INDUSTRIAL INVESTMENT TRUST LTD, MUMBAI V. ACIT CIR 2(2), MUMBAI

ITA 4011/MUM/2010

• Counselvise Citation: [2012] 119 COUNSELVISE.COM (IT) 8657 (ITAT-MUMBAI)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 10-10-2012
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: I
• Next Hearing Date: 17-09-2012
• Assessment Year: 1996-1997
• Appeal Filed On: 18-05-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Keywords: Depreciation; Principle of natural justice; Corroborative evidences
• Section: 143(3); 234B

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI I BENCH MUMBAI BENCHES, MUMBAI BEFORE SHRI RAJENDRA SINGH , AM & SHRI VIJAY PAL R AO, JM ITA NO. 4013 & 4011/MUM/2010 (ASST YEAR 1995-96 & 1996-97 ) INDUSTRIAL INVESTMENT TRUST LTD RAJ BAHADUR MANSION 2 ND FLOOR 28 TH MUMBAI SAMACHAR MARG, FORT MUMBAI 23 VS THE ASST COMMR OF INCOME TAX CIR 2(2), MUMBAI (APPELLANT) (RESPONDENT) PAN NO. AAAC11262R ASSESSEE BY SH VIJAY MEHTA REVENUE BY SH K G KUTTY DT.OF HEARING 17 TH SEPT 2012 DT OF PRONOUNCEMENT 10 TH , OCT 2012 PER VIJAY PAL RAO, JM THESE APPEALS BY THE ASSESSEE ARE DIRECTED AGAINS T THE COMPOSITE ORDER DATED 2.2.2010 OF THE CIT(A) FOR THE AY 1995 -96 AND 1996-97. 2 THE ASSESSEE HAS RAISED COMMON GROUND IN THESE AP PEALS AS UNDER: 1. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND FACTS IN NOT APPRECIATING THAT THE ORDER PASSED BY T HE ASSESSING OFFICER U/S. 143(3) OF THE ACT IS INCORRECT AND BAD IN LAW. 2. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) H AS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE ASSESSMENT ORDER WAS PASSED AND THE APPEAL WAS DISMISSED WITHOUT COMPLYING WITH THE PRIN CIPLES OF NATURAL JUSTICE. 3. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN CONFIRMING THE DISALLOWANCE OF DEPRECIATION OF RS. 24,64,450/- ON ASSETS LEASED TO PRESTIGE FOODS LTD. A. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE SALE AND L EASE BACK TRANSACTION WAS NOT THE FINANCE TRANSACTION. B. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPRECIATING THAT THE ASSESSING OFFICER HAS NOT FOLLOWED THE DIRECTIONS OF HONBLE INCOME-TAX APPEL LATE TRIBUNAL AND PASSED THE ORDER WITHOUT ASSIGNING ANY REASONS THEREOF . ITA NO. 4013 & 4011/MUM/2010 INDUSTRIAL INVESTMENT TRUST LTD 2 C. WITHOUT PREJUDICE, THE LEARNED COMMISSIONER OF INCO ME-TAX (APPEALS) HAS ERRED IN LAW AND IN FACTS IN NOT APPR ECIATING THAT THE ASSESSING OFFICER OUGHT NOT TO HAVE TAXED THE LEASE RENTALS EARNED ON THE SAID LEASED ASSETS. 4. THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) H AS ERRED IN LAW AND IN FACTS IN CONFIRMING THE LEVY OF INTEREST U/S. 234A, 234B AND 220(2) OF THE ACT. 3 IN THE FIRST ROUND OF LITIGATION, THE ISSUE RAISE D BEFORE THIS TRIBUNAL BY THE ASSESSEE WAS REGARDING THE LEASE TRANSACTION WITH P RESTIGE FOODS LTD AND RAJASTHAN ELECTRICITY BOARD TREATED BY THE ASSESSING OFFICER AS SHAM AND THEREBY DISALLOWED THE DEPRECIATION ON LEASED ASSETS. DURING THE HEAR ING BEFORE THIS TRIBUNAL, BOTH THE PARTIES HAD AGREED THAT THE RELEVANT ISSUE IS COVER ED BY THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN THE CASE OF MID EAST PORT FOLIO MANAGEMENT LTD VS DCIT REPORTED IN 87 ITD 537. CONSEQUENTLY, THIS TRIBUN AL, VIDE ITS ORDER DATED 9 TH SEPT 2004 REMITTED THE ISSUE WITH RESPECT TO LEASE TRANSAC TION WITH PRESTIGE FOODS LTD TO THE RECORD OF THE ASSESSING OFFICER WITH THE DIRECTION THAT THE SAME MAY BE RE- EXAMINED AND RECONSIDERED IN THE LIGHT OF THE DIREC TIONS AND GUIDELINES CONTAINED IN THE CASE OF MID EAST PORTFOLIO MANAGEMENT LTD (SUPR A). THE ASSESSING OFFICER, IN THE PROCEEDINGS CONSEQUENT TO THE DIRECTIONS OF THIS T RIBUNAL HAS AGAIN DISALLOWED THE DEPRECIATION CLAIMED BY THE ASSESSEE ON THE LEASED ASSETS TO M/S PRESTIGE FOODS LTD, WHICH WAS CONFIRMED BY THE CIT(A) VIDE IMPUG NED ORDER. 4 BEFORE US, THE LD AR OF THE ASSESSEE HAS SUBMITTE D THAT THE ASSESSING OFFICER HAS NOT EXAMINED THE DETAILS AS WELL AS THE TERMS AND CONDITIONS OF THE LEASE AGREEMENT AND DISALLOWED THE CLAIM OF THE ASSESSEE SUMMARILY. HE HAS FURTHER SUBMITTED THAT THE CIT(A) HAS ALSO NOT DEALT WITH T HE SUBMISSIONS AND CONTENTIONS RAISED BY THE ASSESSEE WHILE DECIDING THE ISSUE IN THE SECOND ROUND OF LITIGATION. THE LD AR HAS FURTHER SUBMITTED THAT THE CIT(A) HAS OBSERVED THAT THE ENTIRE EXERCISE ITA NO. 4013 & 4011/MUM/2010 INDUSTRIAL INVESTMENT TRUST LTD 3 OF PURCHASE AND LEASE BACK HAS BEEN DONE AS COLOURA BLE DEVICE FOR THE PURPOSE OF TAX EVASION WHICH WAS NOT DOUBTED IN THE FIRST ROUN D OF LITIGATION. THEREFORE, THE LD AR HAS SUBMITTED THAT WHEN THE ASSESSEE HAS GIVEN A LL THE DETAILS AND SUPPORTING EVIDENCE TO SHOW THE GENUINENESS OF THE TRANSACTION S, THEN WITHOUT GIVING OPPORTUNITY TO THE ASSESSEE, THE CIT(A) HAS EXPRESS ED THE VIEW OF COLOURABLE DEVICE WHICH IS IN VIOLATION OF NATURAL JUSTICE. THE LD AR HAS REFERRED THE CONTENTION AS RAISED IN PARA 5 OF THE IMPUGNED ORDER AND SUBMITTE D THAT WHILE DECIDING THE ISSUE, THE CIT(A) HAS NOT CONSIDERED THE CONTENTION NOR AN OPPORTUNITY WAS GIVEN TO THE ASSESSEE TO REFUTE THE OBSERVATIONS REGARDING COLO URABLE DEVICE. THUS, THE LD AR PLEADED THAT THE MATTER IS REQUIRED TO BE EXAMINED BY CONSIDERING THE RELEVANT EVIDENCES ON THE POINT OF GENUINENESS OF THE TRANSA CTIONS, WHICH WAS NOT DOUBTED BY THE ASSESSING OFFICER AND EVEN BY THE CIT(A) IN THE FIRST ROUND OF LITIGATION. HE HAS FURTHER SUBMITTED THAT THE MATTER IS ALSO REQUIRED TO BE CONSIDERED IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THIS TRIBUNAL IN T HE CASE OF INDUS-IND BANK REPORTED IN 135 ITD 165. 4.1 ON THE OTHER HAND, THE LD DR HAS RELIED UPON TH E ORDERS OF THE AUTHORITIES BELOW. 5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND REL EVANT MATERIAL ON RECORD. IN THE FIRST ROUND OF LITIGATION, THE TRIBUNAL REMANDE D THE ISSUE TO THE RECORD OF THE ASSESSING OFFICER FOR EXAMINING THE ISSUE IN THE LI GHT OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF MID EAST PORTFOLIO MANAGEMENT LTD (SUPRA). THE ASSESSING OFFICER PASSED A SUMMARY ORDER WHEREBY DISALLOWED C LAIMED BY THE ASSESSEE WITHOUT DISCUSSING EVEN THE FACTS OF THE CASE IN PA RA 3: ITA NO. 4013 & 4011/MUM/2010 INDUSTRIAL INVESTMENT TRUST LTD 4 3. I HAVE GONE THROUGH THE DECISION OF INCOME TAX AP PELLATE TRIBUNAL MUMBAI SPECIAL BENCH IN THE CASE OF M/S MID EAST PORTFOLIO MANAGEMENT LTD VS DCIT 87 ITD 537 AND HOLD THAT THE RATIO OF THE DECISION IN THE SAID CASE SQUARELY APPLIES IN THE CASE OF THE ASSESSEE. ACCORDINGLY, I TAKE THE VIEW THAT THE SALE AND LEASE BACK TRANSACTION ADOPTED BY THE ASSESSEE IN THIS CASE IS NOTHING BUT A FINANCE TRANSACTION AND HENCE THE DEPRECATION CLAIMED BY THE ASSESSEE OF ` 24,64,450/- ON THE LEASED ASSETS TO M/S PRESTIGE FO ODS LTD WAS CORRECTLY DISALLOWED BY THE ASSESSING OFFICER IN HI S ORDER DT 15.3.1999. 5.1 BEFORE THE CIT(A), THE ASSESSEE MADE A DETAILED SUBMISSION AND ARGUMENTS IN PARA 5 TO 5.4. THE CIT(A) CONFIRMED THE ACTION OF THE ASSESSING OFFICER BY OBSERVING THAT THE ASSESSING OFFICER HAS RE-EXAMINED THE MATT ER IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF MI D EAST PORTFOLIO MANAGEMENT LTD (SUPRA) AND FOUND THAT THE DECISION OF THE SPECIAL BENCH IS FULLY APPLICABLE TO THE FACTS OF THE PRESENT CASE IN PARA 6 AS UNDER: 6. I HAVE CAREFULLY CONSIDERED THE ABOVE FACTS. IT IS NOTICED THAT THE MATTER WAS TO BE RE-EXAMINED BY THE ASSESSING OFFICER IN TH E LIGHT OF DECISIONS IN THE CASE OF MID EAST PORTFOLIO MANAGEMENT LTD VS DCIT. THE ASSESSING OFFICER FOUND THAT THE DECISION OF THE SPECIAL BENCH WAS FU LLY APPLICABLE TO THE FACTS OF THE CASE. TOO MUCH EMPHASIS IS BEING LAID BY THE APPELLANT ON THE GENUINENESS OF THE TRANSACTION RATHER THAN EXACT NAT URE OF THE TRANSACTION. THE CONCLUSION OF THE ASSESSING OFFICER IS THAT THE SAID TRANSITION IS A MERE FINANCIAL LEASE. THE APPELLANT HAS NOT BEEN ABLE TO REFUTE SUCH FINDING OF THE ASSESSING OFFICER. 6 AS IT IS OBSERVED BY THE CIT(T) THAT TOO MUCH EMP HASIS IS GIVEN BY THE ASSESSEE ON THE GENUINENESS OF THE TRANSACTION RATH ER THAN EXACT NATURE OF THE TRANSACTION.; WHEREAS THE SAID TRANSACTION IS MERE FINANCIAL LEASE. ON THE CONTRARY, THE CIT(A) IN PARA 6.1 HAS ALSO OBSERVED THAT THE F OLLOWING FEATURES OF THE CASE MAKE IT ABUNDANTLY CLEAR THAT ENTIRE EXERCISE HAS B EEN DONE AS COLOURABLE DEVICE FOR THE PURPOSE OF TAX AVOIDANCE. THIS OBSERVATIO NS OF THE CIT(A) DEPARTURE FROM THE OBSERVATION MADE IN PARA 6. ITA NO. 4013 & 4011/MUM/2010 INDUSTRIAL INVESTMENT TRUST LTD 5 6.1 SINCE THE ARGUMENTS AND THE CONTENTIONS RAISED BY THE ASSESSEE IN DETAIL WERE NOT PROPERLY DEALT WITH BY THE CIT(A) AND PART ICULARLY THE TERMS AND CONDITIONS OF THE AGREEMENT TO FIND OUT THE REAL NATURE OF T HE TRANSACTION WHETHER IT IS A FINAL LEASE OR A REAL LEASE TRANSACTION; THEREFORE, THIS MATER IS REQUIRED TO BE RECONSIDERED IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH I N THE CASE OF INDUS-IND BANK (SUPRA). ACCORDINGLY, IN THE INTEREST OF JUSTICE, WE REMIT T HIS ISSUE TO THE RECORD OF THE CIT(A) TO RECONSIDER AND DECIDE THE SAME AFTER CONSIDERING A LL THE RELEVANT FACTS WITH RESPECT TO THE NATURE OF THE TRANSACTION AS WELL AS IN THE LIGHT OF THE DECISION OF THE SPECIAL BENCH IN THE CASE OF INDUS-IND BANK (SUPRA). 7 GROUND NO.4 IS REGARDING LEVY OF INTEREST, WHICH IS CONSEQUENTIAL IN NATURE AND THEREFORE, DOES NOT REQUIRE ANY ADJUDICATION. 8 IN THE RESULT, THE APPEALS FILED BY THE ASSESSEE ARE ALLOWED FOR STATISTICAL PURPOSE. ORDER PRONOUNCED IN THE OPEN COURT ON THE 10 TH DAY OF OCT 2012. SD/- SD/- ( RAJENDRA SINGH ) ACCOUNTANT MEMBER ( VIJAY PAL RAO ) JUDICIAL MEMBER PLACE: MUMBAI : DATED: 10 TH , OCT 2012 RAJ* ITA NO. 4013 & 4011/MUM/2010 INDUSTRIAL INVESTMENT TRUST LTD 6 COPY FORWARDED TO: 1 APPELLANT 2 RESPONDENT 3 CIT 4 CIT(A) 5 DR /TRUE COPY/ BY ORDER DY /AR, ITAT, MUMBAI