DCIT Circle 11 (1), V. Escorts Finance Ltd,

ITA 4799/DEL/2007

• Counselvise Citation: 479920114 RSA 2007
• Duration Of Justice: 4 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2012
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: C
• Next Hearing Date: 14-05-2012
• Assessment Year: 2004-2005
• Appeal Filed On: 13-12-2007
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Department Lawyers: ARUN BHATIA; SIMRAN MEHTA
• Assessee Lawyers: ANUSHA KHURANA
• Keywords: Depreciation; Earning of tax free income; Speculation loss; Onus to prove
• Section: 234B; 14A; 11

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL (DELHI BENCH C NEW DELHI) BEFORE SHRI R.P. TOLANI, JUDICIAL MEMBER AND SHRI T.S. KAPOOR, ACCOUNTANT MEMBER I.T.A. NO.4720/DEL/2007 ASSESSMENT YEAR : 2004-05 M/S ESCORTS FINANCE LTD., DCIT, N-6, PRATAP BUILDING, CIRCLE-11 (1), CONNAUGHT PLACE, N. DELHI. V. NEW DELHI. AND I.T.A. NO.4799/DEL/2007 ASSESSMENT YEAR : 2004-05 DCIT. M/S ESCORTS FINANCE LTD. CIRCLE-11 (1), N-6, PRATAP BUILDING, NEW DELHI. V. CONNAUGHT PLACE, N. DELHI. (APPELLANT) (RESPONDENT) PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO. PAN /GIR/NO.AAACE AAACE AAACE AAACE- -- -0763 0763 0763 0763- -- -B BB B APPELLANT BY : SHRI SIMRAN MEHTA, ADVOCATE & SHRI ARUN BHATIA, C.A. RESPONDENT BY : SMT. ANUSHA KHURANA, SR. DR. ORDER PER TS KAPOOR, AM: THESE ARE CROSS APPEALS FILED AGAINST THE ORDER OF LD CI T(A) DATED 19 TH SEPTEMBER, 2007. THESE APPEALS WERE HEARD TOGETHER AND FOR THE SAKE OF CONVENIENCE ARE BEING DISPOSED OFF BY THIS COMM ON ORDER. THE ITA NO4720,4799/DEL/07 2 GROUNDS TAKEN BY THE DEPARTMENT AS WELL AS IN CROSS APPE ALS ARE AS UNDER:- I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.4 44 4720/DEL/2007: 720/DEL/2007: 720/DEL/2007: 720/DEL/2007: ( ( ( (A AA ASSESSEES SSESSEES SSESSEES SSESSEES APPEAL): APPEAL): APPEAL): APPEAL): 1. THAT THE IMPUGNED APPELLATE ORDER PASSED BY THE LD C IT(A) IS BAD IN LAW AND WRONG ON FACTS. 2. THAT THE CIT(A) ERRED IN REJECTING THE CLAIM FOR DE PRECIATION ON LEASED OUT VEHICLES TO THE TUNE OF ` .80,54,344/-. 3. THAT THE CIT(A) ERRED IN TREATING THE LOSS OF ` .29,47,766/- ON SALE OF BONDS AS A SPECULATIVE LOSS WITHIN THE MEANING OF TH E EXPLANATION TO SEC. 73 AS AGAINST THE STAND OF THE APPE LLANT THAT IT WAS A CAPITAL LOSS. 4. THAT THE CIT(A) ERRED IN CONFIRMING THE LEVY OF INT EREST U/S 234B AND 234D. ON FACTS AND IN LAW THE SAID INTEREST WAS NO T CHARGEABLE AT ALL. 5. THAT THE CIT(A) ERRED IN UPHOLDING THE ACTION OF TH E ASSESSING OFFICER IN WITHDRAWING INTEREST U/S 244A. 6. THAT THE APPELLANT CRAVES LEAVER TO RESERVE TO ITSELF THE RIGHT TO ADD, ALTER, AMEND, SUBSTITUTE, WITHDRAW AND/OR VARY A NY GROUND(S) OF APPEAL AT OR BEFORE THE TIME OF HEARING . I.T.A. NO. I.T.A. NO. I.T.A. NO. I.T.A. NO.4799/DEL/2007: 4799/DEL/2007: 4799/DEL/2007: 4799/DEL/2007: ( ( ( (DEPARTMENTAL DEPARTMENTAL DEPARTMENTAL DEPARTMENTAL APPEAL): APPEAL): APPEAL): APPEAL): 1. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AN D IN LAW, THE CIT(A) ERRED IN DELETING THE DISALLOWANCE OF ` .53,67,000/- MADE U/S 14A OF THE INCOME TAX ACT, 1961 . 2. THE APPELLANT CRAVES LEAVE TO ADD, ALTER OR AMEND ANY GROUND OF APPEAL RAISED ABOVE AT THE TIME OF HEARING. ITA NO4720,4799/DEL/07 3 2. THE BRIEF FACTS OF THE CASE ARE THAT THAT THE ASSESSE E IS A NON BANKING FINANCE COMPANY AND IS GOVERNED BY THE RESERV E BANK OF INDIA GUIDELINES ISSUED FROM TIME TO TIME. THESE GUIDEL INES ARE MANDATORY WHICH AN NBFC HAS TO FOLLOW WHILE COMPUTIN G THE NET PROFITS OF THE COMPANY. THE ASSESSEE IS ALSO ENGAGED IN T HE BUSINESS OF LETTING OUT ON HIRE MOTOR VEHICLES, MOTOR TAXIES A ND LORRIES AND OTHER COMMERCIAL VEHICLES. THESE ASSETS ARE PURCHASED BY THE A SSESSEE AND ARE LET OUT TO OTHERS ON LEASE-HOLD BASIS. THE RETURN OF INCOME FOR ASSESSMENT YEAR 2004-05 WAS FILED ON 31 ST OCTOBER, 2004 DECLARING AN INCOME OF ` .3,10,49,988/-. 3. THE CASE OF THE ASSESSEE WAS SELECTED FOR SCRUTINY. DUR ING ASSESSMENT PROCEEDINGS, THE ASSESSING OFFICER MADE CERTAIN A DDITIONS TO THE INCOME OF ASSESSEE WHICH ARE AS FOLLOWS:- 1. ON ACCOUNT OF EXCESS DEPRECIATION ON LEASED VEHICLES. ` .80,54,344/- 2. DISALLOWANCE OF EXPENSES U/S 14A ATTRIBUTABLE TO EXEMPTED INCOME. ` .53,67,000/- 3. DISALLOWANCE OF CAPITAL LOSS & TREATING IT AS SPECULATIVE LOSS. ` .29,47,666/- THE FIRST AND THIRD ADDITION IS PART OF ASSESSEES APPEAL WHICH IS BEFORE US FOR ADJUDICATION. THE SECOND ADDITION WAS DELETED BY LD CIT(A) WHICH TH E REVENUE HAS CHALLENGED BEFORE THIS TRIBUNAL. ITA NO4720,4799/DEL/07 4 4. WE WILL BE FIRST DEALING WITH REVENUES APPEAL. DISALLOWANCE OF EXPENSES U/S 14A: DISALLOWANCE OF EXPENSES U/S 14A: DISALLOWANCE OF EXPENSES U/S 14A: DISALLOWANCE OF EXPENSES U/S 14A: 5. GROUND NO.1 RELATES TO DISALLOWANCE OF EXPENSES ATTR IBUTABLE TO EXEMPTED INCOME OF ` .53,67,000/-. DURING ASSESSMENT PROCEEDINGS THE ASSESSING OFFICER NOTED THAT THE ASSESSEE COMPANY HAD E ARNED INTEREST ON BONDS EXEMPT U/S 10(23G) OF THE ACT AMOUN TING TO ` .1,47,07,534/-. THE ASSESSEE WAS CONFRONTED AND WAS ASKED TO EXPLAIN THE APPLICABILITY OF SECTION 14A OF THE ACT. IN RESP ONSE THE ASSESSEE REPLIED THAT PROVISIONS OF SECTION 14A ARE NOT ATTRACT ED AS THIS SECTION PRE-SUPPOSES FOR INCURRENCE OF CERTAIN EXPENDITURE FOR EARNING EXEMPT INCOME. HOWEVER, THE ASSESSING OFFICER DID NOT AGREE WI TH THE CONTENTIONS OF ASSESSEE AND MADE ADDITION OF ` .53,67,000/- U/S 14A OF THE ACT. THE RELEVANT PORTION OF ASSESSING OFFICERS OR DER IS REPRODUCED BELOW:- THE CONTENTION OF THE ASSESSEE IS NOT ACCEPTABLE AS THE FACT REMAIN THAT SECTION 14A CLEARLY PRESCRIBED THAT NO D EDUCTION SHALL BE ALLOWED IN RESPECT OF EXPENDITURE INCURRED B Y THE ASSESSEE IN RELATION TO THE INCOME WHICH DOES NOT FORM PART OF TOTAL INCOME UNDER THIS ACT. THE INVOCATION OF SECTIO N 14A IS AUTOMATIC AND COMES INTO OPERATION WITHOUT ANY EXCEP TION AS SOON AS THE DIVIDEND INCOME IS CLAIMED AS EXEMPT. SIN CE THE ENTIRE TAX FREE INTEREST INCOME FROM BONDS HAVE BEEN CLAIMED EXEMPT AND ARE NOT PART OF TOTAL INCOME UNDER THIS A CT. HENCE, SECTION 14A IS CLEARLY ATTRACTED IN THIS CASE AND ANY E XPENDITURE RELATABLE TO EARNING OF EXEMPT INCOME SHALL HAVE TO BE DISALLOWED. NO EVIDENCE HAS BEEN FURNISHED BY THE ASSESSE E COMPANY TO ESTABLISH THAT NO EXPENSE HAS BEEN INCURRED IN ITA NO4720,4799/DEL/07 5 EARNING OF INTEREST INCOME FROM BONDS. THIS IS SPECIALLY REQUIRED IN THE LIGHT OF FACT THAT CERTAIN EXPENSES LIKE SALAR Y, EMPLOYEES WELFARE EXPENSES, POSTAGE AND TELEGRAM EXPENSES, TRAVELI NG AND CONVEYANCE EXPENSES AND RENT ETC. ARE COMMON EXPENSES WITH REGARD TO DIVIDEND INCOME/INTEREST FREE INCOME AND NORMAL/REGULAR BUSINESS ACTIVITY OF THE ASSESSEE COMPANY - ------- THE DISALLOWANCE OF ADMINISTRATIVE EXPENSES AND INTERE ST EXPENSES ON EARNING OF TAX FREE INTEREST/INCOME CLAIM ED EXEMPT IS ALSO HELD/PERMITTED BY THE VERDICT OF HON'BLE SUPR EME COURT IN THE CASE OF CIT V. UNITED GENERAL TRUST LTD. 200 ITR 488 (SC)------. THE ASSESSING OFFICER THEN CALCULATED AN AMOUNT OF ` .53.67 LAKHS BEING AMOUNT OF INTEREST PAID ATTRIBUTABLE TO EARNING OF E XEMPT INCOME AND MADE THE ADDITION ACCORDINGLY. 6. BEFORE LD CIT(A), THE LD AR SUBMITTED THAT ASSESSING OFFICER HAS NOT PROVED ANY NEXUS BETWEEN THE EXPENDITURE INCURRE D VIS-A-VIS EARNING OF EXEMPTED INCOME AND RELIED UPON THE DECI SION OF ITAT FOR ASSESSMENT YEAR 1999-00 WHEREIN THE ADDITION MADE BY TH E ASSESSING OFFICER WAS DELETED BY HON'BLE ITAT. HE FURTHER ARGU ED THAT NO EXPENDITURE HAS BEEN INCURRED FOR EARNING EXEMPTED I NCOME AND PLEADED THAT ASSESSING OFFICERS ACTION IN MAKING DISALL OWANCE U/S 14A COULD BE JUSTIFIED W.E.F. 1.4.2007 WHEN SUB SECTION (2 ) & (3) WERE ADDED TO SECTION 14A OF THE ACT. THE LD AR ALSO REFE RRED TO EARLIER ORDER OF LD CIT(A) FOR THE ASSESSMENT YEAR 2003-04 WHER EIN THE LD CIT(A) HAD DELETED THE DISALLOWANCE. THE LD CIT(A) AFTER GOING THROUGH THE SUBMISSIONS MADE IN ITS OWN ORDER IN EARLIER YEARS AN D ORDER OF ITAT DELHI BENCH C IN I.T.A. NO.3965/DEL/2002 IN ASSESSMENT YEAR 1999-00 IN APPELLANTS OWN CASE DELETED THE ADDITION MADE BY THE ASSESSING OFFICER. ITA NO4720,4799/DEL/07 6 7. AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 8 THE LD DR ARGUED THAT IN VIEW OF EXEMPTED INCOME EARNED BY THE ASSESSEE, THE DISALLOWANCE MADE BY THE ASSESSING OFFICER IS JUSTIFIED. SHE ARGUED THAT LD CIT(A) WAS NOT JUSTIFIE D IN DELETING THE WHOLE ADDITION U/S 14A ON THE BASIS OF EARLIER YEAR TR IBUNAL ORDER. 9. THE LD AR, ON THE OTHER HAND, ARGUED THAT LD CIT (A) HAS RIGHTLY DELETED THE ADDITION AS IT WAS DONE KEEPING IN VIEW T HE FACTS AND CIRCUMSTANCES OF THE CASE WHICH WERE SIMILAR TO EARLIE R YEAR. 10. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. WE ARE OF THE CONSIDERED OPINION THAT THIS POINT SHOULD BE EXAMINED BY THE ASSESSING OFFICER AFRESH ILN VIEW OF HON'BLE DELHI HIGH COURT JUDGMENT IN THE CASE OF MAXPO INVESTMENT LTD. WHEREIN HON'BLE COURT HAS HELD THAT ASSESSING OFFICER HAD TO FIRST GIVE FINDING AS TO T HE FACT THAT HE IS NOT SATISFIED WITH THE CORRECTNESS OF THE CLAIM IN RESP ECT OF SUCH EXPENDITURE. THE HON'BLE COURT HAD FURTHER OBSERVED THAT WHILE REJECTING THE CLAIM OF ASSESSEE WITH REGARD TO EXPENDIT URE OR NO EXPENDITURE AS THE CASE MAY BE IN RELATION TO EXEMPT INCOME, THE ASSESSING OFFICER WOULD HAVE TO INDICATE COGENT REASONS F OR THE SAME. RESPECTFULLY FOLLOWING THE HON'BLE DELHI HIGH COURT JUDGMENT, WE REMIT THIS POINT BACK TO THE OFFICE OF ASSESSING OFFICER WITH DIRECTIONS TO EXAMINE AND GIVE FINDING AND ARRIVE AT THE DISALLOWA NCE OF INTEREST OR OTHER EXPENSES ACCORDINGLY IN THE LIGHT OF SUCH FINDIN GS. 11. IN VIEW OF THE ABOVE, THE APPEAL FILED BY THE R EVENUE IS DECIDED IN ITS FAVOUR FOR STATISTICAL PURPOSES. ITA NO4720,4799/DEL/07 7 12. NOW WE TAKE UP THE ASSESSEES APPEAL. 13. THE FIRST GROUND OF APPEAL RELATES TO DISALLOWANCE OF EXCESS DEPRECIATION BEING @ 40% ON VEHICLES WHICH HAD BEEN LEASED OUT. THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS NOTED THAT T HE ASSESSEE HAD CLAIMED DEPRECIATION ON MOTOR LORRIES/TAXIS AND MOTOR CARS ETC, AT HIGHER RATE OF 40% IN CASE OF MOTOR LORR IES/TAXIES AND 25% AND IN RESPECT OF MOTOR CARS INSTEAD OF NORMAL DEPRECI ATION @ 20%. THE ASSESSING OFFICER NOTED THAT DURING PREVIOUS YEAR AL SO ADDITION WAS MADE ON SIMILAR GROUNDS FOR CLAIMING EXCESS DEPRECI ATION. THEREFORE, THE ASSESSING OFFICER MADE AN ADDITION OF ` .80,54,344/- ON ACCOUNT OF EXCESS DEPRECIATION. DURING APPELLATE PROC EEDINGS, THE LD AR SUBMITTED AS UNDER:- 1. THAT HON'BLE ITAT HAS ACCEPTED HIGHER RATE OF DEPREC IATION RIGHT UP TO THE ASSESSMENT YEAR 2002-03. 2. THAT THERE ARE NO FRESH LEASING TRANSACTIONS DURING THE YEAR. 3. THAT SUBMISSIONS RELATED TO THIS GROUND OF APPEAL ARE IDENTICAL TO THESE TENDERED IN ASSESSMENT YEAR 2003-04. 14. THE LD CIT(A), HOWEVER, DID NOT AGREE WITH THE SUBMISSIONS MADE BY THE ASSESSEE AND UPHELD THE DECISION OF ASSESSING O FFICER IN RESTRICTING THE DEPRECIATION ALLOWANCE. THE RELEVANT PORTION OF LD CIT(A)S ORDER IS REPRODUCED BELOW:- I HAVE CONSIDERED THE SUBMISSIONS AND ALSO REFERRED TO P ARA 6, 6.1. AND 6.2. OF THE ORDER DATED 21.6.2007 IN APPEA L NO.114/06- 07 FOR ASSESSMENT YEAR 2003-04 PASSED BY ME WHERE THE ISSUE HAD BEEN DEALT BY ME THOROUGHLY. IT SHALL NOT BE OU T OF PLACE TO ITA NO4720,4799/DEL/07 8 MENTION THAT IN ABOVE MENTIONED ORDER PRINCIPLE OF RES JUDICATA OR ESTOPPEL BY RECORD HAS BEEN DISCUSSED IN SO FAR AS, TH IS PRINCIPLE HAS ITS APPLICABILITY TO THE DECISIONS OF CIV IL COURTS AND NOT TO DECISIONS OF INCOME TAX AUTHORITIES/ITAT FOR WH ICH REFERENCE IS MADE TO THE CASE LAWS OF JEHANGIR VAKIL M ILLS CO. LTD. V. CIT (1963) 49 ITR 137 (SC) AND OF ITO V. MURLIDH AR BHAGWAN DASS (1964) 52 ITR 335 (SC). REFERENCE HAS ALSO BEEN MA DE TO THE CASE LAW OF CIT V. BANSAL CREDITS LTD., (2003) 2 59 ITR 69 (DEL.) AS PER WHICH THE HON'BLE JURISDICTIONAL HIGH C OURT CLEARLY HELD THAT FOR DETERMINING THE RATE OF DEPRECIATION THE END USE OF THE VEHICLES GIVEN ON LEASE/HIRE PURCHASE IS REQUIRED T O BE VERIFIED WHICH MEANS THAT THE VERIFICATIONS ARE REQUI RED TO BE CONDUCTED FROM THE LESSEES AS TO THE ACTUAL USE OF THE V EHICLES BY THEM. DURING THE COURSE OF APPELLATE PROCEEDINGS F OR ASSESSMENT YEAR 2003-04, THE APPELLANTS AR HAS BEEN ASKED THROUGH ORDER SHEET ENTRY DATED 17.10.2006 TO FURNISH A CHART OF THE LEASED VEHICLES ALONG WITH THE NAMES AND ADDRESSES O F THE LESSEES FOR WHICH NO REPLY HAS BEEN SUBMITTED BY THE A PPELLANT. THEREAFTER, THE ASSESSING OFFICER HAD ALSO BEEN ASKED TO CONDUCT INQUIRIES/VERIFICATION ON THE ABOVE MENTIONED POINT BUT IT IS OBSERVED THAT THE APPELLANT HAS NOT COOPERATED EITHER WITH THE ASSESSING OFFICER OR WITH THE UNDERSIGNED IN FILING THE NECESSARY PARTICULARS REGARDING THE DETAILS OF THE VEHICLES LEASE D OUT BY IT TO VARIOUS PERSONS. THIS POINT HAD ELABORATELY BEEN DISC USSED IN THE APPELLATE ORDER FOR ASSESSMENT YEAR 2003-04 AND FRO M THE EXPLANATION TENDERED BY THE LD AR, IT IS SEEN THAT DU RING THE CURRENT YEAR UNDER CONSIDERATION TOO, THE APPELLANT HAS NOT RAISED ANY NEW SUBMISSIONS/POINTS AGAINST THE ADDITIONS MA DE BY THE ASSESSING OFFICER WHO RESTRICTED THE DEPRECIATION TO 20% INSTEAD OF 40% CLAIMED BY THE APPELLANT COMPANY. IT SHALL NOT BE ITA NO4720,4799/DEL/07 9 OUT PLACE TO MENTION HERE THAT THE APPELLANT HAS CLA IMED DEPRECIATION AT A HIGHER RATE OF 40% AND HENCE THE BURDEN OF PROOF SQUARELY LIES ON THE APPELLANT TO SHOW THAT IT HAS CLAIMED DEPRECIATION RIGHTFULLY. IN THE CASE OF H.E.H. NIZAM S RELIGIOUS ENDOWMENT TRUST V. CIT (1966) 59 ITR 582, 587 (SC) IT IS HELD THAT TO EARN THE EXEMPTION, THE ASSESSEE HAS TO ESTABLISH THAT HIS CASE CLEARLY SQUARELY FALLS WITHIN THE AMBIT OF THE EXEMPTING PROVISIONS OF THE ACT BUT LIKE EARLIER ASSESSMENT YEAR 20 03-04, THE APPELLANT FOR THE YEAR UNDER CONSIDERATION HAS FA ILED TO DISCHARGE ITS ONUS TO PROVE THAT THE DEPRECIATION AT H IGHER RATE OF 40% HAS BEEN CLAIMED RIGHTLY,. AFTER CONSIDERING THE FACT THAT THE ISSUE HAS BEEN DECIDED AGAINST THE APPELLANT IN THE APP ELLATE ORDER DATED 21.6.2007 FOR ASSESSMENT YEAR 2003-04 AND THAT THERE IS NO MATERIAL CHANGE IN THE FACTS AND CIRCUMST ANCES OF THE CASE FOR THE YEAR UNDER CONSIDERATION AS COMPARED TO T HE LAST YEAR, I AM INCLINED TO UPHOLD ADDITION OF ` .80,54,344/-. 15. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 16. AT THE OUT SET, THE LD A ARGUED BEFORE US THAT NO FRESH LEASING TRANSACTION WAS DONE DURING THE YEAR UNDER CONSIDERATI ON. THE DEPRECIATION WAS CLAIMED AT THE OPENING BALANCE OF WDV BROUGHT FORWARD FROM PREVIOUS YEAR AND DURING PREVIOUS YEAR T HE DEPRECIATION WAS BEING CLAIMED AT 40% AND THEREFORE ON THE BASIS OF CONTI0NUITY AND IN VIEW OF THE FACT THAT VEHICLES REMAINED CONTI NUED TO BE LET OUT ON HIRE, THE CLAIM OF DEPRECIATION AT 40% IS LAWFUL AND JUSTIFIED. RELIANCE WAS PUT IN THE CASE OF CIT V. MGF 285 ITR 14 2. 17. ON THE OTHER HAND, LD DR CONTENDED THAT ONUS WAS ON THE ASSESSEE TO PROVE THAT MOTOR CARS/LORRIES WERE ACTUALLY L ET OUT ON HIRE ITA NO4720,4799/DEL/07 10 AND ASSESSEE DID NOT FILE NECESSARY INFORMATION BEFORE ASSE SSING OFFICER AND BEFORE LD CIT(A). IN THIS RESPECT, SHE I NVITED OUR ATTENTION TO PAGE 2 & 3 OF LD CIT(A)S ORDER WHERE LD CIT(A) H AD ELABORATELY DEALT WITH THE DISALLOWANCE. IN VIEW OF THE DISCUSSION MADE BY LD CIT(A) SHE ARGUED THAT WITHOUT NECESSARY INFORMATION/V ERIFICATION BEING AVAILABLE WITH ASSESSING OFFICER AND LD CIT(A), THE CL AIM OF DEPRECIATION AT 40% WAS NOT JUSTIFIED. 18. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. THE HON'BLE DELHI HIGH COURT IN THE CASE OF CIT V. MGF 285 ITR 142HAS C LEARLY HELD THAT VEHICLES OWNED BY A NON BANKING FINANCE COMPANY (NBF C) AND LEASED TO THIRD PARTY ARE ELIGIBLE FOR HIGHER RATES OF DEPR ECIATION @ 40%. RESPECTFULLY FOLLOWING THE HON'BLE DELHI HIGH COURT JUDGMENT, WE HOLD THE VIEW THAT ASSESSEE WAS RIGHTLY ELIGIBLE FOR DEPRECI ATION AT HIGHER RATE OF 40%. IN VIEW OF THE ABOVE, SECOND GROUND OF APPEAL SUCCEEDS. SPECULATIVE LOSS: SPECULATIVE LOSS: SPECULATIVE LOSS: SPECULATIVE LOSS: 19. THE ASSESSING OFFICER DURING ASSESSMENT PROCEEDINGS FOU ND THAT ASSESSEE HAD CLAIMED AN AMOUNT OF ` .29,47,766/- AS CAPITAL LOSS. THE ASSESSING OFFICER INVOKED THE PROVISIONS OF SECTION 73 REA D WITH EXPLANATION AND TREATED THE LOSS AS SPECULATIVE LOSS ON T HE BASIS THAT ASSESSEE WAS A NBFC AND ITS LOSS IN TRADING OF SHARES WILL BE TREATED AS SPECULATIVE LOSS. THE CONTENTION OF THE ASSESSEE THAT IT DID NOT DEAL WITH SHARE WAS NOT ACCEPTED. 20. DURING APPELLATE PROCEEDINGS, THE LD AR PLEADED THAT CAPITAL LOSS INCURRED BY THE APPELLANT COMPANY PERTAIN TO DEALIN G IN GOVT. SECURITIES WHICH CANNOT BE TERMED AS SPECULATIVE IN TER MS OF PROVISIONS ITA NO4720,4799/DEL/07 11 OF SECTION73. THE LD AR FURTHER PLEADED THAT INVESTM ENT IN GOVT. SECURITIES WERE FOR LONG TERM AND THIS FACT ITSELF PROV ES THAT THESE WERE NOT HELD FOR SPECULATIVE PURPOSES. HOWEVER, THE LD CI T(A) DID NOT AGREE WITH THE CONTENTIONS OF ASSESSEE AND UPHELD THE DE CISION OF ASSESSING OFFICER. 21. AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 22. AT THE OUTSET, LD AR SUBMITTED THAT LONG TERM LOSS HAD OCCURRED ON SALE OF GOVT. SECURITIES WHICH ARE DIFFERENT FROM SH ARES. HE FURTHER PLEADED THAT EXPLANATION TO SECTION 73 REFERS TO SALE/ PURCHASE OF SHARES ONLY. IN THIS RESPECT, HE INVITED OUR ATTENTION TO PAGE 38 OF PAPER BOOK WHEREIN COMPLETE DETAILS OF SECURITIES WHER E FROM LOSS HAD OCCURRED WERE PLACED. 23. ON THE OTHER HAND, LD DR STRESSED THAT WHEREVER A NBFC DEALS WITH SHARES, SECTION 73 COMES INTO APPLICATION AND SHE RELIED UPON THE ORDER OF ASSESSING OFFICER AND LD CIT(A). 24. WE HAVE HEARD THE RIVAL SUBMISSIONS OF BOTH THE PA RTIES AND HAVE GONE THROUGH THE MATERIAL AVAILABLE ON RECORD. EXPLANATION TO SECTION 73 READS AS FOLLOWS:- WHERE ANY PART OF THE BUSINESS OF A COMPANY OTHER THA N A COMPANY WHOSE GROSS TOTAL INCOME CONSIST MAINLY OF INCOM E WHICH IS CHARGEABLE UNDER THE HEAD INTEREST ON SECURIT IES, INTEREST FROM HOUSE PROPERTY, CAPITAL GAINS AND INCOM E FROM OTHER SOURCES, OR A COMPANY THE PRINCIPLE BUSINESS OF WH ICH IS A BUSINESS OF BANKING OR THE GRANTING OF LOANS AND ADVANC ES CONSIST IN THE PURCHASE AND SALE OF SHARES OF OTHER COMPA NIES, ITA NO4720,4799/DEL/07 12 SUCH COMPANY SHALL FOR THE PURPOSE OF THIS SECTION BE D EEMED TO BE CARRYING ON A SPECULATIVE BUSINESS TO THE EXTENT TO WHICH THE BUSINESS CONSIST OF PURCHASE AND SALE OF SUCH SHARES. FROM THE ABOVE DEFINITION, IT IS CLEAR THAT THIS SECTI ON IS APPLICABLE ONLY WHERE SHARES ARE PURCHASED OR SOLD BY A NBFC. THIS SECTI ON DOES NOT TALK ABOUT GOVT. SECURITIES AND THEREFORE, IN OUR OPI NION, IN CASE OF GOVT. SECURITIES, THIS EXPLANATION IS NOT APPLICABLE. W E HAVE OBSERVED FROM COMPUTATION OF CAPITAL GAIN, PLACED AT PAGE 38 OF PAPER BOOK THAT THE LOSS OCCURRED TO ASSESSEE WAS ON ACCOUNT OF SALE OF GO VT. SECURITIES ONLY OTHER THAN ONE BELONGING TO GR SOLVENTS WHICH I S NOT A GOVT. SECURITY BUT IS NOT A SHARE. FROM THE DATES OF PURCHASE MENTIONED AGAINST EACH SECURITY, IT IS CLEAR THAT HELD THESE SECU RITIES WERE HELD FOR FAIRLY LONG PERIOD OF TIME. THEREFORE, WE DO NOT AG REE WITH ASSESSING OFFICER AND LD CIT(A) THAT THE ASSESSEE IS HIT BY EXPLAN ATION TO SECTION 73 AND THEREFORE WE HOLD THAT LOSS OCCURRED TO ASSESSEE IS OF CAPITAL NATURE AND NOT OF SPECULATIVE NATURE. IN VIEW OF ABO VE, GROUND NO.3 SUCCEEDS. INT INTINT INTE EE EREST U/S 234B, 234D & 244A: REST U/S 234B, 234D & 244A: REST U/S 234B, 234D & 244A: REST U/S 234B, 234D & 244A: 25. THESE GROUNDS REGARDING LEVY OF INTEREST HAS BEEN T AKEN BY THE ASSESSEE AS GROUND NO.4 & 5. WE HOLD THE VIEW THAT INTE REST UNDER THESE SECTIONS IS MANDATORY IN NATURE AND THE DETERMINA TION OF INTEREST UNDER THESE SECTIONS WILL DEPEND UPON THE FINAL OUT CO ME OF THE CASE., IN VIEW OF THE ABOVE, GROUND NO.4 & 5 ARE ALSO SUCCEE DS FOR STATISTICAL PURPOSES. 26. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS AL LOWED FOR STATISTICAL PURPOSES. ITA NO4720,4799/DEL/07 13 27. ORDER PRONOUNCED IN THE OPEN COURT ON THE 6TH D AY OF JULY, 2012. SD/- SD/- (R.P. TOLANI) (T.S. KAP OOR) JUDICIAL MEMBER ACCOUNTANT MEMBER DT.06.7.2012. HMS COPY FORWARDED TO:- 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT 4. THE CIT (A)-, NEW DELHI. 5. THE DR, ITAT, LOKNAYAK BHAWAN, KHAN MARKET, NEW DEL HI. TRUE COPY. BY ORDER (ITAT, NEW DELHI). DATE OF HEARING DATE OF DICTATION 27.6.2012 DATE OF TYPING 28.6.2012 DATE OF ORDER SIGNED BY 06.7.2012 BOTH THE MEMBERS & PRONOUNCEMENT. DATE OF ORDER UPLOADED ON NET 06.7.2012 & SENT TO THE BENCH CONCERNED.