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Income Tax Appellate Tribunal, “B” BENCH, MUMBAI
Out of these appeals, one appeal filed by the Revenue and another CO filed by the assessee, are arising out of the order of Commissioner of Income Tax (Appeals)-2, Mumbai [in short CIT(A)], in appeal No. CIT(A)- 2/IT/433/2012-13, dated 24.01.2017. The Assessment was framed by the Income Tax Officer, Circle-1(2)-3, Mumbai (in short ‘ITO/ AO’) for the A.Y. 1997-98 vide order dated 21.10.2010 under section 143(3) read with section 254 of the Income Tax Act, 1961 (hereinafter ‘the Act’).
The only issue in this appeal of Revenue is against the order of CIT(A) directing the AO to verify the claim of depreciation in regard to lease assets and according to Revenue the CIT(A) should not have set aside the assessment under section 251 of the Act as the CIT(A) has no power to set aside the issue. Secondly, the Revenue has also contested the issue on merits. For this Revenue has raised the following ground No. 3 and 4: -
3. Whether on facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in directing the Assessing Officer to verify each claim of the assessee, therefore, to satisfy that the supplier and lessee should not be one and the same, as the Ld CIT(A), u/s. 251 of the Act, has no power to set aside the issue to the Assessing Officer, but to adjudicate himself based on evidence on record."
4. Whether on facts and in the circumstances of the case and in law, the Ld. CIT(A) without bringing any fresh material on record has accepted the impugned lease transactions except in these case of Nath Pulp
CO. No. 247/Mum/2018 and Paper Mills Ltd, as discussed in para 3.4 of the appellate order, without disproving the findings of the Assessing Officer as discussed in the Assessment Order which was earlier confirmed by the [4 CIT(A), particularly in view of the categorical findings of facts recorded by the Assessing Officer in the Assessment Order dtd. 21.10.2010, that the Authorized Representative has submitted only the old details again without any fresh supporting or explanations, therefore, the contention or findings of the Assessing Officer that the said transactions are sham or bogus are not disproved by the CIT(A)?"
Briefly stated facts are that the assessee before AO and before CIT(A) filed the details of the assets purchased and leased to various parties. He also filed invoices of suppliers for purchase of assets along with confirmation from lessee for not claiming depreciation. A copy of chart as reproduced in the order of CIT(A) is being reproduced as under: - Name of Description Name of Date of Lease Rent Int. Capital Lessee of asset Supplier purchase booked ₹ component component bill ₹ Nath Pulp Industrial Nath Pulp 20.02.95 17033184 8106061 8927123 & Paer Pipelines & Papers Mills Ltd. Ltd. Rama Pulp Plant & Rama Pulp 09.09,96 0 1168301 0 & Papers Mach & Papers Ltd. Ltd. 17033184 9274362 8927123
In view of the above, the learned Counsel for the assessee stated that this issue has already been adjudicated by the Tribunal in AY 1996- 97 in vide order dated 23.04.2018 wherein Tribunal after considering the issue in detail has allowed the claim of the assessee dismissing the Revenue’s appeal vide Para 12 and 13 as under: -
We find that the Ld. CIT(A) after examining the details furnished by the assessee and analyzing the decision of the Special Bench as well as the decision of the Supreme Court in the case of I.C.D.S. Ltd. v. CIT [350 ITR 527] and M/s. Avasalara Technologies Ltd v. JCIT, Bangalore, in Appeal No. 2996 of 2004 and held as under: - “3.4. I have gone through the assessment order dated 21,10.2010 passed u/s. 143(3) r.w.s. 254 of the I.T. Act wherein the AO has not allowed depreciation claimed by the appellant of Rs, 62,47,500/- which is sustained as in the original order dated 30.03.1998 and the interest element of Rs. 1,07,76,404/- is assessed as appellant's income from finance business, The above order was passed as per the directions given by Hon’ble ITAT 'E' Bench vide order dated 09.01.2004 where the ratio followed in the case of Mid-East Portfolio Management Ltd. Vs. DC1T (87 1TD 537) (Mum)(SB) in the appellant's case or not. The AR of the appellant has given the full details of depreciation and lease rent for the period 01.04.1996 to 31.03.1997 very elaborately. As per the chart given by the appellant, except the first Lessee at Sr. No. 1, i.e. Nath Pulp & Paper Mills Ltd., all the other suppliers
CO. No. 247/Mum/2018 were third party only. For Nath Pulp & Paper Mills Ltd., the supplier is Nath Pulp & Papers Ltd. Further the AR of the appellant also relies on the Supreme Court decision in the following case:
(i) I.C.D.S. Ltd. v. CIT 350 ITR 527 (2013).
Further, I have also gone through the Supreme Court decision in the case of M/s. Avasalara Technologies Ltd. Vs JCIT, Sp. Rg. 1, Bangalore dated 30.03.2015 vide appeal no. 2996 of 2004 wherein it is held that there was no question of law involved and it is purely on facts and accordingly, the; appeal is dismissed. It is in favour of the department. The relevant portion is as under:
"The appellant-assesse herein claimed depreciation on certain machinery allegedly purchased from Andhra Pradesh State Electricity Board (hereinafter referred to as 'APSEB' for short) vide sale deed dated 29.09.1995 which as per the appellant, was given to the APSEB itself on lease. All the authorities below have found, as a fact, that there was no such purchase of machinery and the transaction in question is sham. On that basis, it was concluded that since the machinery was not purchased by the appellant, it never became the owner of the machinery and therefore, could not claim any depreciation thereof. These are pure findings of facts recorded by the authorities below. No CO. No. 247/Mum/2018 question of law arises. The appeal is, accordingly, dismissed."
So considering the above submissions and legal decision relied by the appellant as well as the revenue, I am of the considered opinion that the appellant company is entitled to claim depreciation on the leased assets except for Nath Pulp & Paper Mills Ltd. Though the AR of the appellant vehemently argues that the confirmation from Nath Pulp & Paper Mills Ltd. has not claimed depreciation on the leased assets. I am not convinced by the above information having the supplier and the lessee found to be the same entity, the ratio followed in M/s. Avasarala Technologies Ltd Vs Jt. CIT, Spl. Rg. I, Bangalore is squarely applicable in the appellant's case and therefore, I am of the considered opinion that depreciation claimed with respect to Industrial Pipelines, both supplier as well as the lessee is found to be of Nath Pulp & Paper Mills Ltd. is confirmed and for the rest of depreciation claim over the assets which were purchased from third party by the appellant company and entered into sale and lease back agreement with different parties are eligible to claim depreciation from sale & lease back assets by the appellant company. However, the AO is directed to verify each such claim and be satisfied that the supplier and lessee should not be one at CO. No. 247/Mum/2018 the same. Accordingly, the appeal is partly allowed on this ground.
On a perusal of the order of the Ld.CIT(A), we see that the Ld.CIT(A) held that in the transactions by the assessee with Nath Pulp & Paper Mills Ltd., the disallowance on depreciation was confirmed for the reason that both supplier as well as the lessee are found to be Nath Pulp & Paper Mills Ltd., itself. However, the Ld.CIT(A) held that the rest of depreciations claim over the assets which were purchased from third parties by the assessee company and entered into sale and lease back agreement with different parties are eligible to claim depreciation. However, he directed the Assessing Officer to verify each such claim and by satisfaction that the supplier and lessee should not be one at the same time. In our considered view this direction of the Ld.CIT(A) will not serve any purpose as the Assessing officer in this case though set-aside to him twice to examine the transaction in detail he miserably failed to examine the transactions and therefore there is no point again directing the Assessing Officer to examine the transactions or part of the transactions for the purpose of allowing the claim of the assessee. Therefore, to that extent the observations of the Ld.CIT(A) are reversed and we confirm the order of the Ld. CIT(A) in holding that assessee is eligible to claim depreciation from sale and lease back assets in respect of the transactions other than Nath Pulp & Paper Mills Ltd. To put an end to the litigation in this case as the matter is very old and relates to the A.Ys. 1996-97, we sustain the order of the Ld. CIT(A) partly as CO. No. 247/Mum/2018 indicated above and the claim of the assessee is directed to be allowed as per the observations of the Ld.CIT(A) without any further verification by the Assessing Officer.” 5. From the above, it is clear that the issue is clearly covered and respectfully following the Tribunal’s decision in assessee’s own case, we confirm the order of CIT(A) and dismiss this appeal of Revenue.
As regards to the CO of the assessee, which is supportive of the order of CIT(A) and hence, the same has become infructuous and dismissed.
In the result, the appeal of Revenue is dismissed and the CO of assessee is also dismissed as infructuous.
Order pronounced in the open court on 28-09-2018.