COMM. OF INCOME TAX , BIKANER vs. M/S. BANSWARA SYNTHETIC LTD.

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ITA/154/2007HC RajasthanRJHC01013662200715 January 2013Bench: DINESH MAHESHWARI,ARUN BHANSALI3 pages
AI SummaryDismissed

What did the High Court hold?

The Tribunal dismissed both appeals filed by the Revenue. The High Court, following its own earlier decision in D.B. Income Tax Appeal No. 54/2007, which dealt with essentially the same questions regarding the nature of lease and allowability of lease rentals as business expenditure, held that no interference was called for in the findings of the CIT(A) and the Tribunal. The Court referred to the Supreme Court decision in CIT Vs. Shaan Finance (P.) Ltd. and its own decision in Rajshree Roadways Vs. Union of India & Ors. The reasoning was that the assessee was found to be essentially a hirer after appreciation of evidence on record, and the features noticed by the CIT(A) made it clear that the lease rentals paid on the hired machinery were allowable as business expenditure for the years in question. Therefore, the findings on the mixed question of law and facts rendered by the appellate authorities were upheld. No issue was expressly left undecided.

What were the facts?

These two appeals by the Revenue (CIT, Udaipur) challenge the common order dated 22.12.2006 passed by the Income Tax Appellate Tribunal (ITAT), Jodhpur Bench. The ITAT had affirmed the orders of the Commissioner of Income Tax (Appeals) (CIT(A)) concerning assessment years 1996-1997 and 2001-2002. The appeals were admitted on substantial questions of law concerning the deletion of additions made by the Assessing Officer (AO). For AY 1996-1997, the addition was Rs. 52,34,789/-, and for AY 2001-2002, it was Rs. 13,90,128/-. The core dispute revolves around the nature of lease agreements and the allowability of lease rentals as business expenditure. The present appeals were connected with other appeals (D.B.I.T.A. Nos. 23/2005 and 54/2007) that dealt with similar issues.

What were the issues?

1. Whether, in the facts and circumstances of the case, the learned Tribunal was justified in dismissing the appeal of the revenue and confirming the order of the CIT(A) regarding deletion of addition of Rs. 52,34,789/- made by the AO on account of disallowance on lease rent, ignoring the substantial finding given by the AO that the lease agreement is that of a financing one and not operational, to treat the costs of the leased assets as loan amount and lease rental as interest? (For AY 1996-1997, with a similar question for AY 2001-2002 involving Rs. 13,90,128/-). Assessee's Contention: The judgment does not record specific arguments made by the assessee. However, the fact that the CIT(A) and ITAT allowed the lease rentals as business expenditure implies the assessee argued for their deductibility as such. Revenue's Contention: The Revenue contended that the lease agreements were financing in nature, not operational, and therefore, the lease rentals should be treated as interest on a loan, and the costs of leased assets as the loan amount, implying disallowance of lease rentals as business expenditure. The Revenue relied on the AO's finding to this effect.

Which sections of the Income-tax Act were involved?

Section 68

AI-generated summary — verify with the full judgment below

ITA Nos.136/2007 & 154/2006 1 (1) D.B.INCOME TAX APPEAL NO.136/2007 CIT, Udaipur Vs. M/s. Banswara Synthetic Ltd. (2) D.B.INCOME TAX APPEAL NO.154/2007 CIT, Udaipur Vs. M/s. Banswara Synthetic Ltd. DATE OF JUDGMENT ::: 15th January 2013 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARI HON’BLE MR. JUSTICE ARUN BHANSALI Mr.K.K.Bissa, for the appellant. Mr.Sanjeev Johari for the respondent . <><><>

BY THE COURT: (Per Hon’ble Dinesh Maheshwari),J. These two appeals, arising out of common order dated 22.12.2006 as passed by the Income Tax Appellate Tribunal, Jodhur Bench, Jodhpur affirming the concerning orders as passed by the Commissioner of Income Tax (Appeals), Udaipur in respect of appeals relating to the assessment years 1996-1997 and 2001-2002, have been admitted on identical nature substantial questions of law with only difference as regards the amount involved. The order of admission with question as formulated in D.B.Income Tax Appeal No.136/2007 concerning the assessment year 1996-1997 could be noticed as under:- “It is contended by learned counsel for the appellant that the earlier order of the ITAT relied upon in the impugned order has already been challenged by the Revenue before this Court by way of D.B.I.T.A. No.23/2005, which has been admitted on 7.4.2005. In that view of the matter, this appeal is also admitted by framing the following substantial question of law: “Whether in the facts and circumstances of the case the learned Tribunal was justified in dismissing the appeal of the revenue and confirming the order of the CIT(A) regarding deletion of addition of Rs.52,34,789/- made by the AO on account of disallowance on lease rent ignoring the substantial finding given by the AO that lease agreement is that of a financing one and not the operational, treat the costs of the leased assets as loan amount and lease rental as interest?”

ITA Nos.136/2007 & 154/2006 2 This appeal be connected with the files aforesaid D.B.I.T.A. No.23/2005 and 54/2007.” In Appeal No.154/2007, concerning the assessment year 2001-2002, the question is similar one except the amount involved i.e., Rs.13,90,128/-. These appeals were admitted, inter alia, with reference to D.B.I.T.A. Nos.23/2005 and 54/2007. In fact, the common order in the present cases has been passed with reference to the order that had been the subject-matter of Appeal No.54/2007. So far Appeal No.54/2007 is concerned, which involved essentially the same questions about the nature of lease and as to whether the lease rentals were allowable as business expenditure, we have considered the matter in detail in a separate judgment delivered today; and, with reference to the decision of the Hon'ble Supreme Court in CIT Vs. Shaan Finance (P.) Ltd.: (1998) 231 ITR 308 and of this Court in Rajshree Roadways Vs. Union of India & Ors.: 263 ITR 206 (Raj.), we have held the findings of the CIT (A) and the Tribunal, allowing lease rental as business expenditure, not calling for any interference. The considerations, reasonings and observations in the judgment delivered in Appeal No.54/2007 equally apply to the present cases too. Therein, we have ultimately held as under:- “In the ultimate analysis, in the present case where the respondent- assessee has been found to be essentially a hirer after appreciation of evidence on record, in our view, no interference in the findings on the mixed question of law and facts as rendered by the Appellate Authority and the Tribunal is called for. The features as noticed by the CIT(A) in his order make it clear that the lease rentals paid on the hired machinery were allowable as business expenditure for the year in question.” Thus, following the decision in Appeal No.54/2007, both these appeals are also dismissed in the same terms. No costs.

ITA Nos.136/2007 & 154/2006 3 (ARUN BHANSALI),J. (DINESH MAHESHWARI), J. cpgoyal/- D.B.INCOME TAX APPEAL NO.154/2007 CIT, Udaipur Vs. M/s. Banswara Synthetic Ltd. DATE OF JUDGMENT ::: 15th January 2013 PRESENT HON'BLE MR. JUSTICE DINESH MAHESHWARI HON’BLE MR. JUSTICE ARUN BHANSALI Mr.K.K.Bissa, for the appellant. Mr.Sanjeev Johari for the respondent . Following the decision in Appeal No.54/2007, the present appeal stands dismissed in the same terms [vide common judgment made in D.B. Income Tax Appeal No.136/2007: CIT, Udaipur Vs. M/s. Banswara Synthetic Ltd.] (ARUN BHANSALI),J. (DINESH MAHESHWARI), J. cpgoyal/-

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