CIT-CHANDIGARH vs. THE INVESTMENT TRUST OF INDIA LTD. CHEENAI

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ITA/225/2009HC Punjab & HaryanaPHHC01084310200911 August 2009Author: MR. JUSTICE ADARSH KUMAR GOEL,MRS JUSTICE DAYA CHAUDHARY4 pages
AI SummaryDismissed

What did the High Court hold?

The High Court held that no substantial question of law arose for consideration. This was based on the concurrent findings of the Commissioner of Income Tax (Appeals) and the Income Tax Appellate Tribunal. Both lower appellate authorities had concluded that the transaction was a genuine lease, and the equipment was duly purchased by the assessee and subsequently leased out. Therefore, the revenue's contention that it was a colourable device or a paper transaction to avoid tax was not accepted. The High Court found no basis to interfere with these concurrent findings. The appeal was dismissed.

What were the facts?

The Revenue, Commissioner of Income Tax, Chandigarh-II, filed an appeal under Section 260A of the Income Tax Act, 1961, against an order of the Income Tax Appellate Tribunal (ITAT), Chennai Bench-A. The appeal pertains to assessment year 1995-96. The assessee, The Investment Trust of India Ltd. (now M/s HFCL Infotel Ltd.), had claimed depreciation on certain equipment leased out in its business. The Assessing Officer disallowed this claim, viewing the transaction as a loan and not a genuine lease, asserting the equipment belonged to the lessee. The Commissioner of Income Tax (Appeals) reversed this, holding the assessee purchased and leased the machinery, entitling it to depreciation.

What were the issues?

1. Whether the Hon'ble ITAT is justified in law in allowing depreciation on an asset which is claimed to be sold and leased back, whereas the sale and lease back transaction is on papers only just to avoid tax by adopting a colourable device/dubious method? (Question of law) Assessee's Contention: Not recorded in the judgment. Revenue's Contention: The lease was merely a paper transaction, and the actual transaction was a loan between the assessee and the lessee, constituting tax avoidance through a colourable device.

Which sections of the Income-tax Act were involved?

Section 260A

AI-generated summary — verify with the full judgment below

IN THE HIGH COURT OF PUNJAB AND HARYANA AT CHANDIGARH

ITA No. 225 of 2009 (O&M) Date of decision: 11.8.2009 Commissioner of Income Tax, Chandigarh -II.

......Appellant Vs. The Investment Trust of India Ltd., Chennai (now M/s HFCL Infotel Ltd., Mohali.) ...Respondent CORAM:- HON'BLE MR.JUSTICE ADARSH KUMAR GOEL HON'BLE MRS.JUSTICE DAYA CHAUDHARY PRESENT: Ms Urvashi Dhugga, Standing Counsel for revenue. **** ADARSH KUMAR GOEL, J. (Oral)

1.

The revenue has preferred this appeal under Section 260A of the Income Tax Act, 1961 (for short, “the Act”) against the order of the Income Tax Appellate Tribunal, Chennai Bench-A in ITA No. 123/Mds/99 dated 19.5.2006 for assessment year 1995-96, proposing to raise following substantial question of law: “ Whether the Hon'ble ITAT is justified in law in allowing depreciation on an asset which is claimed to be sold and leased back whereas the sale and lease back transaction is on papers only just to avoid tax by adopting colourable device/dubious methods.”

2.

The assessee claimed depreciation on certain equipments which were leased out in the course of business by the assessee. The Assessing

ITA No. 225 of 2009 [2] Officer rejected the claim on the ground that the assessee only received lease rent in the form of recovery towards interest /profit on loan and, in fact, the equipments belonged to the so-called lessee. Transaction of lease was stated to be loan transaction between assessee and the lessee. CIT(A) reversed the view taken by the Assessing Officer and held that machinery in question was duly purchased by the assessee and was thereafter leased. Thus, the assessee was entitled to depreciation in accordance with law laid down by the Hon'ble Supreme Court in CIT v. Shaan Finance Private Limited 231 ITR 308. This view has been upheld by the Tribunal.

3.

Learned counsel for the revenue submits that the lease was only a paper transaction and, in fact, the transaction was of loan between assessee and the so called lessee and there was, thus, tax avoidance by using colourable device.

4.

In view of the concurrent findings recorded by the CIT(A) as well as the Tribunal that transaction was of lease and equipments were duly purchased by the assessee and then leased out, we are unable to hold that any substantial question of law arises.

5.

The appeal is dismissed. (ADARSH KUMAR GOEL) JUDGE (DAYA CHAUDHARY) August 11, 2009

JUDGE raghav Note: Whether this case is to be referred to the Reporter? ........Yes/No ITA No. 225 of 2009 [3]

ITA No. 225 of 2009 [4]

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