M/s. INFRASTRUCTURE LEASING & FINANCIAL SERVICES LTD., MUMBAI V. ADDL. CIT Rg. - 10(1), MUMBAI

ITA 978/MUM/2006

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 84460 (ITAT-MUMBAI)
• Duration Of Justice: 8 year(s) 10 month(s) 9 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-12-2014
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: E
• Next Hearing Date: 20-11-2014
• Assessment Year: 2002-2003
• Appeal Filed On: 08-02-2006
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: MANJUNATHA SWAMY
• Assessee Lawyers: D V LAKHANI
• Keywords: Depreciation; Retrospective amendment
• Section: 115JB; 37

Judgement Text

, IN THE INCOME TAX APPELLATE TRIBUNAL E BENCH, M UMBAI BEFORE HONBLE S/SHRI VIJAY PAL RAO (JM) , AND B.R.BASKARAN (AM) , . . , ./I.T.A. NO.77/MUM/2006 ( / ASSESSMENT YEAR : 2002-03) ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 10(1), R NO.455, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 / VS. INFRASTRUCTURE LEASING AND FINANCIAL SERVICES LTD., PLOT NO.C-22, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051 ( / APPELLANT) .. ( / RESPONDENT) ./I.T.A. NO.978/MUM/2006 ( / ASSESSMENT YEAR :2002-03) INFRASTRUCTURE LEASING AND FINANCIAL SERVICES LTD., PLOT NO.C-22, G BLOCK, BANDRA KURLA COMPLEX, BANDRA (E), MUMBAI-400051 / VS. ASSTT. COMMISSIONER OF INCOME TAX, CIRCLE 10(1), R NO.476, AAYAKAR BHAVAN, M K ROAD, MUMBAI-400020 ( / APPELLANT) .. ( / RESPONDENT) ./ ./PAN/GIR NO. :AAACI0989F ! / REVENUE BY: SHRI MANJUNATHA SWAMY ' ! /ASSESSEE BY : SHRI D V LAKHANI # ' $% / DATE OF HEARING : 20.11.2014 &' ' $% /DATE OF PRONOUNCEMENT : 17.12.2014. / O R D E R PER B.R.BASKARAN, ACCOUNTANT MEMBER: THESE CROSS APPEALS RELATE TO THE ASSESSMENT YEAR 2 002-03 AND THEY ARE DIRECTED AGAINST THE ORDERS PASSED BY LD CIT(A)-X, MUMBAI. ITA NO.77/M/2006 AND 978/M/2006 2 2. THE ASSESSEE IS LEASING AND INVESTMENT BANKING C OMPANY ENGAGED IN THE BUSINESS OF LEASING, INVESTMENT BANKING, SECURITIES MANAGEMENT ETC. IN ALL THESE THREE YEARS, THE ASSESSING OFFICER COMPLETED THE AS SESSMENT BY MAKING VARIOUS TYPES OF ADDITIONS. THE APPEAL FILED BY THE ASSESS EE WAS PARTLY ALLOWED BY THE LD CIT(A) AND HENCE BOTH THE PARTIES HAVE FILED THE SE APPEALS BEFORE US ON THE POINTS DECIDED AGAINST EACH OF THEM. 3. WE SHALL FIRST TAKE UP THE APPEAL FILED BY T HE ASSESSEE. THE FIRST ISSUE RELATES TO THE DISALLOWANCE OF LEASE EQUALIZATION R ESERVE. THE ASSESSING OFFICER DISALLOWED THE CLAIM OF LEASE EQUALIZATION RESERVE ON THE REASONING THAT IT IS NOT A PRESCRIBED EXPENDITURE U/S 30 TO 37 OF THE ACT. THE LD CIT(A) ALSO CONFIRMED THE SAME. BEFORE US, THE LD A.R SUBMITTE D THAT IDENTICAL ISSUE HAS ARISEN BEFORE THE TRIBUNAL AND THE ITAT HAS RESTORE D THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER WITH CERTAIN DIRECTIONS. IN THIS REGARD, HE INVITED OUR ATTENTION TO THE ORDER DATED 11.7.2014 PASSED IN TH E ASSESSEES HAND IN ITA NO.1583/MUM/2011 RELATING TO ASSESSMENT YEAR 1998-9 9. WE NOTICE THAT THE TRIBUNAL, IN THE ABOVE SAID ASSESSMENT YEAR, HAS FO LLOWED THE DECISION RENDERED BY THE CO-ORDINATE BENCH IN THE ASSESSEES OWN CASE RELATING TO ASSESSMENT YEARS 1994-95 TO 1997-98 IN ITA NO.2308, 2307, 2309 & 2310/MUM/2011. WE HAVE GONE THROUGH THE ORDER PASSED BY THE TRIBUNAL FOR AY 1998-99, WHEREIN THE TRIBUNAL HAS EXTRACTED THE OBSERVATIONS MADE BY THE CO-ORDINATE BENCH IN THE ORDER PASSED FOR AY 1994-95 TO 1997-98, WHEREIN THE TRIBUNAL HAS EXPLAINED THE CONCEPT OF LEASE EQUALIZATION CHARGE AND ACCORDINGL Y RESTORED THE MATTER BACK TO THE FILE OF THE ASSESSING OFFICER FOR CARRYING O UT FRESH EXAMINATION. CONSISTENT WITH THE VIEW TAKEN BY THE TRIBUNAL IN THE EARLIER YEARS, WE SET ASIDE THE ORDERS OF LD CIT(A) IN THIS YEAR AND RESTORE THE SAME TO THE FILE OF THE ASSESSING OFFICER WITH THE DIRECTION TO DECIDE THE ISSUE AFRESH IN TH E LIGHT OF DISCUSSIONS MADE BY THE TRIBUNAL IN AY 1994-95 TO 1997-98. 4. THE NEXT ISSUE URGED BY THE ASSESSEE RELATES T O THE DISALLOWANCE MADE U/S 35D OF THE ACT. THE LD A.R DID NOT PRESS THE G ROUNDS RELATING TO THIS ISSUE. ACCORDINGLY WE DISMISS THEM AS NOT PRESSED. 5. THE NEXT ISSUE RELATES TO THE ADDITION OF PRO VISION FOR NON-PERFORMING ASSETS WHILE COMPUTING THE BOOK PROFIT U/S 115JB OF THE ACT. THE ASSESSING OFFICER ADDED THE SAME BY TREATING AS UNASCERTAINE D LIABILITY. THE LD A.R ITA NO.77/M/2006 AND 978/M/2006 3 SUBMITTED THAT IT WAS A DIMINUTION IN THE VALUE OF ASSETS AND HENCE THE SAME CANNOT BE CONSIDERED AS UNASCERTAINED LIABILITY. H OWEVER, WE NOTICE THAT THE FINANCE ACT 2009 HAS MADE AMENDMENT IN SEC. 115JB O F THE ACT WITH RETROSPECTIVE EFFECT FROM 1.4.2001 BY INSERTING THE FOLLOWING ITEM TO BE ADDED TO THE BOOK PROFIT:- (I) THE AMOUNT OR AMOUNTS SET ASIDE AS PROVISION FOR DIMINUTION IN THE VALUE OF ANY ASSET. HENCE, THE PROVISION FOR NON-PERFORMING ASSETS, BE ING A PROVISION FOR DIMINUTION IN THE VALUE OF ASSET, THE SAME IS REQUIRED TO BE A DDED TO THE BOOK PROFITS. ACCORDINGLY, WE CONFIRM THE ORDER OF LD CIT(A) ON T HIS ISSUE. 6. THE NEXT ISSUE RELATES TO THE ADDITION OF P ROVISION FOR DIMINUTION IN THE VALUE SECURITIES. THE LD A.R SUBMITTED THAT THE S ECURITIES FORMS PART OF THE ASSESSEES STOCK IN TRADE AND THE ASSESSEE IS VALUI NG THE STOCK AT COST OR MARKET VALUE WHICHEVER IS LOWER. THE LD A.R SUBMI TTED THAT THE MARKET VALUE OF SECURITIES FLUCTUATE EVERY YEAR AND HENCE THE ASSES SEE HAS FOLLOWED THE SYSTEM OF MAKING PROVISION EVERY YEAR, INSTEAD OF WRITING OFF THE LOSS ARISING ON ACCOUNT OF FALL IN THE MARKET VALUE OF SECURITIES BELOW THE COST. HOWEVER, WE NOTICE THAT THE CLAIM OF THE ASSESSEE THAT THE SECURITIES ARE F ORMING PART OF STOCK IN TRADE HAS NOT BEEN EXAMINED BY THE TAX AUTHORITIES. FURTHER THE CLAIM OF THE ASSESSEE THAT IT WAS FOLLOWING THE SYSTEM OF VALUING THE SECURITI ES UNDER THE PRINCIPLE, VIZ., COST OR MARKET VALUE WHICHEVER IS LOWER ALSO REQU IRES EXAMINATION AT THE END OF THE ASSESSING OFFICER. ACCORDINGLY, WE SET ASIDE T HE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE ASSES SING OFFICER TO EXAMINE THE CLAIM OF THE ASSESSEE AFRESH AND TAKE APPROPRIATE D ECISION IN ACCORDANCE WITH THE LAW. 7. THE NEXT ISSUE RELATES TO INTEREST CHARGED U/S 234D OF THE ACT. THOUGH THE ASSESSEE HAS URGED THIS GROUND, NO SPECIFIC DET AILS AGAINST THE LEVY OF INTEREST U/S 234D OF THE ACT. WE NOTICE THAT THE L D CIT(A) HAS HELD IT TO BE CONSEQUENTIAL IN NATURE. ACCORDINGLY, WE CONFIRM H IS ORDER ON THIS ISSUE. 8. WE SHALL NOW TAKE UP THE APPEAL FILED BY THE REVENUE. THE FIRST ISSUE RELATES TO THE EXPENDITURE INCURRED ON CLUBS. THE DISALLOWANCE MADE BY THE AO HAS BEEN DELETED BY THE LD CIT(A). THE LD A.R SUBM ITTED THAT THIS ISSUE IS NOW COVERED BY THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF CIT VS. UNITED ITA NO.77/M/2006 AND 978/M/2006 4 GLASS MFG. CO. LTD (CIVIL APPEAL NO.6447 OF 2012 DA TED SEP. 12, 2012.). WE NOTICE THAT THE HONBLE SUPREME COURT HAS HELD THAT THE CLUB MEMBERSHIP FEES PAID FOR EMPLOYEES IS ALLOWABLE U/S 37 OF THE ACT. HENCE, WE ARE OF THE VIEW THIS ISSUE REQUIRES FRESH EXAMINATION IN THE LIGHT OF DE CISION RENDERED BY HONBLE SUPREME COURT IN THE CASE CITED ABOVE, SINCE THE DE TAILS OF CLUB EXPENDITURE ARE NOT AVAILABLE ON RECORD. ACCORDINGLY, WE SET ASIDE THE ORDER OF LD CIT(A) ON THIS ISSUE AND RESTORE THE SAME TO THE FILE OF THE AO FO R FRESH CONSIDERATION. 9. NEXT ISSUE URGED BY THE REVENUE RELATES TO THE CLAIM OF DEPRECIATION MADE ON LEASED ASSETS. IN AY 1996-97, THE CO-ORDINATE B ENCH OF TRIBUNAL HAS ALLOWED THE CLAIM OF DEPRECIATION ON LEASED ASSETS BY FOLLO WING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF ICDS LIMITED (29 TAXMA N.COM 129). THERE SHOULD NOT BE ANY DISPUTE THAT THE ASSESSEE IS ENTITLED TO DEPRECIATION, IF IT HAS LEASED OUT THE ASSETS UNDER OPERATING LEASE. THE AO HAD T AKEN THE VIEW THAT THE LEASE TRANSACTIONS ENTERED INTO BY THE ASSESSEE WERE NOT GENUINE LEASE TRANSACTIONS. HOWEVER, THE LD CIT(A) HAS COME TO THE CONCLUSION T HAT THE LEASE TRANSACTIONS WERE GENUINE IN NATURE AND HE HELD SO BY PLACING RE LIANCE ON THE DECISION RENDERED IN THE PRECEDING YEARS. IT WAS SUBMITTED THAT THE LEASE TRANSACTIONS HAS BEEN ACCEPTED BY THE TRIBUNAL IN THE EARLIER YE ARS AND ACCORDINGLY DEPRECIATION WAS ALLOWED. ACCORDINGLY, CONSISTENT WITH THE VIEW TAKEN IN THE EARLIER YEARS, WE UPHOLD THE ORDER OF LD CIT(A) ON THIS ISSUE. 10. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS PARTLY ALLOWED FOR STATISTICAL PURPOSES AND THE APPEAL FILED BY TH E REVENUE IS DISMISSED. THE ABOVE ORDER WAS PRONOUNCED IN THE OPEN COURT ON 17TH DEC, 2014 . &' # () * + 17TH DEC , 2014 ' ' , - SD SD ( / VIJAY PAL RAO ) ( . . ,/ B.R. BASKARAN ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER ( # MUMBAI: 17TH DEC,2014. . . ./ SRL , SR. PS ITA NO.77/M/2006 AND 978/M/2006 5 !'# $#%! / COPY OF THE ORDER FORWARDED TO : 1. / THE APPELLANT 2. / THE RESPONDENT. 3. # 0$ ( ) / THE CIT(A)- CONCERNED 4. # 0$ / CIT CONCERNED 5. 6. 1, $ 2 , % 2 , ( # / DR, ITAT, MUMBAI CONCERNED ,3 4 / GUARD FILE. 5 # / BY ORDER, TRUE COPY 6 (ASSTT. REGISTRAR) % 2 , ( # /ITAT, MUMBAI