2 RELATES TO DISALLOWANCE OF PRELIMI NARY EXPENSES. AN IDENTICAL ISSUE HAS BEEN CONSIDERED BY US IN ITA NO . 3535/M/2004 FOR A.Y. 1996-97. FACTS AND CIRCUMSTANCES BEING IDENTI CAL, RESPECTFULLY FOLLOWING OUR OWN FINDING FOR A.Y. 1996-97, WE DISM ISS THIS GROUND RAISED BY THE ASSESSEE. ICICI BANK 9 31. GROUND NO. 3 HAS NOT BEEN PRESSED BY THE LD. CO UNSEL THEREFORE IT IS DISMISSED AS NOT PRESSED. 32. GROUND NO. 4 RELATES TO THE DISALLOWANCE OF EXP ENSES FOR EARNING DIVIDEND INCOME. AN IDENTICAL ISSUE HAS BEEN CONSID ERED BY US IN ITA NO. 3535/M/2004 FOR A.Y. 1996-97. FACTS AND CIRCUM STANCES BEING IDENTICAL, RESPECTFULLY FOLLOWING OUR OWN FINDING F OR A.Y. 1996-97 WE DIRECT THE AO TO ALLOW THE CLAIM OF DIVIDEND INCOME . 33. GROUND NO. 5 RELATES TO CHARGING OF INTEREST U/ S. 234B AND 234C OF THE ACT. . LEVY OF INTEREST U/S. 234B OF THE ACT W OULD BE CONSEQUENTIAL. THE AO IS DIRECTED TO CHARGE INTEREST U/S. 234C OF THE ACT AS PER THE PROVISIONS OF LAW ON THE RETURNED INCOME OF THE ASS ESSEE. THIS GROUND OF THE ASSESSEE IS PARTLY ALLOWED. 34. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IN ITA NO. 3827/M/00, 3535/M/04 AND 3708/M/00 IS PARTLY ALLOWE D AND ITA NO. 1881/M/2000 FOR A.Y. 1993-94 IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 25 TH JULY, 2014 . #2 - 1' ' 3 4#5 25.7.2014 1 - 6 SD/- SD/- (VIVEK VARMA ) (N.K. BILLAIYA) #$ / JUDICIAL MEMBER ' #$ / ACCOUNTANT MEMBER MUMBAI; 4# DATED : 25.7.2014 . . ./ RJ , SR. PS ICICI BANK 10 #2 #2 #2 #2 - -- - *. *. *. *. 7'. 7'. 7'. 7'. / COPY OF THE ORDER FORWARDED TO : 1. () / THE APPELLANT 2. *+() / THE RESPONDENT. 3. 8 ( ) / THE CIT(A)- 4. 8 / CIT 5. 96 *. , , / DR, ITAT, MUMBAI 6. 6: ; / GUARD FILE. #2 #2 #2 #2 / BY ORDER, +. *. //TRUE COPY// < << < / = = = = (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI