ACIT Circle 10 (1), V. DCM Shriram Leasing & Finance Ltd,

ITA 449/DEL/2008

• Counselvise Citation: [2009] 114 COUNSELVISE.COM (IT) 8657 (ITAT-DELHI)
• Duration Of Justice: 1 year(s) 5 month(s) 8 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-07-2009
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: B
• Next Hearing Date: 07-07-2009
• Assessment Year: 2002-2003
• Appeal Filed On: 08-02-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NARENDRA K CHAND
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL DELHI BENCH B NEW DELHI BEFORE SHRI G.E. VEERABHADRAPPA : VICE PRESIDENT; A ND SRHI D.R. SINGH : JUDICIAL MEMBER ITA NOS. 449/DEL/08 & 1054/DEL/08 ASSTT. YRS: 2002-03 & 2003-04 ACIT CIRCLE 10(1), VS. M/S DCM SHRIRAM LEASING & NEW DELHI. FINANCE LTD., KANCHANJUNGA BUILDING, 18, BARAKHAMBA ROAD, NEW DELHI. PAN/GIR NO. AAACD0109L AND ITA NOS. 469 & 470/DEL/08 ASSTT. YRS: 2002-03 2003-04 VERSA TRADING LTD. VS. ACIT CIRCLE 10(1), (FORMERLY KNOWN AS - NEW DELHI. DCM SHRIRAM LEASING & FINANCE LTD.) , KANCHANJUNGA BUILDING, 18, BARAKHAMBA ROAD, NEW DELHI. PAN/GIR NO. AAACD0109L ( APPELLANT ) ( RESPONDENT ) REVENUE BY : SHRI NARENDRA K. CHAND DR ASSESSEE BY : SHRI PRADEEP DINODIA CA O R D E R PER G.E. VEERABHADRAPPA, V.P: THESE CROSS APPEALS FOR A.Y. 2002-03 & 2003-04, FIL ED BY THE ASSESSEE AS WELL AS THE REVENUE, ARISE OUT OF THE O RDER OF CIT(A)-XIII, NEW DELHI DATED 27-11-2007 FOR A.Y. 2002-03 AND 14-01-2 008 FOR A.Y. 2003-04. 2 CERTAIN COMMON ISSUES ARE RAISED IN THESE APPEALS. ALL THESE APPEALS WERE HEARD TOGETHER AND WE FIND IT CONVENIENT TO DISPOSE OFF THE SAME BY THIS CONSOLIDATED ORDER. 2. FOR A.Y. 2002-03 THE GROUNDS RAISED BY THE REVEN UE READ AS UNDER: 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITIONS MADE ON ACCO UNT OF WRITTEN BACK OF PROVISIONS OF RS. 1,00,63,935/- ON ACCOUNT OF NON- PERFORMING ASSETS, WITHOUT APPRECIATING THE FACT TH AT THE ASSESSEE COMPANY HAD FAILED TO SUBSTANTIATE WITH EVIDENCE A S TO WHEN AND IN WHICH YEAR(S) THE ABOVE MENTIONED AMOUNTS HAVE S UFFERED TAX. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CA SE AND IN LAW, THE CIT(A) ERRED IN DELETING THE ADDITIONS MADE ON ACCO UNT OF WRITTEN BACK OF PROVISIONS OF RS. 12,91,627/-ON ACCOUNT OF LEASE EQUALIZATION/ ADJUSTMENT CHARGES, WITHOUT APPRECIAT ING THE FACT THAT THE ASSESSEE COMPANY HAD FAILED TO SUBSTANTIATE WIT H EVIDENCE AS TO WHEN AND IN WHICH YEAR(S) THE ABOVE MENTIONED AMOUN TS HAVE SUFFERED TAX. IDENTICAL ISSUES ARE RAISED FOR A.Y. 2003-04 ALSO. 3. THE ASSESSEE COMPANY IS A NON-BANKING FINANCIAL COMPANY (NBFC IN SHORT) AND HAS BEEN MAKING PROVISIONS FOR NON-P ERFORMING ASSET (NPA IN SHORT) IN TERMS OF MANDATORY GUIDELINES ISSUED B Y THE RESERVE BANK OF INDIA APPLICABLE TO NBFCS. FOLLOWING THESE GUIDELIN ES REGULARLY AND CONSISTENTLY, THE ASSESSEE COMPANY CREATED PROVISIO NS FOR NON-PERFORMING ASSETS (NPA) IN THE ANNUAL ACCOUNTS FOR EARLIER ASS ESSMENT YEARS AND CHARGED THE SAME TO PROFIT & LOSS A/C, DETAILS OF WHICH ARE AS UNDER: A.Y. PROVISION FOR NPA 1998-99 1,98,07,694/- 1999-00 2,45,48,568/- 2000-01 2,81,15,883/- 3.1. ALTHOUGH THE PROVISIONS WERE MADE IN RESPECT OF THE AMOUNTS RECEIVED FROM VARIOUS PARTIES ON ACCOUNT OF ASSETS GIVEN ON LEASE/HIRE 3 PURCHASE/ LOANS/ BILL DISCOUNTED, WHICH HAVE BECOME BAD/ NON-PERFORMING ASSETS DUE TO DEFAULTS IN PAYMENT BY THE PARTIES. W HILE COMPUTING THE TOTAL INCOME UNDER THE PROVISIONS OF THE INCOME-TAX ACT, 1961, THESE PROVISIONS WERE ADDED BACK AND NO DEDUCTIONS IN RESPECT OF THE AFORESAID PROVISIONS IS CLAIMED IN RESPECTIVE YEARS. DURING THE PREVIOUS YE AR RELEVANT TO THE A.Y. 2002-03, THE ASSESSEE WROTE BACK PROVISIONS FOR NON -PERFORMING ASSETS AGGREGATING TO RS. 1,00,63,935/- AND CREDITED TO P &L A/C. THE SUBMISSION OF THE ASSESSEE WAS THAT NEITHER THE ASSESSEE CLAI MED DEDUCTION NOR THE ASSESSING OFFICER GRANTED DEDUCTION IN RESPECT OF T HE PROVISIONS MADE IN THE ACCOUNT. THE CREDIT, WHICH REPRESENTS THE WRITE BA CK OF THE PROVISION, IS PART OF THE AMOUNT ALREADY TAXED IN THE EARLIER YEAR AND CANNOT BE TAXED AGAIN. THE COMPUTATION OF INCOME FOR A.Y. 1998-99, 1999-20 00 AND 2000-01 WERE FILED BEFORE THE CIT(A). THE CIT(A) AFTER VERIFYING THESE DETAILS DIRECTED THE AO TO DELETE THE ADDITION. AGGRIEVED, THE REVENUE IS AGITATING BEFORE US. SIMILAR IS THE SITUATION IN A.Y. 2003-04 WHEREIN FI GURE IS RS. 55,28,430/-. 4. THE LEARNED DR WHO APPEARED BEFORE US, STRONGLY SUPPORTED THE STAND OF THE ASSESSING OFFICER. HE REQUESTED THAT AN OPPO RTUNITY BE GIVEN TO THE ASSESSING OFFICER TO VERIFY THE DETAILS THAT WERE SUBMITTED BEFORE THE CIT(A). 5. THE LEARNED COUNSEL FOR THE ASSESSEE VEHEMENTLY SUPPORTED THE IMPUGNED ORDER OF THE CIT(A) AND POINTED OUT THAT THE LEARNED CIT(A) HAS VERIFIED ALL THESE DETAILS. THE ASSESSEE BEFORE US HAS ALSO FILED DETAILED SUBMISSIONS AND THE COMPUTATION STATEMENT. 6. WE HAVE GONE THROUGH THE RECORDS INCLUDING THE C OMPUTATION STATEMENTS THAT WERE FILED BEFORE THE LEARNED CIT(A ), WHICH SHOW THAT THE CIT(A) HAS CORRECTLY UNDERSTOOD THE ISSUE IN QUESTI ON AND THE ASSESSEES INCOME HAS ALWAYS ADDED BACK THE PROVISION, ALTHOU GH DEBITED TO THE P&L 4 A/C, MEANING THEREBY THAT HE HAS NOT CLAIMED ANY DE DUCTION IN RESPECT OF THE PROVISIONS THAT WERE DEBITED TO THE P&L A/C, WHEN T HE CREDIT HAS TAKEN PLACE TO THE P&L A/C. THERE COULD BE NO QUESTION OF THE REVENUE BRINGING THE SAID AMOUNT TO TAX. THE CIT(A) RIGHTLY HELD THAT TA XING THE WRITE BACK OF THE PROVISION WILL RESULT IN DOUBLE TAXATION. WE DECLIN E TO INTERFERE. 7. AS REGARDS THE NEXT ISSUE, THE FACTS ARE THAT TH E ASSESSEE COMPANY MADE PROVISION FOR LEASE EQUALIZATION CHARGES, REPR ESENTING THE DIFFERENCE BETWEEN THE LEASE RENTALS WORKED OUT BY DIVIDING TH E TOTAL LEASE RENTALS OVER THE PERIOD OF LEASE AND THE DEPRECIATION AS WORKED OUT AS PER SCHEDULE XIV TO THE COMPANIES ACT, 1956, WHICH IS AS PER THE MAN DATORY ACCOUNTING STANDARDS ISSUED BY THE INSTITUTE OF CHARTERED ACCO UNTANTS OF INDIA. IN THE ANNUAL ACCOUNTS, THE LEASE EQUALIZATION AMOUNT WAS DEDUCTED FROM THE LEASE RENTAL INCOME AND NET LEASE RENTALS WERE ACCOUNTED FOR. HOWEVER, WHILE COMPUTING THE TAXABLE INCOME, THE LEASE EQUALIZATIO N CHARGES HAVE ALWAYS BEEN ADDED BACK, THEREBY OFFERING THE GROSS LEASE R ENTALS TO TAX AND THE DETAILS OF SUCH ADD BACKS IN DIFFERENT YEARS WERE A S UNDER: A.Y. LEASE EQUALIZATION CHARGES ADDED BACK 1996-97 1,37,43,752 1997-98 1,36,08,478 1998-99 24,83,437 1999-00 56,46,442 2000-01 19,91,285 2001-02 37,02,953 8. DURING THE PREVIOUS YEAR 2002-03, THE ASSESSEE W ROTE BACK THE LEASE EQUALIZATION CHARGES AMOUNTING TO RS. 12,91,627/- A ND CREDITED THE SAME TO THE P&L A/C. WHILE WORKING OUT THE TAXABLE INCOME O F THE COMPANY, IT EXCLUDED THE AFORESAID WRITE BACK, SINCE THE PROVI SIONS MADE EARLIER WERE 5 ADDED BACK IN THE RESPECTIVE ASSESSMENT YEAR, AS ST ATED ABOVE. THE ASSESSING OFFICER DID NOT ACCEPT THE CLAIM OF THE ASSESSEE A ND STILL BROUGHT THE AMOUNT TO TAX. THE CIT(A), AFTER GOING THROUGH THE COMPUTA TION OF TAXABLE INCOME FOR A.Y. 1996-97, 1997-98, 1998-99, 1999-2000, 200 0-01 AND 2001-02, FOUND THAT THE ASSESSEE HAD REDUCED THE LOSS OR INC REASED THE PROFIT AS PER P&L A/C, WHICH MEANS THAT THE LEASE EQUALIZATION C HARGES HAD ALREADY BEEN OFFERED TO TAX IN THE EARLIER ASSESSMENT YEARS. IN THESE CIRCUMSTANCES THE CIT(A) FOUND NO JUSTIFICATION TO MAKE THE ADDITION AS MADE OUT BY THE AO. 9. WE HAVE HEARD BOTH THE SIDES AND HAVE GONE THROU GH THE DETAILS FILED BY THE ASSESSEE IN THIS REGARD. THE ACTION OF THE ASSESSING OFFICER WILL AMOUNT TO DOUBLE ADDITION AND THE CIT(A) HAS CORRE CTLY DELETED THE ADDITION. WE DECLINE TO INTERFERE. 10. IN A.Y. 2002-03 THE ASSESSEE HAS TAKEN FOLLOW ING EFFECTIVE GROUNDS: 1. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN UP- HOLDING THE ACTION OF THE ASSESSING OFFICER IN ADDI NG TO THE INCOME OF THE APPELLANT FOR A SECOND TIME WRITE BACK OF PR OVISION FOR LESE EQUALIZATION/ ADJUSTMENT CHARGES AMOUNTING TO RS. 1 2,91,627/-, ALREADY INCLUDED IN THE FIGURE OF PROFIT IN THE PRO FIT & LOSS A/C WHILE ACCEPTING THE CLAIM OF THE APPELLANT FOR EXCL USION OF THE SAME FROM TAXABLE INCOME OF THE APPELLANT. 2. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN RESTRICTING THE DEPRECIATION ALLOWABLE U/S 32 OF I. T. ACT TO THE APPELLANT COMPANY TO RS. 9.76 LACS AS AGAINST RS. 4 1,86,995/- CLAIMED HOLDING THAT THE APPELLANT COMPANY IS ENTIT LED TO DEPRECIATION ONLY IN RESPECT OF THOSE LEASED ASSETS ON WHICH LEASE RENTAL INCOME HAS BEEN RECEIVED DURING THE PREVIOU S YEAR RELEVANT FOR A.Y. 2002-03. 3. THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF T HE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HA S ERRED IN UP- HOLDING THE ACTION OF THE ASSESSING OFFICER IN ADDI NG TO THE INCOME OF THE APPELLANT THE ALLEGED EXCESS CLAIM OF DEPREC IATION AMOUNTING TO RS. 32,10,000/- WHICH AMOUNTED TO DOUBLE ADDITIO N, ONCE BY 6 DISALLOWING THE CLAIM AND SECONDLY BY ADDING THE SA ME TO THE INCOME. 11. IN A.Y. 2003-04, FOLLOWING EFFECTIVE GROUNDS HA VE BEEN TAKEN BY THE ASSESSEE: 1.(A) THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UP-HOLDING THE ACTION OF THE ASSESSING OFFICER IN RESTRICTING THE DEPRECIATION ALLOWABLE U/S 32 OF I.T. ACT TO THE APPELLANT COMPANY TO RS. 3.70 LACS AS AGAINST RS. 30,67,014/- CLAIMED HOLDING THA T THE APPELLANT COMPANY IS ENTITLED TO DEPRECIATION ONLY IN RESPECT OF THOSE LEASED ASSETS ON WHICH LEASE RENTAL INCOME HAS BEEN RECEI VED DURING THE PREVIOUS YEAR RELEVANT FOR A.Y. 2003-04. 1(B) WITHOUT PREJUDICE TO GROUND NO. 1(A), THAT ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW, TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) HAS ERRED IN UP-HOLDING THE ACTION OF THE ASSESSING OFF ICER IN RESTRICTING DEPRECIATION TO RS. 3.70 LACS AS AGAIN ST RS. 10.14 LACS ALLOWABLE EVEN ON THE BASIS OF THE ASSES SING OFFICER. 12. AS REGARDS A.Y. 2002-03, THE FIRST ISSUE RELATE S TO THE CONTENTION OF THE ASSESSEE THAT THE CIT(A) ALTHOUGH DELETED THE A DDITION, BUT DID NOT GRANT THE CLAIM OF DEDUCTION. THE ACTION OF THE AO, AS DI SCUSSED EARLIER, HAS RESULTED IN A DOUBLE ADDITION. WHEN THE DEDUCTION I S CLAIMED BY THE ASSESSEE AND THE ASSESSING OFFICER INSTEAD OF MAKING A DEDUC TION, ADDED IT AS THE INCOME, IT HAS DEFINITELY RESULTED IN A DOUBLE ADDI TION. APART FROM HOLDING IT AS NOT TAXABLE, THE PROPER COURSE WOULD HAVE BEEN THAT THE AMOUNT ALREADY INCLUDED IN THE P&L A/C REQUIRES THE EXCLUSION. WE, THEREFORE, AFTER VERIFYING THESE DETAILS FROM THE FINANCIAL ACCOUNTS PRESENTED BEFORE US AND ARE SATISFIED ABOUT THE CLAIM OF THE ASSESSEE. IN O UR VIEW TO THE EXTENT 7 CIT(A) FAILED TO GIVE DEDUCTION, IT HAS RESULTED AG AIN IN A DOUBLE ADDITION. THE ASSESSEES CONTENTION IS ACCEPTED. 13. THE NEXT COMMON GROUND RELATES TO CERTAIN DISAL LOWANCE IN RESPECT OF THE DEPRECIATION CLAIMED. THERE IS NO DISPUTE AS T O THE FACT THAT THE ASSESSEE IS IN THE BUSINESS OF LEASING OF ASSETS. IN TERMS O F SECTION 32, THE ASSESSEE IS ENTITLED FOR DEPRECIATION ON THE ASSETS WHICH ARE P ART OF ITS OPERATIONAL LEASING AND THE ASSESSEE IS ENTITLED TO CLAIM THE DEPRECIATION AND ITS CLAIM OF DEPRECIATION IS WELL SETTLED BY THE DECISION OF THE APEX COURT IN THE CASE OF CIT VS. SHAAN FINANCE (P) LTD. 231 ITR 308. WHAT TH E DEPARTMENT HAS DONE, THEY HAVE RESTRICTED THE DEPRECIATION TO THE EXTENT OF LEASE RENTALS RECEIVED, MEANING THEREBY IN RESPECT OF THE LEASE R ENTALS, WHICH ARE PART OF NPA, THE ASSESSEE HAS LOST THE BENEFIT OF DEDUCTIO N OF DEPRECIATION. 14. WE HAVE HEARD THE PARTIES AND HAVE GONE THROUGH THE DETAILS IN THIS REGARD AND ARE UNABLE TO UPHOLD THE ORDER OF CIT(A) ON THIS ISSUE. AFTER ALL THE DEPRECIATION ON THE ASSETS DEPENDED UPON THE AC TUAL COST OR THE WRITTEN DOWN VALUE, AS THE CASE MAY BE. IT DOES NOT DEPEND UPON THE RECEIPT OF THE LEASE RENTAL. THE STAND THAT THE ASSESSEE IS ENTIT LED TO CLAIM DEPRECIATION ONLY IN RESPECT OF THOSE LEASED ASSETS ON WHICH L EASE RENTALS HAVE BEEN RECEIVED DURING THE RELEVANT PREVIOUS YEAR CANNOT BE ACCEPTED IN THE LIGHT OF PROVISIONS OF SECTION 32 OF THE ACT. THEREFORE, THE DISALLOWANCE MADE BY THE DEPARTMENT HAS RESULTED IN DOUBLE ADDITION. THE AO IS DIRECTED TO ALLOW THE DEPRECIATION ON THE BASIS OF THE BLOCK THAT SURVIV ES AT THE BEGINNING O THE YEAR. ON THE LATTER TWO ISSUES, WE RESTORE THIS ISS UE TO THE FILE OF THE AO WITH THE DIRECTION TO ALLOW DEPRECIATION ON THE BASIS OF THE BLOCK THAT REMAINED. THE DISALLOWANCE OF DEPRECIATION ON THE LEASED ASSE TS ON WHICH LEASE RENTALS 8 ARE OUTSTANDING IS NOT APPROVED. THE ASSESSING OFFI CER WHILE GIVING EFFECT TO THIS ORDER, SHALL ALSO REMOVE ANY DOUBLE ADDITION T HAT HAS TAKEN PLACE. THE ASSESSEE SHALL BE GIVE A FAIR AND REASONABLE OPPORT UNITY OF BEING HEARD. 15. IN THE RESULT, APPEALS OF THE REVENUE ARE DISM ISSED AND THAT OF THE ASSESSEE ARE ALLOWED PARTLY FOR STATISTICAL PURPO SES. ORDER PRONOUNCED IN OPEN COURT ON ______________. (D.R. SINGH ) ( G.E. VEERABHADRAP PA ) JUDICIAL MEMBER VICE PRESIDENT DATED: _______-07-2009. MP COPY TO : 1. ASSESSEE 2. AO 3. CIT 4. CIT(A) 5. DR