ACIT CIR. - 3(1), MUMBAI V. M/s. ICICI BANK LTD., MUMBAI

ITA 4469/MUM/2006

• Counselvise Citation: [2014] 120 COUNSELVISE.COM (IT) 8217 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2014
• Appeal Filed By: Department
• Bench Allotted: G
• Next Hearing Date: 23-09-2014
• Assessment Year: 2001-2002
• Appeal Filed On: 04-08-2006
• Court: TRIBUNAL
• Department Lawyers: AARATI VISSANJI
• Assessee Lawyers: VIVEK BATRA
• Keywords: Depreciation
• Section: 32

Judgement Text

G IN THE INCOME TAX APPELLATE TRIBUNAL G BENCH, MUMBAI . , . , BEFORE SHRI D. MANMOHAN , VICE PRESIDENT AND SHRI D. KARUNAKARA RAO, AM ./I.T.A. NO. 4499/M/2006 (AY:2001 - 2002) ICICI BANK LIMITED, (EARSTWHILE ICICI PERSONAL FINANCIAL SERVICES LIMITED) ICICI BANK TOWERS, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051. VS. DCIT - 3(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 02 0. ./ PAN : AAAC12803C ( / APPELLANT) .. ( / RESPONDENT ) ./I.T.A. NO. 4469 /M/2006 (AY:2001 - 2002) DCIT - 3(1), AAYAKAR BHAVAN, M.K. ROAD, MUMBAI 400 020. VS. ICICI BANK LIMITED, (EARSTWHILE ICICI PERSONAL FINANCIAL SERVICES LIMITED) ICICI BANK TOWERS, BANDRA - KURLA COMPLEX, BANDRA (E), MUMBAI - 400 051. ( / APPELLANT) .. ( / RESPONDENT ) / APPELLANT BY : SMT. AARATI VISSANJI / RESPONDENT BY : SHRI VIVEK BATRA, DR / DATE OF HEARING : 23.09.2014 / DATE OF PRONOUNCEMENT : 31 .10.2014 / O R D E R PER D. KARUNAKARA RAO, AM: THERE ARE 2 APPEALS UNDER CONSIDERATION AND THEY ARE CROSS APPEALS INVOLVING THE ASSESSMENT YEAR 2001 - 2002. THE ISSUES RAISED IN BOTH THE APPEALS ARE CONNECTED TO THE CORE ISSUE I.E., DISALLOWANCE OF DEPRECIATION CLAIMED ON THE LEASED ASSETS. CONSIDERING THE NEXUS OF THE ISSUES IN BOTH THE APPEALS, THE APPEALS ARE CLUBBED, HEARD COMBINEDLY AND DISPOSED OF IN THIS CONSOLIDATED ORDER. 2 2. IN THE ASSESSEES APPEAL, THE ISSUE RAISED RELATES TO THE DISALLOWANCE OF DEP RECIATION IN RESPECT OF SALE AND LEASE BACK TRANSACTIONS INCLUDING THOSE CAPITALIZED IN AY 1999 - 2000 AND AS PER AO, THE DEPRECIATION IS NOT ALLOWABLE WH EN THEY ARE FINANCE TRANSACTIONS. ON THE OTHER HAND, IN THE REVENUES APPEAL, IT IS THE VIEW OF THE REVENUE THAT THE DEPRECIATION IS NOT ALLOWABLE ON THE ASSETS GIVEN ON LEASE (WHICH ARE NOT LEASEBACK TRANSACTIONS). 3. BRIEFLY STATED RELEVANT FACTS OF BOT H THE ISSUES ARE THAT THE ASSESSEE CLAIMED DEPRECIATION ON THE ASSETS INVOLVING PURE LEASE TRANSACTIONS AS WELL SALE AND LEASE BACK TRANSACTIONS. DURING THE ASSESSMENT PROCEEDINGS, AO OBSERVED THAT THE DEPRECIATION OF RS. 5,18,64,790/ - RELATES TO THE SAID LEASED ASSETS AND THE SAME IS NOT ALLOWABLE AS THEY ARE MERELY FINANCIAL TRANSACTIONS. RELYING ON HIS OWN ORDER FOR THE AY 1998 - 1999, AO DISALLOWED THE CLAIM OF DEPRECIATION . 4. DURING THE FIRST APPELLATE PROCEEDINGS, ASSESSEE SUBMITTED THAT THE CL AIM OF DEPRECIATION ON SALE OF LEASE BACK TRANSACTIONS AMOUNTS TO RS.2,93,09,583/ - AND THE BALANCE RELATES TO OTHER LEASED TRANSACTIONS WHICH WERE ACTUALLY CAPITALIZED AND ALLOWED IN THE AY 1999 - 2000. IN CONNECTION WITH THE DEPRECIATION CLAIM RELATING TO TRANSACTIONS OF SALE AND LEASE BACK TRANSACTIONS, RELYING ON THE ITAT, SPECIAL BENCH DECISION IN THE CASE OF MIDEAST PORTFOLIO MANAGEMENT LTD VS. DCIT (87 ITD 537) CIT (A) REJECTED THE CLAIM OF THE ASSESSEE. REGARD ING THE OTHER LEASED ASSETS (OTHER THA N THE SALE AND LEASE BACK TRANSACTIONS), ASSESSEE SUBMITTED THAT THE DEPRECIATION IN THE EARLIER YEARS WAS NOT DISALLOWED ON THE GROUND OF OWN ERSHIP OF ASSETS. ASSESSEE SUBMITTED THAT THE CLAIM OF DEPRECIATION WAS FINALLY ALLOWED BY THE CIT (A) FOR THE AY 1998 - 1999 IN THE ASSESSEES OWN CASE. ACCORDINGLY, CIT (A) REFERRED TO THE EARLIER ORDERS OF HIS PREDECESSOR AND FINALLY DIRECTED THE AO TO VERIFY THE FACTS IF THEY ARE IDENTICAL TO THAT OF THE LEASE TRANSACTIONS IN THE AY 1999 - 2000 AND ALLOWED THE CLAIM OF THE ASSESSEE . THUS , AO IS REQUIRED TO ALLOW THE CLAIM OF THE ASSESSEE IN CASE THE IMPUGNED TRANSACTIONS ARE NOT THE SALE AND LEASE BACK TRANSACTION AND NOT COVERED BY THE SAID SPECIAL BENCH DECISION (SUPRA). 5. DURING THE PROCEEDINGS BEFORE US, LD C OUNSEL FOR THE ASSESSEE MENTIONED THAT IN SO FAR AS THE APPEAL OF THE REVENUE IS CONCERNED, THE GRIEVANCE REVOLVES AROUND THE SAID DIRECTIONS GIVEN BY THE CIT (A) TO AO TO ALLOW THE CLAIM OF THE 3 ASSESSEE AFTER DUE VERIFICATION OF THE L E A S E TRANSACTIONS. OTHERWI SE, THE CONCLUSIONS OF THE CIT (A) ARE CLEAR AND THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE LEASED ASSETS. REGARDING THE CLAIM OF DEPRECIATION ON OTHER LEASED TRANSACTIONS INVOLVING THE SALE AND LEASE BACK TRANSACTIONS , LD COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ISSUE NOW STANDS COVERED AND THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION CONSIDERING THE ORDER OF THE TRIBUNAL FOR THE AY 1998 - 99 VIDE ITA NO.3827/M/2000 DATED 25.7.2014 AND MANY OTHER DECISIONS OF THE ITAT. BRINING OUR ATTENTION TO THE SAID ORDER OF THE TRIBUNAL (SUPRA) LD COUNSE L FOR THE ASSESSEE DESCRIBED RELEVANT FACTS OF THAT YEAR FROM PARA 3 OF THE TRIBUNALS ORDER. AS SEEN FROM PARA 2 OF THE TRIBUNALS ORDER (SUPRA), THE ISSUE ADJUDICATED BY THE TRIBUNAL IS ON THE DISALLOW ANCE OF DEPRECIATION IN RESPECT OF THE SALE AND LEASE BACK TRANSACTIONS IN THE ASSESSEES OWN CASE. IT IS THE OPINION OF THE AO THAT THE DEPRECIATION IS NOT ALLOWABLE ON THE TRANSACTIONS OF LEASE WHICH ARE IN THE NATURE OF FINANCIAL TRANSACTIONS. ASSESSE E RELIED ON VARIOUS JUDICIAL PRONOUNCEMENTS INCLUDING THE JUDGMENT OF THE APEX COURT IN THE CAS E OF ICDS VS. CIT (350 ITR 527) AND RELEVANT DISCUSSION IS FOUND AT IN PARA 6 OF THE SAID TRIBUNALS ORDER (SUPRA). AFTER HEARING BOTH THE PARTIES, RELYING HEAVILY ON THE SAID JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ICDS VS. CIT (SUPRA) AS WELL AS THE VARIOUS JUDICIAL PRONOUNCEMENTS RELEVANT TO THE ISSUE UND ER CONSIDERATION, THE TRIBUNAL HELD THAT ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE TRANSACTIONS INVOLVING SALE AND LEASEBACK ASSETS. IN THIS REGARD, PARAS 8 TO 11 OF THE TRIBUNALS ORDER ARE BROUGHT TO OUR ATTENTION BY THE LD COUNSEL. 6. PER CONTR A, LD DR SUPPORTED THE FINDING OF THE LOWER AUTHORITIES . 7. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AS WELL AS THE RELEVANT MATERIAL IN THIS REGARD. IN SO FAR AS THE DIRECTION OF THE C IT (A) TO THE AO IS CONCERNED, RELATING TO THE LEASED ASSETS, THE SAME IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENCE. REGARDING THE ISSUE RAISED BY THE ASSESSEE, WE HAVE PERUSED THE RELEVANT PARAS OF THE SAID ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE AY 1 998 - 1999 AND FIND THE ISSUE STANDS COVERED IN FAVOUR OF THE ASSESSEE BY SERIES OF JUDGMENTS INCLUDING THAT OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ICDS (SUPRA). FOR THE SAKE OF 4 COMPLETENESS OF THIS ORDER, RELEVANT PARAS 8 TO 11 OF THE SAID TRIBUNALS ORDER ARE REPRODUCED HERE UNDER: 8. WE HAVE CAREFULLY PERUSED THE ORDERS OF THE REVENUE AUTHORITIES AND THE RELEVANT MATERIAL EVIDENCES BROUGHT ON RECORD BEFORE US. WE HAVE ALSO CAREFULLY GONE THROUGH THE DECISIONS RELIED UPON BY THE BOTH THE PARTIES. IN SO FAR AS THE ISSUE RELATING TO THE CLAIM OF DEPRECIATION ON LEASED TRANSACTIONS IS CONCERNED, WE FIND FORCE IN THE SUBMISSION OF THE LD SR. COUNSEL THAT THE HONBLE SUPREME COURT IN THE CASE OF ICDS VS. CIT, 350 ITR 527 (SUPRA) HAD THE O CCASION TO CONSIDER THE QUESTION - WHETHER THE ASSESSEE IS ENTITLED TO DEPRECIATION ON VEHICLES FINANCED BY IT WHICH IS NEITHER OWNED BY THE ASSESSEE 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 OF THE VEHICLES. AS AN OWNER, IT USED THE ASSETS IN THE COURSE OF ITS BUSINESS SATISFYING BOTH THE REQUIREMENTS OF SECTION 32 OF THE ACT AND HENCE IS ENTITLED TO CLAIM DEPRECIATION. 9. A SIMILAR VIEW WAS TAKEN BY THE HONBLE DELHI HIGH COURT IN THE CASE OF COSMOS FILMS (SUPRA) WHEREIN THE HONBLE DELHI HIGH COURT HAS CONSIDERED THE IMPLICATIONS OF SECTION 19 OF SALES OF GOODS ACT, 1930. 10. THE TRIBUNAL, MUMBAI BENCH IN THE CASE OF DEVELOPMENT CREDIT BANK LTD (SUPR A) HAS FOLLOWED THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF ICDS (SUPRA) AND THE DECISION OF HONBLE DELHI HIGH COURT IN THE CASE OF COSMOS FILMS (SUPRA) AND ALLOWED 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 CASE OF ICDS (SUPRA) AND ALSO OF THE COORDINATE BENCH IN THE CASE OF DEVELOPMENT CREDIT BANK LTD (SUPRA) AND ALLOWED THE CLAIM OF DEPRECIATION ON SALE OF LEASE BACK ASSETS. 8. THUS, IT IS A SETTLED ISSUE IN THE ASSESSEES OWN CASE THAT THE IMPUGNED LEASED TRANSACTIONS INVOLVING SALE AND LEASE BACK OF ASSETS ARE ENTITLED FOR DEPRECIATION IN VIEW OF THE JUDGMENT OF THE HONBLE SUPREME COURT IN THE CASE OF ICDS (SUPRA). THEREFORE, IN OUR OPINION, THE FINDING OF THE CIT (A) IS REQUIRED TO BE REVERSED ON THIS ISSUE AND THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION. ACCORDINGLY, GROUNDS RAISED BY THE ASSESSEE ARE ALLOWED AND THE DIRECTION GIVEN BY THE CIT (A) TO THE AO IN THE REVENU ES APPEAL DOES NOT CALL FOR ANY INTERFERENCE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED AND THE APPEAL OF THE REVENUE IS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 3 1 S T OCTOBER, 2014. S D / - S D / - (D. MANMOHAN ) (D. KARUNAKARA RAO ) / VICE PRESIDENT / ACCOUNTANT MEMBER MUMBAI ; 31/10/2014 5 . . ./ OKK , SR. PS / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. ( ) / THE CIT(A) - 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE . //TRUE COPY// / BY ORDER, / (DY./ASSTT. REGISTRAR) , / ITAT, MUMBAI