DCIT, New Delhi V. M/s. Bax Global India (P) Ltd, New Delhi

ITA 439/DEL/2010

• Counselvise Citation: 43920114 RSA 2010
• Duration Of Justice: 2 year(s) 1 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 16-03-2012
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 05-03-2012
• Assessment Year: 2005-2006
• Appeal Filed On: 01-02-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Assessee Lawyers: J S KOCHAR
• Keywords: Depreciation; Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL IN THE INCOME TAX APPELLATE TRIBUNAL DELHI DELHI DELHI DELHI BENCH BENCH BENCH BENCH A AA A : NEW DELHI : NEW DELHI : NEW DELHI : NEW DELHI BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G. BEFORE SHRI G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND VICE PRESIDENT AND SHRI SHRI SHRI SHRI CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG, JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER , JUDICIAL MEMBER ITA NO. ITA NO. ITA NO. ITA NO.439/DEL/2010 439/DEL/2010 439/DEL/2010 439/DEL/2010 ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR ASSESSMENT YEAR : : : : 2005 2005 2005 2005- -- -06 0606 06 DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF DEPUTY COMMISSIONER OF INCOME TAX, INCOME TAX, INCOME TAX, INCOME TAX, CIRCLE CIRCLE CIRCLE CIRCLE- -- -2(1), 2(1), 2(1), 2(1), NEW NEW NEW NEW DELHI. DELHI. DELHI. DELHI. VS. VS. VS. VS. M/S BAX GLOBAL INDIA (P) LTD., M/S BAX GLOBAL INDIA (P) LTD., M/S BAX GLOBAL INDIA (P) LTD., M/S BAX GLOBAL INDIA (P) LTD., (NOW KNOWN AS SCHENKER INDIA (NOW KNOWN AS SCHENKER INDIA (NOW KNOWN AS SCHENKER INDIA (NOW KNOWN AS SCHENKER INDIA PVT.LTD.), PVT.LTD.), PVT.LTD.), PVT.LTD.), 93 9393 93- -- -94, KAPASAHERA, 94, KAPASAHERA, 94, KAPASAHERA, 94, KAPASAHERA, NEW DELHI NEW DELHI NEW DELHI NEW DELHI 110 037. 110 037. 110 037. 110 037. PAN : AAACB0697B. PAN : AAACB0697B. PAN : AAACB0697B. PAN : AAACB0697B. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI ALOK SINGH, SR.DR. RESPONDENT BY : SHRI J.S.KOCHAR, CA. ORDER ORDER ORDER ORDER PER G. PER G. PER G. PER G.D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, D.AGRAWAL, VP VPVP VP : : : : THIS APPEAL BY THE REVENUE IS FILED AGAINST THE ORDER OF LEARNED CIT(A)-V, NEW DELHI DATED 26 TH NOVEMBER, 2009 FOR THE AY 2005-06. 2. GROUND NO.1 OF THE REVENUES APPEAL READS AS UNDER: - ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT (A) HAS ERRED IN DELETING ADDITION OF RS.11,74,000/- ON A CCOUNT OF DISALLOWANCE OF DEPRECIATION ON LEASED ASSETS BY IGNORING THE DECISION OF THE APEX COURT IN THE CASE O F M/S ASIA BROWN BOVERI LTD., WHICH WAS CLEARLY APPLICABLE IN THIS CASE. ITA-439/DEL/2010 2 3. AT THE TIME OF HEARING BEFORE US, IT IS STATED BY T HE LEARNED DR THAT DURING THE ACCOUNTING YEAR RELEVANT TO ASSESSMENT YEAR UNDER CONSIDERATION, THE ASSESSEE COMPANY LEASED OUT CERTAIN ASSE TS ON FINANCIAL LEASE BASIS. HOWEVER, THE ASSESSEE ALSO CLAIME D DEPRECIATION ON THOSE ASSETS. THAT ADMITTEDLY, ON THE FINANCIAL LEA SE, THE DEPRECIATION IS NOT PERMISSIBLE AND, THEREFORE, THE ASSE SSING OFFICER RIGHTLY DISALLOWED THE DEPRECIATION ON THE ASSETS WHICH ARE GIVEN ON THE BASIS OF FINANCIAL LEASE. IN SUPPORT OF THIS CONTEN TION, HE RELIED UPON THE DECISION OF HONBLE APEX COURT IN THE CASE O F ASEA BROWN BOVERI LTD. VS. INDUSTRIAL FINANCE CORPN. OF INDIA 154 TAXMAN 512. THAT THE LEARNED CIT(A), WITHOUT PROPERLY APPRECIAT ING THE FACTS OF THE CASE, DIRECTED TO ALLOW THE DEPRECIATION TO THE ASSESSEE . HE, THEREFORE, SUBMITTED THAT THE ORDER OF THE LEARNED CIT(A) SHOUL D BE REVERSED AND THAT OF THE ASSESSING OFFICER SHOULD BE RESTORED. 4. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER HA ND, STATED THAT IN THE BOOKS OF ACCOUNT, THE ASSESSEE HAS ACCOUNTED FOR THE TRANSACTION ON THE BASIS OF FINANCIAL LEASE AND, THEREF ORE, NO DEPRECIATION WAS CLAIMED IN THE BOOKS OF ACCOUNT AND THE LEASE RENT OF `36.14 LAKHS WAS CREDITED TO THE PROFIT & LOSS ACCOUNT WHICH WAS THE FINANCIAL CHARGES (INTEREST) ACCRUED TO THE ASSESSEE FROM SUCH FINANCIAL LEASE. HOWEVER, IN THE COMPUTATION OF INCOME, THE A SSESSEE OFFERED THE INCOME OF GROSS LEASE RENT AND ALSO CLAIMED THE DEP RECIATION. THUS, IN THE COMPUTATION OF INCOME, THE ASSESSEE DISCLOSED THE INCOME AS IT WAS AN OPERATIVE LEASE. THAT THE INCOME DISCLOSE D BY THE ASSESSEE AS PER COMPUTATION OF INCOME WAS MORE THAN THE I NCOME CHARGEABLE TO TAX AS FINANCE LEASE. THAT IF THE ASSESSI NG OFFICER TREATED THE TRANSACTION AS FINANCE LEASE, HE SHOULD HAV E CONSIDERED THE LEASE RENT ALSO ON THE BASIS OF FINANCE LEASE AND NO T THE GROSS LEASE RENT WHICH INCLUDED THE PART OF THE SALE CONSIDE RATION OF THE ASSET ALSO. HE, THEREFORE, SUBMITTED THAT THE ASSESSING OF FICER MAY BE ITA-439/DEL/2010 3 DIRECTED TO RE-WORK OUT THE ASSESSEES INCOME TREATING T HE LEASE AS FINANCE LEASE. 5. WE HAVE CAREFULLY CONSIDERED THE ARGUMENTS OF BOTH THE SIDES AND PERUSED THE MATERIAL PLACED BEFORE US. IN THE BO OKS OF ACCOUNT, THE ASSESSEE HAS ACCOUNTED FOR THE INCOME AS IF THE TRANSA CTION WAS IN THE NATURE OF FINANCIAL LEASE. HOWEVER, IN THE COMP UTATION OF INCOME, HE OFFERED THE INCOME AND CLAIMED THE DEPRECIATION AS IF THE TRANSACTION WAS OPERATING LEASE. THE ASSESSING OFFICER HA S NOT EXAMINED THE LEASE AGREEMENT AND HAS NOT ARRIVED AT A CONCLUSIVE FINDING WITH REGARD TO THE NATURE OF THE LEASE BUT T REATED THE LEASE TO BE FINANCE LEASE AND, ACCORDINGLY, DISALLOWED THE DEP RECIATION. IT WAS CONTENDED BY THE LEARNED COUNSEL THAT IF THE ASSESSING O FFICER TREATED THE LEASE TO BE FINANCE LEASE, THEN, HE SHOULD HAVE TA KEN THE LEASE RENT ALSO AS PER FINANCE LEASE. THE ASSESSING OFFICER CAN NOT ADOPT DOUBLE YARDSTICK, ONE FOR ALLOWING THE DEPRECIATION AND, SECOND FOR TAXING THE LEASE RENT. HE ALSO REFERRED TO ACCOUNTIN G STANDARD-19 PRESCRIBED BY THE INSTITUTE OF CHARTERED ACCOUNTANTS OF INDIA IN WHICH THE INSTITUTE HAS PROVIDED HOW TO ACCOUNT FOR THE LEA SE RENT IN THE CASE OF FINANCIAL LEASE AS WELL AS OPERATING LEASE. AFTER C ONSIDERING THE ARGUMENTS OF BOTH THE SIDES AND THE FACTS OF THE CASE, W E ARE OF THE OPINION THAT THE MATTER NEEDS RE-EXAMINATION AT THE END OF THE ASSESSING OFFICER. WE AGREE WITH THE CONTENTION OF THE LEARNED COUNSEL THAT FIRSTLY THE ASSESSING OFFICER HAS TO DETERMINE THE NATURE OF THE LEASE, WHETHER IT IS A FINANCIAL LEASE OR AN OPERATIN G LEASE AND THEREAFTER, HE HAS TO DETERMINE THE INCOME WHICH INC LUDES THE TAXABILITY OF LEASE RENT AS WELL AS ALLOWABILITY OF DE PRECIATION BOTH. THE ASSESSING OFFICER CANNOT ADOPT A DIFFERENT YARDSTICK FOR TAXING THE LEASE RENT AND DIFFERENT YARDSTICK FOR ALLOWABILITY O F DEPRECIATION. IN VIEW OF THE ABOVE, WE SET ASIDE THE ORDERS OF AUTHORIT IES BELOW ON THIS POINT AND RESTORE THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER. ITA-439/DEL/2010 4 WE DIRECT HIM TO READJUDICATE THIS ISSUE IN ACCORDANC E WITH LAW AFTER ALLOWING ADEQUATE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. GROUND NO.2 RAISED BY THE REVENUE READS AS UNDER:- ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD.CIT (A) HAS ERRED IN DELETING ADDITION OF RS.62,96,000/- ON A CCOUNT OF UNCLAIMED LIABILITIES TREATED AS INCOME BY THE AO IGNORING THAT THE COMMENTS REPORTED IN FORM 3CB BY T HE AUDITOR STATING THAT THE CLAIMS FROM THE OVERSEAS COMPANIES WITH RESPECT TO THE CREDIT BALANCE WERE STIL L PENDING AT THE TIME OF FILING THE RETURN AND IN THE ABSENCE OF CONFIRMATION FILED BY THOSE CREDITORS, THE AO WAS CORRECT IN WRITING BACK THE UNCLAIMED LIABILITIES TO THE TOT AL INCOME. 7. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAS NOT SUB MITTED ANY PLAUSIBLE EXPLANATION AS TO WHY THE AMOUNT OF UNC LAIMED LIABILITIES REMAINED UNCLAIMED FOR MORE THAN A YEAR. HE, THERE FORE, ADDED THE SAME TO THE INCOME OF THE ASSESSEE. THE LEARNED CIT(A) RECORDED A FINDING THAT ALL THE LIABILITIES ARE MAXIMUM FOUR MO NTHS OLD. THE ASSESSEE HAS EXPLAINED THE PROCEDURE AS TO HOW THE UNCLAI MED LIABILITIES ARE DEALT WITH IN ITS BOOKS OF ACCOUNT. H E HELD THAT SINCE NEARLY 95% OF THE UNCLAIMED BALANCE AROSE ONLY DURIN G THE LAST FOUR MONTHS, THE ASSESSING OFFICER WAS NOT JUSTIFIED IN WRITING IT BACK TO THE INCOME OF THE ASSESSEE FOR THE SAME ASSESSMENT YEAR. HE, TH EREFORE, DELETED THE AMOUNT. 8. THE LEARNED DR SUPPORTED THE ORDER OF THE ASSESSING O FFICER AND CONTENDED THAT THE ASSESSEE HAS NOT SUBMITTED A PLAUSIBLE EXPLANATION AS TO WHY THE AMOUNT REMAINED UNCLAIMED FOR SUCH A LO NG PERIOD. HE, ITA-439/DEL/2010 5 THEREFORE, SUBMITTED THAT THE ORDER OF THE ASSESSING OFF ICER NEEDS TO BE CONFIRMED. 9. THE LEARNED COUNSEL FOR THE ASSESSEE, ON THE OTHER H AND, CONTENDED THAT THE LEARNED CIT(A) HAS RECORDED A CAT EGORICAL FINDING THAT MAXIMUM AMOUNT OF LIABILITIES WAS CREATED DURING THE LAST FOUR MONTH OF THE PREVIOUS YEAR AND, MOREOVER, THERE IS NO EVIDENCE ON RECORD BROUGHT BY THE REVENUE IN SUPPORT OF THE CONT ENTION THAT THERE IS CESSATION OF LIABILITY. THE LEARNED CIT(A) WAS JUSTI FIED IN DELETING THE AMOUNT OF UNCLAIMED LIABILITIES. HE, THEREFORE, URG ED THAT THE ORDER OF LEARNED CIT(A) MAY BE UPHELD. 10. WE HAVE HEARD THE RIVAL CONTENTIONS OF BOTH THE PARTIES AND PERUSED THE MATERIAL PLACED BEFORE US. IT IS A SETTLED LAW THAT SECTION 41(1) OF THE IT ACT, 1961 WOULD BE APPLICABLE IN TH E YEAR IN WHICH THERE IS REMISSION OR CESSATION OF A TRADING LIABILITY INCURRE D IN THE EARLIER YEAR. THE ONUS IS UPON THE REVENUE TO PROVE THAT TH ERE WAS REMISSION OR CESSATION OF LIABILITY. IN THE CASE UNDER CONSIDERA TION BEFORE US, THE REVENUE HAS NOT BROUGHT ON RECORD AN IOTA OF EVIDENC E TO ESTABLISH THAT THERE WAS ANY REMISSION OR CESSATION OF THE TRADING LIABILITY. ON THE OTHER HAND, THE LEARNED CIT(A) HAS RECORDED A FI NDING THAT THE LIABILITY UNDER CONSIDERATION WAS MAXIMUM FOUR MONTHS OLD. HE HAS ALSO GIVEN THE MONTH-WISE DETAIL OF SUCH LIABILITY WHI CH IS REPRODUCED BELOW:- DECEMBER, 2004 : 13,83,683/- JANUARY, 2005 : 09,67,563/- FEBRUARY, 2005 : 16,43,666/- MARCH, 2005 : 19,75,526/- ---------------- 59,70,438/- ---------------- ITA-439/DEL/2010 6 11. FROM THE ABOVE, IT IS EVIDENT THAT OUT OF THE TO TAL LIABILITY, THE LIABILITY OF ` 19.75 LAKHS IS LESS THAN ONE MONTH OLD, THE LIABILITY O F ` 16.43 LAKHS IS LESS THAN TWO MONTHS OLD, THE LIABILITY OF ` 9.67 LAKHS IS LESS THAN THREE MONTHS OLD AND THE LIABILITY OF ` 13.83 LAKHS IS LESS THAN FOUR MONTHS OLD. ONLY THE BALANCE LIABILITY OF APPR OXIMATELY ` 3 LAKHS IS MORE THAN FOUR MONTHS OLD. NO REASON HAS BEEN POINTED OUT BY THE REVENUE FOR PRESUMING THAT THERE WAS CESSATION OF THESE LIABILITIES WHICH WERE INCURRED JUST WITHIN FOUR MONTHS OF THE EN D OF THE RELEVANT PREVIOUS YEAR. IN VIEW OF THESE FACTS, IN OUR OPINION , THE LEARNED CIT(A) RIGHTLY DELETED THE ADDITION OF ` 62,96,000/- MADE BY THE ASSESSING OFFICER. ACCORDINGLY, WE UPHOLD THE ORDER OF LEARNED CIT(A) AND DISMISS GROUND NO.2 RAISED BY THE REVENUE. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISMISSE D. DECISION PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2012. SD/- SD/- ( (( (CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG CHANDRA MOHAN GARG) )) ) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) (G.D.AGRAWAL) JUDICIAL JUDICIAL JUDICIAL JUDICIAL MEMBER MEMBER MEMBER MEMBER VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT VICE PRESIDENT DATED : 16.03.2012 VK. COPY FORWARDED TO: - 1. APPELLANT 2. RESPONDENT 3. CIT 4. CIT(A) 5. DR, ITAT ASSISTANT REGISTRAR