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IN THE HIGH COURT OF KARNATAKA AT BENGALURU
DATED THIS THE 14TH DAY OF MARCH, 2022
PRESENT
THE HON’BLE MRS.JUSTICE S.SUJATHA
AND
THE HON’BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR
I.T.A.No.3/2022 c/w I.T.A.No.2/2022, I.T.A.No.4/2022, I.T.A.No.5/2022, I.T.A.No.6/2022 & I.T.A.No.7/2022
BETWEEN :
M/s MAHARASHTRA APEX CORPORATION LTD., PAN: AACCM 2741 B, SYNDICATE HOUSE, MANIPAL-576104, REP BY ITS SENIOR OFFICER, SRI J.SUDHASHANKAR RAO, S/O SRI K.JANARDHANA RAO AGED ABOUT 52 YEARS
...APPELLANT (COMMON)
(BY SRI K.K.CHYTHANYA, SENIOR COUNSEL A/W SRI TATA KRISHNA, ADV.)
AND :
THE DEPUTY COMMISSIONER OF INCOME TAX, CIRCLE-1, UDUPI
…RESPONDENT (COMMON)
(BY SRI E.I.SANMATHI, ADV.)
THIS INCOME TAX APPEAL NO.3/2022 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE
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IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘A’ BENCH BEARING IN ITA NO.239/BANG/2018, DATED 20.09.2019 FOR THE ASSESSMENT YEAR 1995-1996 AS ENCLOSED IN ANNEXURE-A AND ETC.
THIS INCOME TAX APPEAL NO.2/2022 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘A’ BENCH BEARING IN ITA NO.242/BANG/2018, DATED 20.09.2019 FOR THE ASSESSMENT YEAR 1998-1999 AS ENCLOSED IN ANNEXURE-A AND ETC.
THIS INCOME TAX APPEAL NO.4/2022 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘A’ BENCH BEARING IN ITA NO.241/BANG/2018, DATED 20.09.2019 FOR THE ASSESSMENT YEAR 1997-1998 AS ENCLOSED IN ANNEXURE-A AND ETC.
THIS INCOME TAX APPEAL NO.5/2022 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘A’ BENCH BEARING IN ITA NO.246/BANG/2018, DATED 20.09.2019 FOR THE ASSESSMENT YEAR 2000-2001 AS ENCLOSED IN ANNEXURE-A AND ETC.
THIS INCOME TAX APPEAL NO.6/2022 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘A’ BENCH BEARING IN ITA NO.240/BANG/2018, DATED 20.09.2019 FOR THE
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ASSESSMENT YEAR 1996-1997 AS ENCLOSED IN ANNEXURE-A AND ETC.
THIS INCOME TAX APPEAL NO.7/2022 IS FILED UNDER SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A) FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE IMPUGNED ORDER OF THE INCOME TAX APPELLATE TRIBUNAL, BENGALURU ‘A’ BENCH BEARING IN ITA NO.244/BANG/2018, DATED 20.09.2019 FOR THE ASSESSMENT YEAR 1999-2000 AS ENCLOSED IN ANNEXURE-A AND ETC.
THESE APPEALS COMING ON FOR ORDERS, THIS DAY, S. SUJATHA, J., DELIVERED THE FOLLOWING:
J U D G M E N T
Since common and akin issues are involved in these appeals, they are heard together and disposed of by this common judgment.
These appeals are filed by the assessee under Section 260A of the Income Tax Act, 1961 [‘Act’ for short] assailing the order passed by the Income Tax Appellate Tribunal Bangalore Bench ‘A’, Bangalore [‘Tribunal’ for short] in ITA Nos.239, 242, 241, 246, 240 and 244/Bang/2018 dated 20.09.2019 and M.P.Nos.52 to 55/Bang/2020 relating to the assessment years
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1995-96 to 2000-01 raising the following substantial questions of law:
Common Substantial Questions of Law in ITA Nos.2 to 7/2022:
“1. Whether on the facts and circumstances of the case, the Tribunal is right in perversely denying the Appellant’s claim for deduction of depreciation on assets leased merely on the basis that lease agreements were not made available before it, ignoring the lease agreements filed vide Memo dated 31.07.2019 for AY 1998-99 and the assessment order detailing the clauses of the lease agreements?
Whether, the findings of the Tribunal that the lease transactions entered into by the Appellant are sham and perverse?
Whether on the facts and circumstances of the case, the Tribunal is right in law in denying depreciation on assets leased by the appellant?
Whether on the facts and circumstances of the case, the Tribunal erred
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in law in failing to follow the decision of the co-ordinate bench of the same jurisdiction rendered in similar set of facts?
Common Substantial Questions of Law in ITA Nos.2 and 3/2022:
Whether on the facts and circumstances of the case, the Tribunal has erred in failing to adjudicate the issue relating to depreciation on assets leased by the appellant to educational institutions for the impugned AY despite a specific ground being raised in this regard?
Common Substantial Questions of Law in ITA Nos.3, 4 and 6/2022:
Whether on the facts and circumstances of the case, the Tribunal has erred in dismissing as belated, the mistake apparent from record added vide Memo dated 10.08.2020 to the miscellaneous petition filed in time on 03.02.2020?
Common Substantial Questions of Law in ITA Nos.2, 3, 4 and 6/2022:
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Whether on the facts and circumstances of the case, the Tribunal is justified in perversely dismissing the miscellaneous petitions filed before it despite pointing out glaring errors apparent from records in the original order?”
Common Substantial Questions of Law in ITA Nos.2, 5 and 7/2022:
Whether on the facts and circumstances of the case, the Tribunal is right in law in denying depreciation on assets leased by the Appellant to M/s. Khatema Fibers merely for the reason that the appellant did not pay the excise duty component on the assets leased when the same did not form part of actual cost under Explanation 9 to Section 43[1]?
Whether on the facts and circumstances of the case, the Tribunal is right in law in denying depreciation on assets leased by the Appellant to M/s. Mohan Meakin on the basis that the appellant met only part of cost when the appellant had met
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Rs.19,98,000/- out of Rs.22,25,057/- constituting 89.8% of cost?
Common Substantial Questions of Law in ITA Nos.5 and 7/2022: 7. Whether on the facts and circumstances of the case, the Tribunal is right in upholding the action of the respondent in denying the appellants’ claim for interest on refund under Section 244A?”
These appeals are admitted to consider the substantial question of law No.1 at present as the same is the basis for arriving at a decision by the Tribunal which gives rise to the other substantial questions of law raised by the appellant as framed in the appeals.
The appellant-assessee is a public limited company carrying on the business of a Non-Banking Financial Institution and classified by RBI as a Hire Purchase Finance and Equipment Leasing Company. The appellant has filed its return of income for the
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assessment years 1995-96 to 2000-01. After issuance of notices under Section 143[2] and 142[1] and considering the response filed by the appellant, the orders were passed under Section 143[3] of the Act. Aggrieved by the said orders, the appellant filed appeals before the Commissioner of Income Tax (Appeals) [CIT(A)] and the appeals were partly allowed. Aggrieved by the said orders, the appellant has preferred appeals before the Tribunal which are disposed of by the Tribunal holding that the transactions in question is a financial transaction and not lease transaction. Hence, these appeals by the assessee.
Learned senior counsel Sri.K.K.Chythanya appearing for the appellant-assessee would submit that the entire approach of the Tribunal is on a wrong notion that no lease agreements are placed on record by the assessee. The primary question involved herein i.e., whether the transactions are lease or financial
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arrangements would certainly depends on the clauses of the lease agreements which were made available before the Tribunal in the first round of litigation. This indeed has been considered by the Assessing Officer and it was recorded that “these lease agreements have been examined, they are all identical and contained identical terms and conditions they are discussed below……”. The clauses in the lease deeds having been extracted by the Assessing Officer, the Tribunal ought to have considered the same. Even otherwise, in the Miscellaneous Petition Nos.52 to 55/2020 filed by the assessee, the main ground urged was that the finding of the Tribunal that lease agreements were not brought on record by the appellant-assessee was not justifiable. In support of the said contention, Memos were filed along with the copy of the index and the affidavits of the learned Chartered Accountant. Despite the index depicting the lease agreements submitted by the appellant-assessee, the same are given a go-bye in
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arriving at a conclusion by the Tribunal. Thus, the learned senior counsel submits that the matters require re-consideration by the Tribunal keeping open the other substantial questions of law to be considered by the Tribunal.
Learned counsel appearing for the Revenue justifying the impugned orders submitted that despite providing reasonable opportunity to the appellant- assessee, no lease agreements were made available before the Tribunal. The burden of proof lies on the assessee. For the query made by the Tribunal insofar as the lease agreements, the reply given by the learned authorized representative appearing for the assessee that the lease agreements are not readily available was indeed recorded by the Tribunal. In such circumstances, no fault can be found with the order of the Tribunal in proceeding with the matter accepting
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the finding of the Assessing Officer/First Appellate Authority.
We have given our anxious consideration for the arguments advanced by the learned counsel appearing for the parties and perused the material on record.
Though the assessee has raised several substantial questions of law, we have considered only the substantial question of law No.1 which is the genesis for these appeals. The entire gamut of the order impugned revolves around the controversy whether the transactions involved in the case are lease or financial arrangement. In order to answer this controversy, it was necessary for the appellant-assessee to place on record the copies of the lease agreements. It may be true that the Tribunal was examining the matter in the second round but that itself would not preclude the assessee to place on record the copies of the lease agreements for
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the examination of the Tribunal notwithstanding certain clauses of the lease agreements extracted by the Assessing Officer in the assessment order. The assessee instead of furnishing the lease agreement copies has taken a circuitous method of defending its action of having submitted the copies of the lease agreements in the first round of litigation, so in the Miscellaneous Petition. In the absence of furnishing the relevant lease agreements, the Tribunal had no other option but to give weightage to the finding of the Assessing Officer as recorded in the order impugned.
However, in view of the undertaking given by the learned Senior Counsel appearing for the appellant- assessee that the copies of the lease agreements would be furnished before the Tribunal within a period of four weeks from today, which is sine qua non for deciding the issue whether the transactions are lease or financial arrangement, we are of the considered opinion that the
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interest of justice and equity would be met in setting aside the impugned orders and restoring the matters to the file of the Tribunal to provide an opportunity to the appellant-assessee to furnish the lease agreements before the Tribunal.
If such lease agreements are furnished before the Tribunal within a period of four weeks from today, the Tribunal shall consider the same in accordance with law and shall take a proper decision in an expedite manner after providing an opportunity of hearing to the appellant-assessee. It is needless to observe that all the rights and contentions of the parties are left open to be urged before the Tribunal including the issues raised in the form of substantial questions of law before this Court. After considering all these issues, the Tribunal shall pass appropriate orders in accordance with law in an expedite manner.
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With the aforesaid observations and directions, the appeals are disposed of answering the substantial question of law No.1 in favour of the assessee and against the Revenue, keeping open the other substantial questions of law as aforesaid.
The appellant-assessee shall appear before the Tribunal on 11.04.2022 and shall take further orders thereof.
Sd/- JUDGE
Sd/- JUDGE
NC.