COMMISSIONER OF INCOME TAX-II vs. GUJARAT STATE FINANCIAL SERVICES LTD

TAXAP/1404/2011 1/4 JUDGMENT IN THE HIGH COURT OF GUJARAT AT AHMEDABAD TAX APPEAL No. 1404 of 2011 with TAX APPEAL No. 1406 of 2011 For Approval and Signature: HONOURABLE MR.JUSTICE V. M. SAHAI HONOURABLE MR.JUSTICE N.V. ANJARIA ========================================================= 1 Whether Reporters of Local Papers may be allowed to see the judgment ? 2 To be referred to the Reporter or not ? 3 Whether their Lordships wish to see the fair copy of the judgment ? 4 Whether this case involves a substantial question of law as to the interpretation of the constitution of India, 1950 or any order made thereunder ? 5 Whether it is to be circulated to the civil judge ? ========================================================= COMMISSIONER OF INCOME TAX-II - Appellant(s) Versus GUJARAT STATE FINANCIAL SERVICES LTD - Opponent(s) ========================================================= Appearance : MRS MAUNA M BHATT for Appellant(s) : 1, None for Opponent(s) : 1, ========================================================= CORAM : HONOURABLE MR.JUSTICE V. M. SAHAI and HONOURABLE MR.JUSTICE N.V. ANJARIA Date : 05/07/2012 ORAL ORDER

TAXAP/1404/2011 2/4 JUDGMENT (Per : HONOURABLE MR.JUSTICE N.V. ANJARIA) 1. The Revenue has brought these two Tax Appeals to challenge the order dated 21.04.2011 passed in Income Tax Appeal No.2763 of 2007 by the Income Tax Appellate Tribunal, Ahmedabad Bench `C”, which is a common order in two appeals and Cross Objection before the Tribunal. Tax Appeal No.1404 of 2011 relates to Income Tax Appeal No.2763 of 2007 whereas Tax Appeal No.1406 of 2011 is relatable to Cross Objection No.211 of 2007 in that Income Tax Appeal. 2. In both the appeals, the appellant has raised following question proposing it as a substantial question of law:- “Whether the Tribunal is right in law and on facts in deleting the disallowance of Rs.98,76,523/- being depreciation on assets of sale and lease back transactions?” 3. We have heard learned advocate Mrs. Mauna Bhatt for the appellant. The material on record as well as the impugned order are considered. 4. The assessee company, which is a State owned enterprise engaged in the business of providing financial assistance to the industrial units, claimed in its return of income for the assessment year 2004-05, depreciation amount of Rs.98,56,523/- on assets. The depreciation was claimed in respect of the lease back transactions entered into by the assessee with Gujarat State Road Transport Corporation. The Assessing Officer took the case for scrutiny assessment and served notice upon the assessee calling upon it to explain as to why the depreciation should not be disallowed. The Assessing Officer was of the view that the transactions in respect of which depreciation was claimed were not genuine and was a device adopted with

TAXAP/1404/2011 3/4 JUDGMENT a view to avoid tax and accordingly, he disallowed the depreciation. 4.1. The assessee went in appeal before the CIT(A), who deleted the disallowance, on the footing that in the previous assessment year and the years prior thereto the claim of the assessee was consistently allowed and that no fresh material was brought in to show that the transactions were not genuine. The Revenue preferred appeal before the Appellate Tribunal, which culminated into the impugned order. 4.2. While dismissing the appeal of the Revenue and confirming the decision of the Commissioner, the Tribunal took note of the fact that in the preceding assessment years, the issue was covered by its decision in assessee's own case for the assessment year 2001-02 wherein, in similar set of circumstances it had set aside the decision of the Assessing Officer. In the impugned order the Tribunal quoted and relied on its earlier order dated 10.03.2009 passed in Income Tax Appeal No.403 of 2005 for the assessment year 2001-02, which is reproduced hereunder:- “... We noticed that the assessee entered into five lease transactions with GSRTC. They are first transaction was in financial year 1993-64 (sic) when, depreciation was claimed at Rs.59,97,155/-. The second lease transactions was also entered into AY 1994-95 wherein depreciation of Rs.40,18,720/- was claimed and allowed. The third lease transaction was entered into FY 1996-97 on which the depreciation approx of Rs.2,00,06,325/- was claimed. Forth transaction took place in AY 1998-99 in which depreciation of Rs.4,01,38,576/- was claimed and allowed. Fifth also took place in AY 1998- 99 in which the depreciation of Rs.7,99,42,946/- was claimed. It is stated by the learned AR of the assessee that no fresh lease transaction has taken place this year and depreciation in respect of old lease transaction has only been claimed this year.” 5. The Tribunal was right in basing its order on the doctrine of

TAXAP/1404/2011 4/4 JUDGMENT consistency. On the record of the Tribunal there were no distinguishable facts to take a different course. In the earlier years, the claim of deprecation was accepted by the Revenue, and therefore, the Revenue could not have disputed the same for the year under consideration. In Radhasoamy Satsang v. CIT [193 ITR 321 (SC)] the Apex Court observed that though principle of res judicata does not apply as such to the income tax proceedings, at the same time, in absence of any material change in the circumstances, a different view than one taken in earlier years could not be taken. It was also seen that assessee as well as GSRTC both are statutory corporations. In absence of any manifest material on record, it would be far fetched to view the transactions reflected in the accounts of the two statutory corporations as not genuine. On all the above counts, the Tribunal's order of dismissing the appeal of the Revenue was quite justified. 6. No error is found in the conclusions of the Tribunal. No substantial question of law arises for consideration of this Court. 7. Hence, both the appeals are dismissed. (V.M. SAHAI, J.) (N.V. ANJARIA, J.) (SN DEVU PPS)