ACIT, Visakhapatnam V. Balaji Sea Foods Pvt Ltd, Visakhapatnam

ITA 52/VIZ/2009

• Counselvise Citation: [2010] 136 COUNSELVISE.COM (IT) 0613 (ITAT-VISAKHAPATNAM)
• Duration Of Justice: 1 year(s) 5 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-07-2010
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: Not Allotted
• Next Hearing Date: 21-04-2010
• Assessment Year: 2005-2006
• Appeal Filed On: 04-02-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: SUBRATA SARKAR
• Keywords: Depreciation
• Section: 32

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM BENCH, VISAKHAPATNAM BEFORE: SHRI SUNIL KUMAR YADAV, JUDICIAL MEMBER AND SHRI BR BASKARAN, ACCOUNTANT MEMBER ITA NO.52/VIZAG/2009 ASSESSMENT YEAR : 2005-06 ACIT CIRCLE-3(1) VISAKHAPATNAM BALAJI SEA FOODS PVT. LTD VISAKHAPATNAM (APPELLANT) VS. (RESPONDENT) PAN NO.AAACA 4036F APPELLANT BY: SHRI SUBRATA SARKAR, DR RESPONDENT BY: SHRI G.V.N. HARI, CA ORDER PER SHRI S.K. YADAV, JUDICIAL MEMBER:- THIS APPEAL IS PREFERRED BY THE REVENUE AGAINST T HE ORDER OF THE CIT(A) ON A SOLITARY GROUND THAT CIT(A) HAS ERRED I N DIRECTING THE A.O. TO ALLOW THE DEPRECIATION CLAIMED BY THE ASSESSEE COMP ANY IN RESPECT OF 10 TUNA LONG LINERS ALLEGEDLY PURCHASED BY THE ASSESSE E WITHOUT APPRECIATING THE FACT THAT THE ASSESSEE COULD NOT PROVE THAT THE ASS ETS WERE OWNED BY IT. 2. WE HAVE HEARD THE RIVAL SUBMISSIONS AND CAREFULL Y PERUSED THE ORDERS OF AUTHORITIES BELOW AND DOCUMENTS PLACED ON RECORD . 3. THE BRIEF FACTS BORNE OUT FROM THE RECORD ARE TH AT ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF PROCESSING AND EXPORT OF MARINE PRODUCTS AND DEEP SEA FISHING. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, THE A.O. NOTED THAT ASSESSEE COMPANY HAS CLAIMED THE DEPRECI ATION ON 10 TUNE LONG LINERS. ON INQUIRY, IT WAS NOTICED BY THE A.O. THA T THE DOCUMENTATION RELATING TO TRANSFER OF VESSELS TO THE ASSESSEE COMPANY WAS COMPLETED BUT NO PAYMENT WAS MADE. THE SALE DEED EXECUTED BETWEEN T HE PARTIES DID NOT THROW ANY LIGHT REGARDING THE RIGHTS OF THE PURCHAS ER. IT DOES NOT EVEN INDICATE THE DATE OF PASSING ON THE OWNERSHIP TO TH E ASSESSEE. THE SALE DEED DOES NOT CONVEY THE FULL RIGHT TO THE ASSESSEE. IT IMPOSED LOT OF RESTRICTIONS ON THE ASSESSEE REGARDING THE MOVEMENT OF VESSELS A ND ALSO ON THE ACTIVITY TO BE CARRIED ON BY THE ASSESSEE. THE CREWS ARE TO BE SUPPLIED BY THE SELLERS 2 AND FISHING OPERATIONS ARE CONTROLLED AND SUPERVISE D BY M/S. DEEP SEA FISHING MANAGEMENT, THE SELLERS OF THE VESSELS. TH ERE ARE VARIOUS CONDITIONS IN THIS CONVEYANCE DEED WHICH INDICATE THAT OWNERSH IP WAS NOT PASSED TO THE ASSESSEE. ON THE BASIS OF THE ABOVE FACTS, THE ASS ESSING OFFICER CAME TO THE CONCLUSION THAT ASSESSEE WAS ONLY USING THE VESSELS WITHOUT ANY OWNERSHIP. HAVING RELIED UPON VARIOUS JUDGEMENTS, THE A.O. CON CLUDED THAT ASSESSEE COMPANY WAS NOT EVEN THE BENEFICIAL OWNER OF SUCH V ESSELS AND HE DISALLOWED THE CLAIM OF DEPRECIATION OF RS.2,59,23, 070/-. 4. THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT( A) WITH THE SUBMISSION THAT THE ASSESSEE COMPANY HAD TAKEN UP T HE ACTIVITY OF DEEP SEA FISHING EMPLOYING TUNA LONG LINERS (DEEP SEA FISHIN G VESSELS) IMPORTED FROM THE REPUBLIC OF SEYCHELLES. THE ASSESSEE COMPANY H AD ENTERED INTO A PURCHASE AGREEMENT TO PURCHASE THESE VESSELS WITH D EEP SEA FISHING MANAGEMENT LIMITED AND PURCHASED 10 TUNA LONG LINER S FROM THE SAID CONCERN UNDER SUPPLIERS CREDIT AT A TOTAL COST OF U.S.$ 4600000, THE EQUIVALENT AMOUNT IN INDIAN RS.20,73,84,563/-. THE SAID AGREEMENT TO PURCHASE WAS ENTERED ON 18.9.2004. THE REPAYMENT A GREEMENT WAS ALSO ENTERED ON 3.1.2005 FOR PAYMENT OF THE COST OF TUNE LINERS IN 5 YEARLY INSTALMENTS WITH MORATORIUM OF ONE YEAR FROM THE DA TE OF COMMENCING OF THE FISHING OPERATIONS. THE ASSESSEE HAS PLACED ALL RE LEVANT EVIDENCE IN ORDER TO PROVE THE GENUINENESS OF THE TRANSACTIONS. IT WAS ALSO POINTED OUT BEFORE THE A.O. THAT THE ASSESSEE COMPANY HAS MADE THE FIRST I NSTALMENT DUE TOWARDS THE PURCHASE OF VESSELS AND HENCE THE ASSESSING OFF ICER IS NOT JUSTIFIED IN HOLDING THAT IT HAD NOT MADE ANY PAYMENTS TOWARDS A CQUISITION OF THE VESSELS. THE TRANSACTION INVOLVED I.E. ACQUISITION OF VESSELS FROM FOREIGN PARTY, WAS SUBJECTED TO SEVERAL STATUTORY REQUIREME NTS LIKE LETTER OF PERMISSION BY THE MINISTRY OF AGRICULTURE, THE SALE BILL DULY ENDORSED BY THE OFFICE OF HIGH COMMISSION OF INDIA, SINGAPORE, PORT CLEARANCE FROM VISAKHAPATNAM PORT TRUST, BILL OF ENTRY FROM THE OF FICE OF INDIAN CUSTOMS, EDI SYSTEMS, CERTIFICATE OF REGISTRY OF A FISHING B OAT GRANTED BY THE REGISTRAR OF INDIAN FISHING BOATS ETC. ALL THESE EVIDENCE WER E PRODUCED BEFORE THE A.O. BUT HE WAS NOT CONVINCED WITH IT. THE CIT(A) RE-EXAMINED THE ISSUE IN THE LIGHT OF THESE FACTS AND FINALLY CONCLUDED THAT THE ASSESSEE COMPANY IS A BENEFICIAL OWNER OF THE IMPUGNED VESSELS AND AS SUC H VESSELS HAVE BEEN USED 3 FOR THE PURPOSE OF DEEP SEA FISHING WHICH IS THE BU SINESS OF THE ASSESSEES. THEREFORE, THE DEPRECIATION CLAIMED ON SUCH VESSEL IS ADMISSIBLE AND THE SAME SHOULD BE ALLOWED. THE RELEVANT OBSERVATION O F THE CIT(A) ARE EXTRACTED HEREUNDER FOR THE SAKE OF REFERENCE: IN THIS CONTEXT, I HAVE CAREFULLY EXAMINED THE FAC TS OF THE CASE AND THE RIVAL SUBMISSIONS. IN ORDER TO CLAIM DEPREC IATION THE ESSENTIAL CONDITION IS THAT THE ASSESSEE MUST BE TH E OWNER OF THE ASSET CONCERNED. THIS VIEW IS UNDISPUTED AND NON-C ONTROVERSIAL. IN CIT VS. NANDAN CONSTRUCTION REPORTED 222 ITR 737 THE HONBLE A.P. HIGH COURT HAD FOLLOWED THE HONBLE SUPREME CO URTS DECISION IN R.B. JODHAMAL KUTHIALAS CASE REPORTED IN 82 ITR 517 AS CLEAR AND BINDING IN THAT IT HAS HELD THE BENEFICIAL OWNE RSHIP IS ALSO RELEVANT AND THAT SUCH DECISION SHOULD BE HELD TREA TED AS APPLICABLE IN ALL TAX MATTERS BY RECOGNIZING THE BENEFICIAL OW NERS FOR LIABILITY AS WELL AS ANY DEDUCTION. THE RIGHT TO DEPRECIATION F OR BENEFICIAL OWNER GOT SETTLED IN THE DECISION OF HONBLE SUPREM E COURT IN MYSORE MINERALS LIMITED VS. CIT REPORTED IN 239 ITR 775. THE CONCEPT OF OWNERSHIP IN DIFFERENT CONTEXTS GOT RECO NCILED AND HAS BECOME CONSISTENT WITH EARLIER DECISIONS IN R.B. JO DHAMAL KUTHIALA (SUPRA) AS WELL AS CIT VS. PODDAR CEMENTS PVT. LTD. , REPORTED IN 226 ITR 625 BY THE HONBLE SUPREME COURT. HENCE, I N VIEW OF THESE PRECEDENTS, THE HONBLE KARNATAKA HIGH COURT HAD LITTLE DIFFICULTY IN GRANTING DEPRECIATION IN RESPECT OF A PROPERTY, WHERE THE ASSESSEE HAD THE USE OF THE PROPERTY, THOUGH TH E TITLE VESTED WITH A COOPERATIVE SOCIETY IN THE CASE OF SURANA PH ARMACEUTICALS PVT. LTD VS. CIT REPORTED IN 243 ITR 218. THE SAME VIEW WAS TAKEN IN CIT VS. DEEPAK NITRITE LIMITED REPORTED IN 243 ITR 825 (GUJ) WHERE POSSESSION HAS BEEN TAKEN OVER BY THE A SSESSEE AFTER PART PAYMENT OF PRICE, THOUGH NOT REGISTERED. HOWE VER, PRIOR TO THE DECISION RENDERED IN MYSORE MINERALS (SUPRA) BY THE HONBLE SUPREME COURT, THE HONBLE HIGH COURT OF MADRAS IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORPORATION LIMITED VS. C IT REPORTED IN 228 ITR 399 HAS HELD ONE OF THE CONDITIONS PRECEDE NT FOR CLAIMING DEPRECIATION U/S 32 OF THE ACT, IS THAT THE ASSESSE E MUST BE THE OWNER OF THE BUILDING, MACHINERY, PLANT OR FURNITUR E, AS THE CASE MAY BE. THE USE OF THE EXPRESSION `OWNED BY THE AS SESSEE AND USED FOR THE PURPOSE OF BUSINESS OR PROFESSION EMP HASIZES THAT IT IS NOT MERE USER IRRESPECTIVE OF OWNERSHIP THAT IS CONTEMPLATED BY SECTION 32 AS A NECESSARY CONDITION FOR CLAIMING TH E ALLOWANCE OF DEPRECIATION. SUCH OWNERSHIP MUST NECESSARILY MEAN LEGAL TITLE TO THE ASSET IN THE ASSESSEE AND THE USER THEREOF BY T HE ASSESSEE WHILE BEING SUCH OWNER IN THE COURSE OF THE BUSINES S OF THE ASSESSEE. PERSONS WHO ARE MERELY IN POSSESSION, WI THOUT ANY TITLE TO THE PROPERTY, CANNOT CLAIM DEPRECIATION. THIS DECISION OF THE HONBLE MADRAS HIGH COURT WAS UPHELD BY HONBLE SUP REME COURT IN 249 ITR 214 IN SPITE OF THE DECISION IN MYSORE M INERALS (SUPRA). THEREFORE, THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF TAMIL NADU CIVIL SUPPLIES CORPORATION LIMITED REPOR TED 249 ITR 214 4 SHOULD BE TAKEN AS ONE RENDERED IN THE CONTEXT OF A PPRECIATION OF THE FACTS BASED ON INFERENCE THAT THE UNDISPUTED BE NEFICIAL OWNERSHIP WAS NOT ESTABLISHED IN THAT CASE. THEREF ORE, TO CLAIM DEPRECIATION, THE ESSENTIAL CONDITION AS PRESCRIBED IN THE ACT AS WELL AS ANALYSED IN VARIOUS DECISIONS CITED AS ABOVE IS THAT THE BENEFICIAL OWNERSHIP OF THE ASSET HAS TO BE ESTABLISHED BEYOND DOUBT. 4.2 AGAINST THE ABOVE BACKGROUND OF LAW, THE ISSUE FOR CONSIDERATION IS WHETHER THE APPELLANT COMPANY CAN BE TERMED AS THE BENEFICIAL OWNER OF THE IMPUGNED VESSELS. FROM THE FACTS OF THE CASE, IT IS NOTED THAT THE APPELLANT COMPANY AC QUIRED 10 NUMBERS OF DEEP SEA FISHING VESSELS FOR A TOTAL CON SIDERATION OF RS.20.74 CRORES DURING THE YEAR FROM M/S. DEEP SEA FISHERY MANAGEMENT LTD., SEYCHELLES ON DEFERRED SUPPLIERS C REDIT BASIS VIDE AGREEMENT DATED 18.9.2004. SUBSEQUENTLY, THE APPEL LANT COMPANY ENTERED INTO REPAYMENT AGREEMENT FOR THE 10 TUNA LO NG LINERS VIDE AGREEMENT DATED 3.1.2005. AS PER THE SAME, THE TOT AL SALE CONSIDERATION HAS TO BE PAID TO THE SUPPLIER OF VES SELS IN FIVE ANNUAL INSTALMENTS WITH ONE YEAR MORATORIUM PERIOD FROM TH E DATE OF PURCHASE. ACCORDINGLY, THE FIRST INSTALMENT WAS PA YABLE IN JUNE, 2006. AS PER THE EVIDENCES AVAILABLE ON RECORD, TH E FIRST INSTALMENT WAS PAID ON 10.8.2006 WHICH WAS PAYABLE IN JUNE, 20 06. IN ADDITION TO THE ABOVE, THE APPELLANT COMPANY SUBMIT TED THE FOLLOWING DOCUMENTS/CERTIFICATES AS EVIDENCES FOR T HE PURCHASE OF THE SAID VESSELS: (I) INVOICES ISSUED BY THE DEEP SEA FISHERIES MANAGEMENT DATED 25.11.2004 RECEIVED IN THE CUSTOMS DEPARTMENT ON 22.12.2004. (II) PERMISSION LETTER FROM THE MINISTRY OF AGRICULTURE DEPARTMENT OF ANIMAL HUSBANDRY, GOVERNMENT OF INDIA, NEW DELHI DATED 24.11.2004. (III) BILL OF SALE ISSUED BY THE DEEP SEA FISHERIES MANAG EMENT LTD., TOWARDS THE TRANSFER OF SHARES IN FAVOUR OF B ALAJI SEA FOODS LTD., DATED 21.12.2004 AND ENDORSED IN THE HI GH COMMISSION OF INDIA, SINGAPORE. (IV) BILL OF ENTRY FOR HOME CONSUMPTION OF INDIAN CUSTOMS EDI SYSTEM IMPORTS (ICES/1), CUSTOMS HOUSE, VISAKHAPATNA M DATED 5.2.2005. (V) CERTIFICATE OF REGISTRY OF FISHING BOAT ISSUED BY T HE REGISTRAR OF INDIAN FISHING BOATS, GOVERNMENT OF INDIA, VISAKHAPATNAM DATED 13.1.2005. (VI) PORT CLEARANCE CERTIFICATE ISSUED BY THE ASSISTANT COMMISSIONER OF CUSTOMS EXPORT DEPARTMENT DATED 10.2.2005. (VII) SALE INVOICES RAISED BY THE ASSESSEE FOR FISH CATCH ON M/S. HAI FONG COMPANY LTD., 2/25 MOO 1 T RUSSADA, MUANG, PHUKET 83000 THAILAND. ALL THESE EVIDENCES CLEARLY ESTABLISH THE FACT THAT THE APPELLANT IS THE BENEFICIAL OWNER OF SUCH VESSELS AS THE FIRST I NSTALMENT OF THE AMOUNT DUE TO THE SUPPLIER OF THE VESSELS AS PER TH E REPAYMENT 5 AGREEMENT WAS PAID THOUGH WITH SLIGHT DELAY AND SUC H VESSELS WERE OPERATED BY THE APPELLANT COMPANY IN INDIA. H AVING PAID THE FIRST INSTALMENT, THE APPELLANT COMPANY HAD VESTED DOMAIN AND TITLE OVER THOSE VESSELS. THE RATIO LAID DOWN BY THE HON BLE SUPREME COURT IN M/S. MYSORE MINERALS CASE TO THE EFFECT TH AT TRANSFER OF TITLE IN FAVOUR OF THE ASSESSEE IS NOT A PRECONDITI ON FOR ALLOWING THE CLAIM OF DEPRECIATION BUT THE ACTUAL USE OF THE ASS ET AND THE PERSON WHO IS HAVING DOMAIN AND TITLE OVER THE ASSET IS TH E PERSON WHO IS ENTITLED TO CLAIM DEPRECIATION SQUARELY APPLIES IN FAVOUR OF THE APPELLANT COMPANY. 4.3 THE ASSESSING OFFICERS RELIANCE ON THE ORDER O F THE UNDERSIGNED IN THE CASE OF M/S. PRIYANSH SEA FOODS (P) LTD (SUPRA) IS NOT CORRECT IN AS MUCH AS THAT THE FACTS ARE DIF FERENT. IN THAT CASE, THE BUYER OF THE VESSELS DID NOT PAY ANY AMOU NT TO THE SUPPLIER, THE VESSELS WERE SURRENDERED TO THE SUPPL IERS AND THESE FACTS WERE CONFRONTED TO THE SAID COMPANY, ITS MANA GING DIRECTOR WITHDREW THE CLAIM OF DEPRECIATION. HOWEVER, IN TH E INSTANT CASE, THE APPELLANT COMPANY, AS PER THE TERMS OF THE REPA YMENT AGREEMENT, HAVE PAID THE FIRST INSTALMENT AND HAS B EEN USING THE ASSETS FOR THE PURPOSES OF THE BUSINESS. THEREFORE , THE CONCLUSION DRAWN IN THE SAID ORDER WOULD NOT BE APPLICABLE TO THE FACTS OF THE APPELLANT COMPANY. AS IT HAD ALREADY BEEN CONCLUDED THAT THE APPELLAN T COMPANY IS THE BENEFICIAL OWNER OF THE IMPUGNED VES SELS AND SUCH VESSELS HAVE BEEN USED FOR THE PURPOSES OF DEEP SEA FISHING WHICH IS THE BUSINESS OF THE APPELLANT COMPANY, THE DEPRE CIATION CLAIMED ON SUCH VESSELS IS ADMISSIBLE AND THE SAME SHOULD B E ALLOWED. 5. AGGRIEVED, THE REVENUE HAS PREFERRED AN APPEAL B EFORE US AND PLACED HEAVY RELIANCE UPON THE ASSESSMENT ORDER. THE LD. D.R. EMPHATICALLY ARGUED THAT AT THE TIME OF HANDING OVER THE VESSELS, THE A SSESSEE HAS NOT PAID EVEN A SINGLE PENNY TO THE SELLER AND IT IS HIGHLY IMPRO BABLE THAT THE VESSELS COSTING IN CRORES OF RUPEES ARE SOLD WITHOUT RECEIV ING EVEN A SINGLE PENNY FROM THE BUYER. HE HAS ALSO INVITED OUR ATTENTION TO THE TERMS OF THE SALE DEED WITH THE SUBMISSION THAT IN SALE DEED LOT OF C ONDITIONS WERE IMPOSED UPON THE BUYER WHICH CLEARLY SHOWS THAT THE BUYER D ID NOT GET THE RIGHTS OF OWNERSHIP IN THE VESSELS. IT IS A CASE WHERE THE V ESSELS WERE ALLOWED TO BE USED BY THE BUYER WITHOUT HAVING ACQUIRED THE OWNER SHIP RIGHT THEREIN. THE CIT(A) HAS WRONGLY ALLOWED THE CLAIM AFTER HAVING O BSERVED THAT ASSESSEE IS A BENEFICIAL OWNER OF THE VESSELS. WHEREAS FOR GRA NTING DEPRECIATION, THERE IS NO CONCEPT OF BENEFICIAL OWNER. AS PER SECTION 32 OF THE ACT, ONLY THE OWNER OF THE ASSET IS ENTITLED TO CLAIM THE DEPRECIATIONS THEREON ON ITS USE. THE DOCUMENTS FILED BY THE ASSESSEE DOES NOT PROVE THAT HE HAS ACQUIRED THE 6 OWNERSHIP RIGHT IN THE VESSELS, THEREFORE, THE ASSE SSEE IS NOT ENTITLED FOR THE DEPRECIATION AS CLAIMED BY IT AND THE CIT(A) HAS AL LOWED THE DEPRECIATION UNDER A WRONG PREMISE. 6. THE LD. COUNSEL FOR THE ASSESSEE ON THE OTHER HA ND HAS SUBMITTED THAT ASSESSEE HAD PURCHASED THIS TUNA LONG LINERS FROM A FOREIGN COMPANY AND THIS PURCHASE IS NOT POSSIBLE WITHOUT GETTING A CLEARANC E FROM THE CUSTOM AUTHORITIES AND OTHER GOVERNMENT AGENCIES. NO DOUB T CERTAIN CONDITIONS WERE IMPOSED ON THE SALE DEED BUT THESE CONDITIONS ARE WITH REGARD TO THE MODE OF USE BUT THAT DOES NOT RESTRICT THE TRANSFER OF THE RIGHT OF THE VESSELS TO THE BUYER. A COPY OF SALE DEED IS PLACED ON REC ORD ALONG WITH REPAYMENT AGREEMENT. OUR ATTENTION WAS ALSO INVITED TO THE I NVOICE ISSUED BY DEEP SEA FISHERIES MANAGEMENT DATED 25.11.2004 AND THE PERMI SSIONS GRANTED BY DEPARTMENT OF ANIMAL HUSBANDRY AND DAIRYING, MINIST RY OF AGRICULTURE BILL OF SALE DATED 21.12.2004 AND PORT CLEARANCE DATED 10.2 .2005. 7. THE LD. COUNSEL FOR THE ASSESSEE FURTHER CONTEND ED THAT ASSESSEE CAN APPLY TO VARIOUS AUTHORITIES FOR THE PERMISSION TO USE THE VESSELS AFTER HAVING A PROPER AGREEMENT FOR SALE FROM THE SELLER. THERE FORE, THE SALE DEED/AGREEMENT WAS EXECUTED ON 18.9.2004 AND THE PE RMISSION WAS OBTAINED THEREAFTER. AFTER OBTAINING THE PERMISSIO N, THE REPAYMENT AGREEMENT WAS EXECUTED ALONG WITH THE BILL OF SALE. IF ALL THESE SEQUENCES ARE TO BE EXAMINED ONE WOULD FIND THAT FIRST OF ALL THE SALE AGREEMENT OR THE SALE DEED WAS EXECUTED, THEREAFTER ASSESSEE APPLIED FOR PERMISSION AND ONCE HE GOT THE PERMISSION FROM DIFFERENT AUTHORITIES, R EPAYMENT AGREEMENT WAS EXECUTED ALONG WITH THE BILL OF SALE. HE HAS ALSO FILED THE BILL OF ENTRY ISSUED BY THE INDIAN CUSTOM, EDI SYSTEMS, CUSTOM HOUSE WHICH PROVED THE GENUINENESS OF PURCHASES THROUGH THE INVOICE. MERE BY PUTTING A CONDITION IN THE SALE AGREEMENT, THE TRANSFER OF PROPERTY CANNOT BE DEFERRED. HE HAS ALSO PLACED THE RELIANCE UPON THE ACKNOWLEDGEMENT OF DEE P SEA FISHERIES MANAGEMENT CONFIRMING THE RECEIPT OF US$ 4600000 TO WARDS IN FULL AND FINAL SETTLEMENT OF 10 FISHING VESSELS AGAINST THAT SALE DEED DATED 18.9.2004. THE CERTIFICATE WAS ISSUED ON 5.11.2008. THE ASSESSEE HAS ALSO PLACED RELIANCE UPON THE ORDER OF THE TRIBUNAL IN THE CASE OF MISHA PAR INVESTMENTS LTD. VS. ITO 8 SOT 532 MUMBAI IN WHICH THE RELEVANT PROVISIO NS OF THE SALES OF GOODS 7 ACT WERE EXAMINED BY THE TRIBUNAL. ACCORDING TO TH E PROVISIONS OF SECTION 20 OF THE SALES OF GOODS ACT, WHERE THERE IS UNCONDITI ONAL CONTRACT FOR SALE OF A SPECIFIED GOODS IN A DELIVERABLE STATE, THE PROPERT Y IN THE GOODS PASSES TO THE BUYER IF THE CONTRACT IS MADE AND IT IS IMMATERIAL WHETHER TIME OF PAYMENT OF PRICE OR TIME OF THE DELIVERY OF GOODS OR BOTH POST PONED. IN THE INSTANT CASE, THE USE OF THE VESSELS WERE NOT POSSIBLE WITHOUT OB TAINING THE LICENSE FROM THE VARIOUS GOVERNMENT AGENCIES AND LICENSE FROM TH OSE AGENCIES ARE NOT POSSIBLE WITHOUT HAVING AGREEMENT TO SALE OF ALL TH ESE VESSELS WITH THE SELLER. AFTER GETTING A PERMISSION FROM THE CONCERNED AUTHO RITIES, THE ASSESSEE OBTAINED THE DELIVERY OF THESE VESSELS AND USED IT FOR DEEP SEA FISHING. THE USE OF THE VESSELS IS NOT DISPUTED BY THE REVENUE. THE DISPUTE IS ONLY WITH REGARD TO THE OWNERSHIP OF THE VESSEL WHICH IS PROV ED/ESTABLISHED FROM THE AFORESAID DOCUMENTS FILED BY THE ASSESSEES DURING T HE COURSE OF ASSESSMENT PROCEEDINGS. 8. HAVING HEARD THE RIVAL SUBMISSIONS AND FROM A CA REFUL PERUSAL OF RECORD, WE FIND THAT NO DISPUTE WAS RAISED BY THE D EPARTMENT WITH REGARD TO THE USE OF THE VESSELS FOR THE PURPOSE OF THE BUSIN ESS. THE DISPUTE WAS RAISED WITH REGARD TO THE OWNERSHIP OF THE VESSELS. IN ORDER TO DETERMINE THE OWNERSHIP OF THE VESSELS, WE HAVE TO EXAMINE THE DO CUMENT RELATING TO THE SALE TRANSACTIONS AND THE PERMISSION GIVEN BY THE G OVERNMENT AUTHORITIES WHICH ARE AVAILABLE ON RECORD. IF A SEQUENCE OF EVE NTS ARE TO BE EXAMINED, WE WOULD FIND THE SALE DEED WITH REGARD TO THE SALE OF THESE TUNA LONG LINERS (VESSELS) WERE AGREED TO BE SOLD BY THE DEEP SEA FI SHERIES MANAGEMENT LIMITED TO THE ASSESSEES VIDE ITS AGREEMENT DATED 1 8 TH SEPTEMBER, 2004. THOUGH THE NAME OF THE DOCUMENT IS GIVEN AS SALE DE ED FOR TUNA LONG LINERS BUT IN FACT IT WAS A SALE AGREEMENT IN WHICH DIFFER ENT TERMS AND CONDITIONS WERE IMPOSED UPON THE PROPOSED BUYER. THIS AGREEME NT WAS EXECUTED ON 18 TH SEPTEMBER, 2004. THEREAFTER, THE INVOICE OF THESE VESSELS WAS ISSUED ON 25 TH NOVEMBER, 2004 AFTER THE ASSESSEE GOT THE PERMISSI ON FOR ITS OPERATION FROM THE DEPARTMENT OF ANIMAL HUSBANDRY AND DAIRYIN G, MINISTRY OF AGRICULTURE. THIS PERMISSION WAS GRANTED ON 24 TH NOVEMBER, 2004 AND THE INVOICE WAS PREPARED ON 25 TH NOVEMBER, 2004. THEREAFTER A BILL OF SALE ACKNOWLEDGING THE TRANSFER OF SHARE IN THE SHIP WAS EXECUTED ON 21 ST DECEMBER, 2004. AFTER THIS EXECUTION OF BILL OF SA LE, THE REPAYMENT 8 AGREEMENT WAS EXECUTED ON 3 RD JANUARY, 2005. THEREAFTER, PORT CLEARANCE WAS ALSO GRANTED TO THE ASSESSEES ON 10 TH FEBRUARY, 2005. BILL OF ENTRY FOR HOME CONSUMPTION WAS ALSO ISSUED BY THE INDIAN CUSTO MS HOUSE ON 24 TH JANUARY, 2005. MEANING THEREBY THAT FIRST OF ALL S ALE AGREEMENT OF THESE VESSELS WERE EXECUTED BETWEEN THE ASSESSEE AND THE SELLER AND THEREAFTER THE ASSESSEE APPLIED TO VARIOUS GOVERNMENT AGENCIES FOR SEEKING PERMISSION FOR THE OPERATION OF THESE VESSELS IN THE INDIAN OC EAN. ONCE THE PERMISSION IS GRANTED, THE INVOICE, THE BILL OF SALE AND THE R EPAYMENT AGREEMENTS WERE EXECUTED. ALL THESE STEPS MOVES ONE AFTER THE OTHE R IN ORDER TO PURCHASE THE VESSELS BY THE ASSESSEES. IN THE REPAYMENT AGREEME NT, THE SCHEDULE OF PAYMENT WAS GIVEN WHICH WAS COMPLIED WITH BY THE AS SESSEES AND TILL NOVEMBER, 2008, HE PAID THE ENTIRE PAYMENT OF US$ 4 600000 TO THE DEEP SEA FISHERIES MANAGEMENT LIMITED AND CONFIRMATION T O THIS EFFECT IS ALSO PLACED ON RECORD. 9. ALL THESE DOCUMENTS ARE PLACED BEFORE US DURING THE COURSE OF HEARING OF THE APPEAL AND FROM A CAREFUL PERUSAL OF THESE D OCUMENTS, WE FIND THAT THE ASSESSEE WAS MOVING STEP BY STEP AHEAD TOWARDS THE PURCHASE OF THE VESSELS. SINCE THE USER OF THE VESSEL WAS NOT DISP UTED BY THE REVENUE, WE ARE NOT INCLINED TO GIVE ANY OBSERVATION IN THIS RE GARD AND WE CONFINE OURSELVES WITH REGARD TO THE ACQUISITION OF OWNERSH IP RIGHT IN THE VESSELS. IF THESE DOCUMENTS ARE CONSIDERED OR TAKEN INTO ACCOUN T SIMULTANEOUSLY, ONLY ONE INFERENCE WOULD BE DRAWN THAT BEFORE THE END OF THE FINANCIAL YEAR, THE ASSESSEE BECAME THE OWNER OF THE IMPUGNED VESSELS. 10. WE HAVE ALSO EXAMINED THE RELEVANT PROVISIONS O F THE SALES OF GOODS ACT AND ACCORDING TO SECTION 20 OF SALES OF GOODS A CT WHERE THERE IS AN UNCONDITIONAL CONTRACT FOR SALE OF A SPECIFIC GOODS IN A DELIVERABLE STATE, THE PROPERTY IN THE GOODS PASSES TO THE BUYER WHEN THE CONTRACT IS MADE AND IT IS IMMATERIAL WHETHER THE TIME OF PAYMENT OF PRICE OR THE TIME OF DELIVERY OF GOODS OR BOTH IS POSTPONED. IN THE CASE OF SADHU S ARAN SINGH VS. W.B. STATE ELECTRICITY BOARD AIR 1986 CALCUTTA 240 IT HAS BEEN HELD BY THE HONBLE HIGH COURT THAT IT MUST BE BORNE IN MIND, HOWEVER, THAT THESE RULES ARE BUT PRIMA- FACIE RULE OF CONSTRUCTION AND IN EACH CASE THE INT ENTION OF THE PARTIES MUST BE ASCERTAINED AND WHEN ASCERTAINED, ACTED UPON. M EANING THEREBY, THE 9 COMPLETION OF CONTRACT DEPENDS UPON THE INTENTION O F THE PARTIES. WHEN THE PARTIES HAVE AGREED TO SALE THE GOODS, THE PROPERTY THEREIN IMMEDIATELY PASSES TO THE BUYER AND DELIVERY AND THE PAYMENT CA N BE DEFERRED. THE PROVISIONS OF SALES OF GOODS ACT WERE EXAMINED BY T HE TRIBUNAL IN THE CASE OF MISHAPAR INVESTMENTS LTD. VS. ITO (SUPRA) IN WHICH SIMILAR VIEWS WERE EXPRESSED. 11. KEEPING IN VIEW THE LEGAL PROVISIONS AND THE FA CTUAL ASPECT OF THE PRESENT CASE, WE ARE OF THE CONSIDERED OPINION THAT THE ASSESSEE HAS ACQUIRED THE OWNERSHIP RIGHT BEFORE THE END OF THE FINANCIAL YEAR, AS SUCH, THE ASSESSEE IS ENTITLED FOR THE DEPRECIATION ON TH ESE VESSELS. SINCE WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A), WE CONFIRM THE SAME. 12. IN THE RESULT, THE APPEAL OF THE REVENUE IS DISM ISSED. PRONOUNCED IN THE OPEN COURT ON 19.7.2010 SD/- SD/- (BR BASKARAN) (SUNIL KUMAR YADAV) ACCOUNTANT MEMBER JUDICIAL MEMBER VG/SPS VISAKHAPATNAM, DATED 19 TH JULY, 2010 COPY TO 1 ACIT, CIRCLE-3(1), VISAKHAPATNAM 2 M/S. BALAJI SEA FOODS PVT. LTD., 15-1-37/2, NOWRO JI ROAD, MAHARANIPETA, VISAKHAPATNAM 3 THE CIT, VISAKHAPATNAM 4 THE CIT(A)-I, VISAKHAPATNAM 5 THE DR, ITAT, VISAKHAPATNAM. 6 GUARD FILE. BY ORDER SENIOR PRIVATE SECRETARY INCOME TAX APPELLATE TRIBUNAL VISAKHAPATNAM