M/S YASHIK FINLEASE PVT LTD V. COMMI. OF IT, PANCHKULA AND ANR

ITA/321/2011

AI Insights

The case involves M/s Yashik Finlease Private Limited, the appellant, who appealed against the decision of the Income Tax Appellate Tribunal, which had upheld the reassessment of the appellant's income and denied depreciation on leased assets, categorizing them as hire purchase agreements. The Tribunal's decision was based on the interpretation of the lease agreements and the application of Explanation 3 to Section 147 of the Income Tax Act, 1961, introduced by the Finance (No.2) Act, 2009. The High Court's decision affirmed the Tribunal's findings, dismissing the appellant's claims and upholding the reassessment proceedings.

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 733002 (HC-CHANDIGARH)
• Appeal Type: Others
• Pronouncement Date: 02-05-2012
• Assessment Year: misc
• Other Referred Cases: MCORP Global (P) Limited v. Commissioner of Income Tax, Commissioner of Income Tax v. Shaan Finance (P) Limited, CIT v. Punjab State Electricity Board, Manjinder Singh Kang v. Commissioner of Income Tax, Amritsar and another
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Revenue
• Court: HIGH COURT
• Assessee Lawyers: DEEPAK AGGARWAL
• Keywords: Depreciation; Hire purchase; Lease Transaction; Re-assessment; Validity of reassessment
• Section: 147; 148; 143(3); 139(1); 260A

Judgement Text

"ITA No.321 of 2011 1 IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH ITA No. 321 of 2011 and connected appeals being ITA Nos.322 to 325 of 2011 Date of decision: 02.05.2012 M/s Yashik Finlease Private Limited -----Appellant Vs. Commissioner of Income Tax, Panchkula and another ----Respondents CORAM:- HON’BLE MR. JUSTICE AJAY KUMAR MITTAL HON'BLE MR. JUSTICE GURMEET SINGH SANDHAWALIA Present:- Mr. Deepak Aggarwal, Advocate for the appellant. Ajay Kumar Mittal,J. 1. Delay in refiling the appeals is condoned. Consequently, Civil Miscellaneous application Nos. 24456, 24458, 24460, 24462 and 24464 CII of 2011 in ITA Nos.321 to 325 of 2011 respectively stand disposed of. 2. This order shall dispose of ITA Nos.321 to 325 of 2011 as learned counsel for the appellant states that identical facts and questions of law are involved in all these appeals. However, in ITA No.325 of 2011 relating to assessment year 1999-2000, only one question (which is question No.(ii) in all other appeals) has been claimed. The facts are being taken from ITA No.321 of 2011. 3. The assessee has filed ITA No.321 of 2011 under Section 260A of the Income Tax Act, 1961 (in short, “the Act”) against the order dated 30.6.2010, Annexure A.1 passed by the Income Tax Appellate Tribunal “A” Bench, Chandigarh (for brevity, “the Tribunal”) in ITA No.39/CHANDI/2010, for the assessment year ITA No.321 of 2011 2 1994-95, claiming following substantial questions of law:- i) Whether in the present facts and circumstances of the case, the learned Tribunal was justified in terming the re-assessment as valid? ii)Whether the learned Tribunal was justified in terming the Lease Transaction as Hire Purchase transaction and thus denying the benefit of depreciation to the appellant lessor whereas admittedly the lessee did not claim depreciation? 4. Briefly, the facts as narrated in the appeal may be noticed. The appellant-company is engaged in the business of hire purchase and leasing of vehicles. For the assessment year 1994-95, the return of income was filed by the assessee on 31.8.1994 and the same was processed at nil income. On 03.4.2000, notice under section 148 of the Act was issued by respondent No.2 on the ground that the depreciation was not allowable on leased assets on the basis of assessment framed by the Assessing Officer for the assessment year 1997-98 on 13.3.2000. In response to the notice, the assessee vide letter dated 24.4.2000 replied to treat the return of Income filed under section 139(1) to be filed under section 148 of the Act. The reassessment proceedings were carried out by the Assessing Officer and the proposed addition on account of depreciation on leasing transaction was dropped while framing the assessment under section 143(3) read with Section 148 of the Act and personal disallowance was made amounting to Rs.1500/- on account of telephone and telex expenses and the order was passed on 30.1.2002, Annexure A.5. Feeling aggrieved, the assessee filed an appeal before the CIT(A). ITA No.321 of 2011 3 Notice was issued for enhancement on the issue of depreciation on leasing transaction but after discussion, the Commissioner of Income Tax (Appeals) [CIT(A)] dropped the notice of enhancement and the appeal was partly allowed vide order dated 27.8.2002, Annexure A.4. Against the said order, the revenue preferred an appeal before the Tribunal. The Tribunal vide order dated 30.6.2006, Annexure A.3 remanded the matter back to CIT(A) for fresh disposal of the case. During the remand proceedings before the CIT(A), an additional ground was taken challenging re-assessment under section 148 of the Act but the CIT(A) dismissed the appeal of the assessee rejecting all the grounds. The assessee filed an appeal before the Tribunal. The Tribunal vide order dated 30.6.2010 dismissed the appeal by observing that lease agreements were infact in the nature of hire purchase agreements and reassessment was valid by relying upon Explanation 3 inserted vide Finance (No.2) Act, 2009 to Section 147 of the Act. Hence the present appeal. 5. The assessee has raised two-fold contention. Learned counsel for the assessee submitted that the agreement entered by the assessee with his customers was a lease agreement and the ownership of the vehicle vested with the assessee till the payment of the final installment and in such circumstances, the assessee was entitled for depreciation. According to the counsel, the authorities below had erred in not granting the said benefit. Relying upon a judgment of the Apex court in MCORP Global (P) Limited v. Commissioner of Income Tax, (2009) 309 ITR 434, it was canvassed that the claim of ITA No.321 of 2011 4 depreciation by the assessee was well-founded which had been illegally denied by the respondent. Reliance was also placed on decision of the Apex Court in Commissioner of Income Tax v. Shaan Finance (P) Limited, (1998) 231 ITR 308 and decision of this Court in CIT v. Punjab State Electricity Board, (2010) 320 ITR 469 in support of the submission. 6. Elaborating his contention, learned counsel for the appellant in respect of second argument submitted that the Assessing Officer had sought to invoke Sections 147/148 of the Act on a ground on which no addition was however made. It was urged that while making assessment, addition was sought to be made on a different ground on which no notice had been issued. It was contended that jurisdiction can be assumed by Assessing officer and addition made in respect of the issue on which action under Section 148 of the Act had not been initiated provided some addition had been made by the Assessing Officer on the ground on which re-assessment proceedings had been initiated. In other words, it was submitted that in the absence of any addition on the ground on which reassessment proceedings had been initiated, re-assessment on other grounds could not be made. 7. Taking up first issue as raised by the assessee, it requires to be determined whether the agreement entered by the assessee with his customers was in the nature of lease agreement or hire purchase agreement. The Tribunal while rejecting the plea of the assessee had recorded that the transport vehicle was registered in the name of the ITA No.321 of 2011 5 lessee at the time of giving the vehicle on lease and the leased vehicles were not to revert back to the lessor and infact no vehicle had been either taken back at the expiry of the lease. The Tribunal had further noticed as under:- “a) In terms of the arrangement, the manufacturer of the vehicle was effecting delivery to the lessee directly and not to the assessee/lessor. b) the selection of the vehicles was left to the choice of the lessee. c) The registration certificate issued by the transport authorities reflected the name of the lessee as registered owner. d) Although as per the lease agreement the leased vehicles were to revert back to the lessor/assessee but infact no vehicle was ever taken back at the expiry of the lease. e) The vehicles were retained by the lessee even after the expiry of the lease agreement without affecting any formal purchase from the assessee. f) The assessee lessor did not make any sale but passed a book entry showing the adjustment of the leased security amount as full and final consideration received for the transfer of the vehicle.” 8. In view of the aforesaid findings, it could not be said that the assessee was dealing in the business of lease. Infact, it was in the nature of hire purchase. Once that was so, the ownership stood transferred in the name of the vendee and the assessee was rightly held not entitled to depreciation. 9. Referring to the judgments relied upon by learned counsel for the assessee, a perusal of the facts therein shows that in ITA No.321 of 2011 6 all those cases, ownership of the assets remained with the assessee and in such circumstances,it was held that the assessee was entitled to the benefit of either depreciation or investment allowance. The judgments, thus, do not advance the case of the assessee. 10. Adverting to the second issue, reference is made to Explanation 3 to Section 147 of the Act added by Finance (No.2) Act, 2009 with effect from 1.4.1989. It provides that the revenue is entitled to continue with the proceedings in respect of the income which had escaped assessment even though the Assessing officer while issuing notice for reassessment had not included the same in the reasons recorded. 11. This Court in ITA No.421 of 2010 (Manjinder Singh Kang v. Commissioner of Income Tax, Amritsar and another) decided on 13.9.2010 while dealing with the similar issue had noticed as under:- “Explanation 3 to Section 147 has been inserted by Finance(No.2) Act, 2009 retrospectively with effect from 1.4.1989. It reads thus:- “Income escaping assessment. 147. XX XX XX Explanation 3.—For the purpose of assessment or reassessment under this section, the Assessing Officer may assess or reassess the income in respect of any issue, which has escaped assessment, and such issue comes to his notice subsequently in the course of the proceedings under this section, notwithstanding that the reasons for such issue have not been included in the reasons recorded under sub-section (2) of section 148.” ITA No.321 of 2011 7 A plain reading of Explanation 3 to Section 147 clearly depicts that the assessing officer has power to make additions even on the ground on which re-assessment notice might not have been issued in case during reassessment proceedings, he arrives at a conclusion that some other income has escaped assessment which comes to his notice during the course of proceedings for re- assessment under Section 148 of the Act. The provision no where postulates or contemplates that it is only when there is some addition on the ground on which re- assessment had been initiated, that the assessing officer can make additions on any other ground on the basis of which income may have escaped assessment. The reassessment proceedings, thus,in the present case cannot be held to be vitiated.” 12. The submission of learned counsel for the appellant that some addition is required to be made on the basis of which re- assessment notice had been issued in order to continue with the proceedings under any other head is without any substance as per provisions of Explanation 3 to Section 147 of the Act. 13. In view of the above, we do not find any substance in the contentions of the learned counsel for the assessee. Accordingly, no error is found in the order of the Tribunal and no substantial question of law arises in these appeals. Consequently, all the appeals are dismissed. (Ajay Kumar Mittal) Judge May 02, 2012 (Gurmeet Singh Sandhawalia) 'gs' Judge "