M/s. Paramount Pollutions Control Ltd, Baroda V. The Jt.CIT., Baroda

MA 249/AHD/2009

• Counselvise Citation: [2010] 123 COUNSELVISE.COM (IT) 4770 (ITAT-AHMEDABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 23 day(s)
• Appeal Type: Miscellaneous Application
• Pronouncement Date: 17-09-2010
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 1996-1997
• Appeal Filed On: 24-07-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: VIMALENDU VERMA SRDR
• Assessee Lawyers: M K PATEL
• Keywords: Depreciation; Rectification of order; Valuation report

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL AHMEDABAD BENCH B AHMEDABAD BEFORE SHRI N.S.SAINI, ACCOUNTANT MEMBER AND SHRI MAHAVIR SINGH, JUDICIAL MEMBER M.A.NO.249/AHD/2009 (ARISING OUT WITH ITA NO.859/AHD/2000 ASSESSMENT YEAR:1996-97 DATE OF HEARING:27.8.10 DRAFTED:27.89 .10 PARAMOUNT LIMITED (FORMERLY KNOWN AS PARAMOUNT POLLUTION CONTROL LTD.), PARAMOUNT COMPLEX, NR. NATUBHAI CIRCLE, GOTRI ROAD, VADODARA-390007 PAN NO.AABCP6509P V/S . JOINT COMMISSIONER OF INCOME-TAX, RACE COURSE CIRCLE, BARODA (ORIGINAL RESPONDENT) (ORIGINA L APPELLANT) (APPELLANT) .. (RESPONDENT) APPELLANT BY :- SHRI M.K. PATEL, AR RESPONDENT BY:- SHRI VIMALENDU VERMA, SR-DR O R D E R PER MAHAVIR SINGH, JUDICIAL MEMBER:- BY WAY OF THIS MISCELLANEOUS APPLICATION (MA), THE ASSESSEE HAS REQUESTED FOR RECTIFICATION OF MISTAKE IN ITA NO.859/AHD/2000 DATED 20-07- 2006. 2. AT THE OUTSET, LD. COUNSEL FOR THE ASSESSEE, SHR I M.K. PATEL, STATED THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF ERECTION AND INSTALLATION OF POLLUTION CONTROL EQUIPMENTS ON TURNKEY BASIS. THE ASSESSMENT IN THE RELEVANT ASSESSMENT WAS COMPLETED U/S.143(3) OF THE INCOME-T AX ACT, 1961 MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 2 (HEREINAFTER REFERRED TO AS THE ACT) AT A TOTAL I NCOME OF RS.3,15,60,740/-. AGGRIEVED, ASSESSEE PREFERRED APPEAL BEFORE CIT(A) AND FOLLOWING ISSUES WERE CONTESTED:- (A) THE DISALLOWANCE OF RS.2,50,00,000/- BEING DEPR ECIATION AT THE RAT OF 100% ON PURCHASE OF WASTE HEAT RECOVERY EQUIPMENT F ROM MADHYA PRADESH ELECTRICITY BOARD; AND (B) DISALLOWANCE OF FINANCIAL CHARGES IN THE FORM O F SYNDICATION FEE AND HIRE PURCHASE AGREEMENT FEES. THE CIT(A) CONSIDERED THE SUBMISSIONS OF THE ASSESS EE AND NOTED THAT A SIMILAR DISALLOWANCE WAS MADE IN THE CASE OF THE AS SESSEE IN THE ASSESSMENT YEAR 1995-96, WHICH WAS SUBSEQUENTLY ALLOWED BY TH E TRIBUNAL IN ITA NO. 365/AHD/1994 DATED 06-10-1999. ACCORDINGLY TO THE LD. COUNSEL F OR THE ASSESSEE THE ISSUE WAS COVERED IN FAVOUR OF THE ASS ESSEE BY THE DECISION OF THE TRIBUNAL IN ITS OWN CASE, THE ASSESSING OFFICER WAS DIRECTED TO ALLOW THE CLAIM OF THE ASSESSEE. SIMILARLY, SINCE THE DISALLO WANCE OF FINANCIAL CHARGES IN THE FORM OF SYNDICATION FEE AND HIRE PURCHASE AGREE MENT FEES WAS ALSO COVERED IN FAVOUR OF THE ASSESSEE BY THE DECISION O F THE TRIBUNAL, THE ASSESSING OFFICER WAS DIRECTED TO ALLOW THE CLAIM O F THE ASSESSEE. AGGRIEVED, REVENUE PREFERRED APPEAL BEFORE TRIBUNAL ON THE FOL LOWING GROUND:- ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE AND IN LAW THE LD. CIT(A) ERRED:- 1. IN HOLDING THAT THE ASSESSEE IS ENTITLED FOR DEP RECIATION AT 100% ON WASTE HEAT RECOVERY EQUIPMENT RS.2,50,00,000. 2. IN DIRECTING TO ALLOW AN AMOUNT OF RS.8,50,000/- CLAIMED BY THE ASSESSEE AS SYNDICATE FEES AND HIRE PURCHASE AGREEM ENT FEES. 3. LD. COUNSEL FOR THE ASSESSEE STATED THAT THE TRI BUNAL HAS RELIED ON ALTOGETHER DIFFERENT ORDER I.E. IN THE CASE OF PARAMOUNT TECHNOLOGIES LTD. V. DCIT IN ITA NO.366/AHD/1999 FOR ASSESSMENT YEAR 1995-96 DATED 27-10- 2005 AND NOT ON ASSESSEES OWN CASE (PARAMOUNT LTD. FORMERLY KNOWN AS PARAMOUNT POLLUTION CONTROL LTD.) FOR ASSESSMENT YEAR 1995-96 IN ITA MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 3 NO.365/AHD/1994 DATED 06-10-1999. THE TRIBUNAL HAS REPRODUCED THE PARA-7 OF THE ORDER IN THE CASE OF PARAMOUNT TECHNOLOGIES LTD. (SUPRA) IN PARA-7 AND FINALLY RESTORED THE MATTER TO THE FILE OF CIT(A) V IDE PARA-8 AS UNDER:- WE FIND FROM THE ASSESSMENT ORDER THE AO HAS OBSER VED THAT THE TRANSACTION IN THIS CASE FOR ASSESSMENT YEAR 1996-9 7 IS SIMILAR WHICH WAS ENTERED INTO BY THE ASSESSEE WITH R.E.B IN AY 1 995-96. WE ALSO FIND FROM THE ASSESSMENT ORDER 1997-98, WHEREIN THE A.O HAS HELD THAT ENTIRE LIPASE AND BY WAY OF TRANSACTION HAS BEEN HE LD AS SHAM AND BOGUS AS PER THE FINDING RECORDED IN THE CASE OF TH E ASSESSEE OF AY 1995-96 AND 1996-97. WE FIND THAT THE FACTS OF THIS YEAR UNDER CONSIDERATION ARE SIMILAR TO THE FACTS OF AY 1995-9 6 AND 1996-97. THEREFORE, WE FIND THE TRIBUNAL HAS RESTORED THIS I SSUE TO THE FILE OF CIT(A). THE COPY OF THE ORDER OF THE ASSESSEE FOR A Y 1995-96 WHICH IS PLACED AT PAGES 78 TO 85.WE FIND THAT THE TRIBUNAL HAS OBSERVED HAS OBSERVED AS UNDER:- WE HAVE HEARD THE LD. REPRESENTATIVES OF THE PARTI ES, PERUSED THE RECORD AND GONE THROUGH THE DECISIONS CITED. IN BRIEF THE FACTS NOTICED BY US ARE THAT IN THE CASE OF PARAMOUNT POL LUTION CONTROL LTD. THE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF TH E ASSESSEE IN ITA NO.365/AHD/94 FOR ASSTT. YEAR 1995-96 DATED 6-1 0-99. IT IS STATED THAT THE REVENUE HAS FILED THE APPEAL BEFORE THE HIGH COURT WHICH IS PENDING. IT HAS ALSO NOTICED THAT THE CIT( A) HAS SIMPLY FOLLOWED THE ORDER OF ANOTHER ASSESSEE AND HAS NOT GIVEN INDEPENDENT FINDING ON MERITS. WE FIND THAT AFTER T HE ORDER OF CIT(A) A LOT OF DEVELOPMENT HAS BEEN TAKEN PLACE AS ON IDENTICAL SET OF FACTS THE ITAT, SPECIAL BENCH. MUMBAI IN THE CASE OF MID EAST PORTFOLIO MANAGEMENT LTD. V. DCIT REPORTED IN 87 ITD 537 (MUM)(SB) FOLLOWING THE DECISION OF THE APEX COURT IN MCDOWELL & CO. LTD. (SUPRA) DECIDED THE MATTER AGAINST THE ASS ESSEE. IT HAS ALSO BEEN NOTICED THAT AFTER THE JUDGMENT OF APEX C OURT IN THE CASE OF MCDOWELL & CO. LTD . THERE IS ANOTHER JUDGMENT OF APEX COURT IN THE CASE OF UNION OF INDIA V AZADIO BACHAOA ANDOLAN 263 ITR 706 (SC). APART FROM THE ABOVE, IT HAS ALSO BEEN NOTICED THAT IN THE CASE UNDER CONSIDERATION THE COMPLETE F ACTS REGARDING WHETHER THE TRANSACTION WAS A SHAM TRANSACTION AND THE ASSESSEE WAS OWNER OF THE IMPUGNED ASSETS OR NOT TH ESE FACTS ARE NECESSARY FOR ALLOWING THE CLAIM OF DEPRECIATIO N OF THE ASSESSEE. SINCE THE CIT(A) HAS NOT DECIDED THE MATT ER ON MERIT AFTER EXAMINING AND VERIFYING THE RELEVANT FACTS. U NDER THE CIRCUMSTANCES, WE FIND APPROPRIATE TO SEND BACK THI S MATTER TO THE FILE OF CIT(A) WITH A DIRECTION TO DECIDE THE MATTE R AFRESH IN ACCORDANCE WITH LAW, KEEPING IN VIEW THE ABOVE OBSE RVATION AND LATEST JUDGMENTS CITED ABOVE AND AVAILABLE AT THE T IME OF FINALIZING THE MATTER. THE CIT(A) WILL PROVIDE REASONABLE OPPO RTUNITY OF MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 4 HEARING TO BOTH THE SIDES BEFORE REASONABLE OPPORTU NITY OF HEARING TO BOTH THE SIDES BEFORE FINALIZING THE MAT TER. THE CIT(A) WILL PROVIDE REASONABLE OPPORTUNITY OF HEARING TO B OTH THE SIDES BEFORE FINALIZING THE MATTER. 4. ACCORDINGLY, THE LD. COUNSEL FOR THE ASSESSEE ST ATED THAT THERE IS AN ERROR AND AMBIGUITY IN THE ABOVE PARAGRAPH WHICH IN DICATES THAT FOR THE ASSESSMENT YEAR 1995-96, THE MATTER WAS SET ASIDE A ND AS A COROLLARY, THE MATTER FOR THE YEAR UNDER CONSIDERATION, THAT IS TO SAY, ASSESSMENT YEAR 1996- 97 IS ALSO TO BE SET ASIDE TO THE FILE OF CIT(A). T HE LD. COUNSEL FOR THE ASSESSEE FILED A COMPARATIVE CHART TO SHOW THAT THE TRIBUNAL HAS COMMITTED A MISTAKE APPARENT FROM RECORD AS UNDER:- A.Y 1995-96 ITA NO.365/AHD/94 DATED 6 OCTOBER 1999 A.Y. 1996-97 ITA NO.859/AHD/2000 DATED 20 JULY 2006 ISSUES ISSUES A) THE DISALLOWANCE OF RS.3,20,15,905/- BEING DEPRECIATION AT 100% ON THE LEASED PLANT AND MACHINERY PURCHASED FROM RAJASTHAN STATE ELECTRICITY BOARD; AND B) DISALLOWANCE OF LEASING EXPENSES (HIRE PURCHASE CHARGES AND HIRE MANAGEMENT CHARGES PAID TO WIPRO FINANCE LIMITED. A) THE DISALLOWANCE OF RS.2,50,00,L000/- BEING DEPRECIATION @ 100% ON PURCHASE OF WASTE HEAT RECOVERY EQUIPMENT FROM MADHYA PRADESH ELECTRICITY BOARD; AND B) DISALLOWANCE OF FINANCIAL CHARGES IN THE FORM OF SYNDICATION FEE AND HIRE PURCHASE AGREEMENT FEES PAID TO WIPRO FINANCE LTD. DECISION 1. SALE AND LEASE BACK TRANSACTION NOT SHAM 2. DEPRECIATION AND CLAIM FOR FINANCIAL CHARGES ALLOWED. DECISION DIRECTION FOLLOWING A.Y. 1995-96 THE DECISION OF CIT(A) BE SET ASIDE AND RESTORED TO CIT(A) FOR RECONSIDERATION (THIS ERROR BEING APPARENT FROM RECORD MUST BE RECTIFIED AS FOLLOWING THE ORDER OFA.Y1995-96 THE APPEAL OUGHT TO BE ALLOWED) 5. ON THE OTHER HAND, LD. SR-DR FAIRLY STATED THAT THE TRIBUNAL HAS PLACE RELIANCE ON ENTIRELY A DIFFERENT ORDER AND ADMITTED THE POSITION. HOWEVER, THE MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 5 LD. SR-DR STATED THAT THE ASSESSEE WILL NOT BE EFFE CTED AS THE TRIBUNAL HAS ONLY SET ASIDE THE ISSUE TO THE FILE OF CIT(A). 6. WE HAVE HEARD THE RIVAL CONTENTIONS AND GONE THR OUGH THE FACTS OF THE CASE. WE FIND THAT IN THE IMMEDIATE PRECEDING YEAR THE TRIBUNAL ALLOWED THE ISSUE IN FAVOUR OF ASSESSEE. THE TRIBUNAL IN ASSESS EES OWN CASE IN ASSESSMENT YEAR 1995-96 IN ITA NO.365/AHD/1994 DATED 06-10-1999 HAS ALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF TRANSAC TION OF SALE AND LEASE BACK AS GENUINE AND NOT SHAM AND CLAIM OF DEPRECIATION, INTEREST AND FINANCE CHARGES WERE ALLOWED. WE FIND THAT THE ABOVE OBSERV ATION OF THE TRIBUNAL DOES NOT PERTAIN TO ASSESSEES OWN CASE FOR ASSESSM ENT YEAR 1995-96 ON THE CONTRARY A REFERENCE TO THE APPELLATE ORDER FOR ASS ESSMENT YEAR 1995-96 IN ITA NO.365/AHD/94 DATED 06-10-12999 IT WILL BE ESTA BLISHED THAT THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. IN VIE W OF THE ABOVE, WE ARE OF THE VIEW THAT FOR THE ASSESSMENT YEAR 1996-97, WHIL E INTENDING TO FOLLOW THE ORDER FOR ASSESSMENT YEAR 1995-96 INADVERTENTLY, DI RECTED TO RESTORE THIS ISSUE TO THE FILE OF CIT(A), WHICH IN OUR OPINION, IS A M ISTAKE APPARENT FROM RECORD HAS CREPT IN THE ORDER DATED 20-07-2006 PASSED BY T RIBUNAL AS THE ISSUE WAS SQUARELY COVERED IN FAVOUR OF THE ASSESSEE. FOR THE SAKE OF CLARITY, WE ARE REPRODUCING PARA-7 TO PARA-9 FROM THE ORDER IN ITA NO.365/AHD/1994 FOR ASSESSMENT YEAR 1995-96 IN ASSESSEES OWN CASE (SUP RA), WHICH IS AS UNDER:- 7. WE HAVE HEARD BOTH THE SIDES AND PERUSED THE MA TERIALS ON RECORD. THE BASIC FACT OF THE CASE IS NOT IN DISPUTE THAT T HE RSEB WAS THE OWNER OF ELECTRICITY METERS WHICH WERE PURCHASED BY THE ASSESSEE ON 25.3.1995 FOR WHICH SALE DEED WAS EXECUTED IN FAVOU R OF THE ASSESSEE. THE PURCHASE WAS FINANCED BY M/S. WIPRO LTD. AND FU RTHER THE ASSESSEE LEASED BACK THE METER TO RSEB FOR WHICH TRIPARTITE AGREEMENT WAS ENTERED INTO ON 27.5.95 BETWEEN M/S. WIPRO FINANCE LTD. AND THE ASSESSEE AND RSEB. THE METERS WERE LEASED BACK TO R SEB BY AGREEMENT DTD. 27.3.95. THE VALUATION OF THE METERS WAS ASCERTAINED ON THE BASIS OF THE VALUATION REPORT OF M. CHOWDHURY A ND ASSOCIATES, CHARTERED ENGINEERS AND VALUER. ON THE BASIS OF THE AFORESAID FACT, THE AUTHORITIES BELOW WERE OF THE VIEW THAT THE TRANSAC TION IS NOT GENUINE AND ITS IS A SHAM TRANSACTION. THE FIRST ROUND FOR COMING TO THE SAID CONCLUSION BY THE ASSESSING OFFICER IS THAT LEASING OUT OF ASSET IS NOT THE BUSINESS OF THE ASSESSEE. IN THIS CONNECTION, I T HAS BEEN BROUGHT TO MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 6 OUR NOTICE ON BEHALF OF THE ASSESSEE THE COPY OF TH E MEMORANDUM OF ARTICLE OF ASSOCIATION WHICH IS AVAILABLE AT PG. 54 TO 72 OF THE PAPER BOOK. CLAUSE-(6) OF THE MEMORANDUM OF ASSOCIATION H AS ALREADY BEEN QUOTED ABOVE FROM WHICH WE FIND THAT ONE OF THE INC IDENTAL OBJECT OF THE COMPANY IS TO SELL, EXCHANGE, MORTGAGE, LET ON LEAS E OF ASSETS. ACCORDING TO THE ASSESSEE, IT HAD PURCHASED THE MET ERS FROM RSEB FOR WHICH COPY OF THE INVOICE-CUM-DELIVERY CHALLAN DTD. 25 TH MARCH, 1995 ISSUED BY RSEB HAS BROUGHT ON RECORD AT PG-76 OF TH E PAPER BOOK. FURTHER THE SAID DEED DTD. 27.3.95 WAS EXECUTED BY RSEB IN FAVOUR OF THE ASSESSEE, COPY OF WHICH IS AVAILABLE AT PG. 74 TO 77 OF THE PAPER BOOK. FURTHER WE FIND THAT BEFORE PURCHASE OF THE M ETERS, THE ASSESSEE COMPANY GOT THE METERS VALUED WITH CHARTERED ENGINE ERS WHO ACCORDING TO THE REPORT HAD INSPECTED THE METERS PH YSICALLY. COPY OF THE VALUATION REPORT IS AVAILABLE AT PGS. 115 TO 124 OF THE PAPER BOOK. ACCORDING TO THE ASSESSING OFFICER, THE RSEB PURCHA SED THE METERS IN 1989 TO 1992 FOR RS.2,67,85,311/- AND THE SAME HAVE BEEN OVER-VALUED TO RS.3,20,16,384/-. HOWEVER, WE FOUND THAT THE VAL UATION WHICH HAS BEEN ARRIVED IN THE PRESENT TRANSACTION BETWEEN THE ASSESSEE AND RSEB IS SUPPORTED BY THE VALUATION REPORT OF SHRI M .CHAUDHARY. THERE IS NO MATERIAL ON RECORD TO SHOW THAT ANY EFFORT WA S MADE ON BEHALF OF THE ASSESSING OFFICER TO ASCERTAIN THE VALUATION OF THE METERS FROM ANY OTHER AGENCY., NEITHER THE PRESENT VALUER WAS EXAMI NED. THERE4FORE, THE CONTENTION OF THE ASSESSING OFFICER THAT METERS WERE OVER-VALUED IS SNOT CORRECT. THE FURTHER GROUND FOR HOLDING THAT T HE TRANSACTION IS NOT GENUINE BY THE ASSESSING OFFICER IS THAT THE ADDRES SEE DID NOT HAVE SUFFICIENT FUND IN ITS HAND FOR PURCHASING THE METE RS. THEREFORE, IT HAD BROUGHT IN PICTURE M/S. WIPRO FINANCE LTD. TO FINAN CE THE ASSESSEE. IN THIS REGARD THE ASSESSING OFFICER HAS FAILED TO TAK E INTO CONSIDERATION THE VOLUME OF TRANSACTION INVOLVED IN THE PRESENT C ASE WHICH IS MORE THAN A RS.3 CRORES FOR WHICH ANY PRUDENT BUSINESSMA N GENERALLY SHALL GET FINANCIAL ASSISTANCE FROM SOME OUTSIDE AGENCY. IT IS NOTHING NEW IN SUCH BUSINESS TRANSACTION. IN THE CASE OF HIRE PURC HASE, THE INVOLVEMENT OF FINANCER IS QUITE COMMON. THE NEXT O BJECTION OF THE ASSESSING OFFICER WAS THAT THE ASSETS OF THE GOODS WERE NOT REMOVED FROM JAIPUR TO BARODA. IN THE PRESENT CASE, THE SAI D AND LEASE BACK OF THE ASSET HAD TAKEN PLACE WITHIN THE PERIOD OF THRE E DAYS. ADMITTEDLY THE METERS WERE AFFIXED IN DIFFERENT PLACES ON DIFFEREN T HOUSES. THEREFORE, FOR THE SAKE OF CONVENIENCE OF ALL THE PARTIES AND MORE PARTICULARLY WHEN THE ASSETS ARE TO BE LEASED BACK TO THE RSEB IT WAS QUITE NATURAL THAT THE ASSETS WILL NOT BE TAKEN FROM JAIPUR TO BARODA AND AGAIN TO BE SENT TO JAIPUR. THE ASSESSEE HAD TAKEN CONSTRUCTIVE DELI VERY OF THE GOODS WHICH IS PERMITTED UNDER SALE OF GOODS ACT. IN THIS CONNECTION, LEARNED COUNSEL PLACED RELIANCE ON THE DECISION OF THE TRIB UNAL REPORTED IN 51 ITD PG. 556. MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 7 8. CONSIDERING THE SERIES OF TRANSACTION TAKEN PLA CE WHICH ARE DULY SUPPORTED BY DOCUMENTS, IN OUR OPINION, THERE IS NO SCOPE TO HOLD THAT THE TRANSACTION IS NOT GENUINE. THERE IS NO FINDING OF THE AUTHORITIES BELOW THAT THE ABOVE MENTIONED DOCUMENTS BY WHICH T HE ASSESSEE PURCHASED THE METERS FROM RSEB IS A BOGUS DOCUMENT. SIMILARLY IT IS NOT IN DISPUTE THAT M/S. WIPRO FINANCE LTD. FINANCE D THE ASSESSEE FOR PURCHASE OF THE METERS. THE AGREEMENT OF LEASE BETW EEN THE ASSESSEE AND RSEB HAS BEEN BROUGHT ON RECORD. THERE IS NO FI NDING THAT THE MONEY WAS ACTUALLY INVESTED BY THE ASSESSEE IN SOME BODYS NAME AND AGAIN THE MONEY CAME BACK TO THE ASSESSEE. RSEB IS CONCERN. IT IS TRUE THAT FINANCIAL POSITION OF RSEB WAS NOT SATISF ACTORY. THEREFORE, IT MIGHT HAVE ENTERED INTO THE TRANSACTION WITH THE AS SESSEE. FROM THE INVOICE-CUM-DELIVERY CHALLAN EXECUTED BY RSEB, IT I S APPARENT THAT THE TRANSACTION WAS EXEMPTED FROM SALES TAX VIDE GOVERN MENT NOTIFICATION NO.F.4(24)FD/GR IV/90-48 DATED 18 TH MARCH, 1995, COPY OF WHICH IS AVAILABLE AT PG. 73 OF THE PAPER BOOK. I SIMILAR CI RCUMSTANCES IN THE CASE OF UNITED TECHNOLOGISTS LTD. IN ITA NO.2456/A/98 , THE TRIBUNAL HELD THAT THE TRANSACTION IS A GENUINE TRANSACTION. IN THAT CASE ALSO ASSETS WERE PURCHASED FROM RSEB AND AGAINST LEASED BACK TO RSEB. THE ASSESSING OFFICER DISALLOWED CLAIM OF DEPRECIAT ION HAVING APPLIED THE RATIO OF THE MCDOWELLS CASE. AFTER GOING THROU GH THE AFORESAID DECISION, IN OUR OPINION, THE REASONING GIVEN BY TH E TRIBUNAL IN THAT CASE IS APPLICABLE IN THE PRESENT CASE ALSO. IN THE MCDW ELLS CASE REPORTED IN 154 ITR 148, IT WAS HELD BY THE SUPREME COURT AS FO LLOWS:- TAX PLANNING MAY BE LEGITIMATE PROVIDED IT IS WITH IN THE FRAME WORK OF LAW. COLOURABLE DEVICES CANNOT BE PART OF T AX PLANNING AND IT IS WRONG TO ENCOURAGE OR ENTERTAIN THE BELIE F THAT IT IS HONOURABLE TO AVOID THE PAYMENT OF TAX BY RESORTING TO DUBIOUS METHODS. IT IS THE OBLIGATION OF EVERY CITIZEN TO P AY THE TAXES HONESTLY WITHOUT RESORTING TO SUBTERFUGES. WHILE COMING TO THE AFORESAID CONCLUSION. SUPREME C OURT CONSIDERED THE EARLIER DECISIONS IN THE CASE OF CIT VS. RAMAN & CO. REPORTED IN 67 ITR 11 (SC) WHERE IT HAS BEEN HELD THAT IT IS OPEN TO EVERYONE TO ARRANGE THIS AFFAIRS HAS TO REDUCE THE AMOUNT OF TA XATION TO THE MINIMUM AND SUCH A PROCESS DOES NOT CONSTITUTE TAX AVOIDANC E. FURTHER, WE FIND THAT SUPREME COURT IN THE CASE OF CIT VS. ARVIND NAROTTAM- REPORTED IN 173 ITR 479 HELD THAT WHERE THE TRUE EFFECT ON THE CONSTRUCTION OF THE DEED IS CLEAR, THE APPEAL DISCOURAGE TAX AVOIDANCE IS NOT A RELEVANT CONSIDERATION. SIMILAR VIEW HAS BEEN TAKEN BY THE T RIBUNAL AHMEDABAD BENCH IN THE CASE OF AMAR SRUCTURE (P) LTD. VS. ASSTT. CIT (1997) REPORTED IN 57 TTJ 508. IN THE PRESENT CASE, CONSID ERING THE FACTS INVOLVED WHICH WE HAVE MENTIONED ABOVE AND MORE PAR TICULARLY THE TRANSACTION HAS BEEN ENTERED INTO BY THE ASSESSEE W ITH RSEB WHICH IS A GOVERNMENT CONCERN AND SUPPORTED BY VARIOUS DOCUM ENTS. IT CANNOT MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 8 BE SAID THAT IT IS A SHAM TRANSACTION OR THE TRANSA CTION IS NOT A GENUINE. THEREFORE, THE AUTHORITIES BELOW WAS NOT JUSTIFIED IN HOLDING THAT IT IS A SHAM TRANSACTION HENCE RATIO OF MCDOWELLS CASE IS APPLICABLE. 9. WHETHER THE ASSESSEE IS ENTITLED TO DEPRECIATIO N AND THE TRANSACTION IS UNDER HIRE PURCHASE AGREEMENT HAS BEEN EXPLAINED IN CIRCULAR NO.9 OF 1943 DATED 23.3.1943 ISSUED BY THE CENTRAL BOARD OF REVENUE WHICH HAS BEEN RE-CONFIRMED BY CENTRAL BOARD OF DIRECT TA XES IN ITS LETTER F.NO.17(20)-IT/59, DATED 26.6.1959 (IN THE CONTEXT OF DEVELOPMENT RATE) AT PAGE 1714 OF CHATURVADI & PITHISARIAS LAW ON IN COME-TAX. THE SAME VIW HAS BEEN REITERATED IN INSTRUCTION NO.1097 DTD. 19.9.97 WHEREON A POINTED QUERY RAISE BEFORE THE C.B.D.T. IT IS CLARI FIED THAT THE INSTRUCTION CONTAINED IN CIRCULAR NO.9 OF 1943 AND LETTER DTD. 26.6.59 HAVE NOT BEEN WITHDRAWN AND ARE STILL IN FORCE AND AS SUCH ARE TO BE FOLLOWED. THE SUPREME COURT IN THE CASE OF NAVNITLAL C.ZAVERI VS. ITO 56 ITR 199 HAS HELD THAT BENEVOLENT CIRCULARS ISSUED BY THE CB DT MUST BE FOLLOWED BY INCOME-TAX AUTHORITIES. THE SC IN THE CASE OF CIT VS. SHAAN FINANCE PVT. LTD. (231 ITR 308) HAS TAKEN NOTE OF THE BOARDS CIRCUL AR NO.9 OF 1943 AT PAGES 316 AND 317 AND IT HAS ACCEPTED THAT IN A CASE OF HIRE PURCHASE AGREEMENT THERE IS AN ELEMENT OF SALE. THE HONBEL DELHI HIGH COURT IN THE CASE OF CIT VS. NAGPUR GOLDEN TRANSPORT CO. (1998) 233 ITR 389 (DELHI) HAS HELD THAT IN A CASE WHERE M ACHINERIES ARE PURCHASED BY THE ASSESSEE ON HIRE PURCHASE BASIS TH E ASSESSEE IS THE OWNER OF MACHINERY AND IS ENTITLED TO DEPRECIATION. SIMILAR IS THE VIEW OF THE DELHI HIGH COURT IN THE CASE OF ADDL. CIT VS. GENERAL INDUSTRIES CORPORATION (1985) 155 ITR 430 (DELHI) AND THAT OF THE HONBLE ANDHRA PRADESH HIGH COURT IN THE CASE OF S.P.B.P. SRIRANGA CHARYULU (58 ITR 95) (SUPRA). AS REGARDS THE RELIANCE OF THE SENIOR DR ON THE DEC ISION OF THE SUPREME COURT IN THE CASE OF KERALA FINANCE CORPORATION (SUPRA) AND THAT OF HIMACHAL PRADESH STATE FOREST CORPORATION (SUPRA) IS CONCERNED, THEY DID NOT DEAL WITH THE ISSUE OF DEPR ECIATION. IN THOSE CASES, THE QUESTION WAS OF THE CIRCULAR BEING CONTR ARY TO A STATUTORY PROVISION, WHEREAS IN THE PRESENT CASE THE CIRCULAR S RE NOT CONTRARY TO STATUTORY PROVISIONS. THEY ONLY EXPLAIN AS TO UNDER WHAT CIRCUMSTANCES HIRE PURCHASER CAN BE TREATED AS OWNER OF THE PROPE RTY FOR THE PURPOSE OF ALLOWING DEPRECIATION. SIMILAR VIEW HAS BEEN TAK EN BY THE TRIBUNAL IN THE CASE OF UNITED TECHNOLOGIES LTD. IN ITA NO.2456/A/98, COPY OF WHICH IS AVAILABLE ON RECORD. IN VIEW OF THE AFORES AID CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE TRANSACTION IS A GENUINE T RANSACTION AND THE ASSESSEE IS ENTITLED TO DEPRECIATION AT THE RATE OF 100% CLAIMED BY IT. HENCE GROUND NOS. 1 TO 5 ARE ALLOWED. 9. GROUND NOS. 6 & 7 RELATE TO ADDITION ON ACCOUNT OF LEASING EXPENSES WHICH INCLUDES HIRE PURCHASE CHARGES AND HIRE MANAG EMENT CHARGES. THE ASSESSING OFFICER DISALLOWED THE EXPENSES ON TH E GROUND THAT THE NATURE OF TRANSACTION IS NOT GENUINE. THEREFORE, TH E EXPENDITURE WAS MA NO.249/AHD/2009 (A/O ITA NO.859/AHD/2000 A.Y. 96-97 PARAMOUNT LTD. V. JCIT, BRD PAGE 9 CONSIDERED AS CAPITAL IN NATURE. THE FINDING WAS CO NFIRMED BY THE CIT(A). IN VIEW OF THE ABOVE FACTS AND CIRCUMSTANCES, WE AR E OF THE VIEW THAT IN ASSESSEES OWN CASE (SUPRA) IN EARLIER YEAR THE TRI BUNAL HAS ALLOWED THE CLAIM OF ASSESSEE IN RESPECT OF TRANSACTION OF SALE AND L EASE BACK AS GENUINE AND NOT SHAM AND CLAIM OF DEPRECIATION, INTEREST AND FI NANCE CHARGES WERE ALLOWED. THE ISSUE BEING COVERED IN FAVOUR OF THE A SSESSEE, WE ALLOW THE CLAIM OF THE ASSESSEE IN THIS YEAR ALSO AND THE MA OF ASSESSEE IS ALLOWED ACCORDINGLY, 7. IN THE RESULT, ASSESSEES MA IS ALLOWED. ORDER PRONOUNCED IN OPEN COURT ON 17/09/2010 SD/- SD/- (N.S.SAINI) (MAHAVIR S INGH) (ACCOUNTANT MEMBER) (JUDICIAL MEMBER) AHMEDABAD, DATED : 17/09/2010 *DKP COPY OF THE ORDER FORWARDED TO :- 1. THE ASSESSEE. 2. THE REVENUE. 3. THE CIT(APPEALS)-I, BARODA 4. THE CIT CONCERNS. 5. THE DR, ITAT, AHMEDABAD 6. GUARD FILE. BY ORDER, /TRUE COPY/ DEPUTY / ASSTT.REGISTRAR ITAT, AHMEDABAD