HYBRID FINANCIAL SERVICES LTD.,MUMBAI vs. A,C,I.T.-10(3), MUMBAI

The assessee has raised the following grounds:-

CIT(Appeals) erred in not considering the long term capital losses of the current year to be carried forward as per the Income Tax Act, 1961. A.Y. 2009-10,2010-11&2011-12

CIT(Appeals) erred in not indicating in the Assessment Order the brought forward business losses and allowances as per income tax records.

The brief facts of the case are that theassessee filed the return of income on 24.09.2009 declaring total loss of Rs.67,09,964/-. The return was processed u/s. 143(1) of the Income Tax Act, 1961( in short “the Act”). Thereafter, notice u/s.143(2) of the Act was issued on 28.08.2010 which was duly served upon the assessee. Notice u/s.142(1) of the Act along with questionnaire was also issued on 23.08.2010 which was duly served upon the assessee. The assessee is engaged in the business of leasing and hire purchase finance company. The Assessing Officer disallowed the claim of the depreciation on lease assets and also disallowed the claim u/s.194C of the Act and carried forward long term losses and also disallowed the claim u/s.14A of the Act and certain claim u/s.115JB of the Act and assessed the income as Nil. Feeling aggrieved the assessee filed an appeal before the CIT(A) – 22 Mumbai who confirmed the order of the Assessing Officer therefore the assessee has filed the present appeal before us. A.Y. 2009-10,2010-11&2011-12 ISSUE NO.1:-

Under this issue, the assessee has challenged the disallowance of depreciation on WDV of leased assets amounting to Rs.1,45,62,977/-. The Assessing Officer passed the order on the basis of previous order for the A.Y. 1993-94 to 1998-99 and arrived at this conclusion that the lease transactions are in the nature of finance and the assessee was not the owner of the leased assets and therefore he is not entitled to get depreciation thereon. Apparently, it is only required to be seen that whether the assessee is entitled to get the depreciation upon the lease assets or not. This issue has already been adjudication by the Income Tax Appellate Tribunal in the assessee’s own case for the A.Y.1993-94 and 1994-95 to 1998-99 in dated 08.02.2012 for A.Y.1993-94 and in ITA No.3991 to 3995/Mum/2009 for A.Y. 1994-95 to 1998-99 dated 21.11.2014, copy of which lies at page 1 to 17 of the paper book. The Hon’ble Tribunal has relied upon the judgment passed by the Hon’ble Supreme Court in case ICDS Ltd. Vs. CIT, CA No.3282 of 2008, wherein the Hon’ble Supreme Court has observed at page 16 para 19 mentioned below:-

There was some controversy regarding the invoices issued by the manufacturer – whether they were issued in the name of the lessee or the lessor. For the view we have taken above, we deem it unnecessary to go into the said question as it is of no consequence to our final opinion on the main issue. From a perusal of the lease agreement and other related factors, as discussed above, we are satisfied of the assessee’s ownership of the trucks in question.

Therefore, in the facts of present case, we hold that the lessor i.e. the assessee is the owner of the vehicles. As the owner, it used the assets in the course of its A.Y. 2009-10,2010-11&2011-12 business, satisfying both requirements of Section 32 of the Act and hence, is entitled to claim depreciation in respect of additions made to the trucks, which were leased out.”

In view of the above said observations the Hon’ble Income Tax Appellate Tribunal in the above mentioned case allowed the case of the assessee therefore in the said circumstances we are of the view that the case of the assessee is fully covered by the aforesaid decisions passed by the Hon’ble Income Tax Appellate Tribunal in the assessee’s own case, we are of the view that the assessee is entitled to claim the depreciation on WDV of leased assets amounting to Rs.1,45,62,977/- in accordance with law. Accordingly, this issue is decided in favour of the Assessee and against the Revenue.

The learned representative of the assessee did not press both the grounds. Therefore these grounds are hereby ordered to be dismissed being not pressed.

The assessee has challenged the action of Assessing Officer and learned CIT(A) to not to carry forward the Long Term Capital Loss of Rs.5,44,47,930/-. The assessee suffered Long Term Capital Loss of A.Y. 2009-10,2010-11&2011-12 Rs.5,44,47,930/-. The claim for carry forward of this loss to the subsequent years was not made in the return of income. However, the same was claimed by way of a letter dated 11.11.2011 in the course of assessment proceedings. The Assessing Officer declined the claim of the assessee on the ground that the same was not raised in the return. The said observations was confirmed by the learned CIT(A) relying upon the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. 284 ITR 323 wherein it has been held that the assessee can raise a further claim before the Assessing Officer only by way of a revised return of income. The contention of the assessee is that the assessee can raised the additional ground to accept the claim before the appellate authorities in view of the law settled by Bombay High Court in CIT Vs. Pruthivi Brokers and Shareholders Pvt. Ltd. 349 ITR 336. It is not in dispute that the assessee did not raise his claim in his return as well as in his revised return. However he raised his claim by way of letter dated 11.11.2011. In view of the law settled by Bombay High Court in CIT Vs. Pruthivi Brokers and Shareholders Pvt. Ltd. 349 ITR 336, wherein it is held that it is open to the assessee to raise the additional ground before the appellate authority. In view of the said circumstances, we are of the view that this matter is required to be reconsidered again by the Assessing Officer by giving an opportunity of being heard to the assessee in accordance with law. Therefore, in this regard the finding of the learned CIT(A) is hereby ordered to be set aside and the Assessing Officer is directed to A.Y. 2009-10,2010-11&2011-12 reconsider the matter in accordance with law after giving an opportunity of being heard to the assessee in the interest of justice. Accordingly, this issue is decided in favour of the Assessee and against the Revenue.

The assessee has contended that the learned CIT(A) was wrong for not carry forwarding / brought forwarding business losses and allowances further. The appellant had incurred business losses and has unabsorbed depreciation allowance in respect of the earlier years which are liable to be carry forwarding for the subsequent year in accordance with law. Therefore, in this case we set aside the finding of learned CIT(A) and this issue is hereby restored to the file of Assessing Officer to decide this issue a fresh in accordance with law after giving full opportunity of being heard to the assessee. Accordingly, this issue is decided in favour of the Assessee and against the Revenue.

Under this issue the assessee has contended that there was a total addition of provision of contingencies and addition of interest disallowance u/s.14A of the Act while computing the book profit u/s. 115 JB of the Act which has been shown at page 7 of the assessment order. It is apparent that there is a provision for contingencies of A.Y. 2009-10,2010-11&2011-12 Rs.1,80,00,000/- which has been added as well as form part of Rs.1,88,65,335/-. Since the amount of Rs.1,80,00,000/- for the contingencies has been added twice and the addition should be made once. The amount of disallowance of interest u/s.14A of the Act as determined while giving effect to ground no.3 above is required to be added while computing the book profit. No doubt in the said circumstances, the said amount is not required to be added to income of assessee. Therefore, in the said circumstances we set aside the finding of the CIT(A) on this issue and delete the said addition. Accordingly, this issue is decided in favour of the Assessee and against the Revenue.

Under issue no.9 the assessee has challenged the action of the Assessing Officer which has been confirmed by the learned CIT(A) for not carry forwarding the unabsorbed depreciation u/s. 115JB of the Act while computing book profit for subsequent years. The assessee had unabsorbed depreciation in its books of account of Rs.52,76,19,767/- which has been shown at page 69 of the paper book. As per its computation of income, it has adjusted such depreciation to the extent of Rs.4,51,20,663/- against the book profit for the year under consideration and carried forward the balance amount of Rs.48,24,99,104/- for being set off in subsequent years. The Assessing Officer in the assessment order set off such unabsorbed A.Y. 2009-10,2010-11&2011-12 depreciation to the extent of Rs.6,31,20,663/- based on his computation of book profit in view of the page 7 of the assessment order. The appellant has claimed in connection with carry forwarding the remaining unabsorbed depreciation. No doubt, the Assessing Officer as well as learned CIT(A) has not decided this issue on merit. In view of the said circumstances, we set aside the finding of the CIT(A) on this issue. Since there is no specific finding on record on this issue, therefore, we are of the view that the matter is required to be decided afresh on merits by the Assessing Officer after giving an opportunity of being heard to the assessee in accordance with law. Accordingly, this issue is decided in favour of the Assessee and against the Revenue.

So far as the issue no.10 is concerned, the assessee has raised the claim of deciding the application u/s.154 of the Act. It is not in dispute that whenever an application to section 154 of the Act has been moved before the authority the same is liable to be decided in accordance with law, therefore, there is no need to issue the directions in this regard.

The assessee has raised the following grounds:-

The issue no. 2 is in connection with the disallowance of Rs.3,06,563/- towards printing charges of Annual Report of the A.Y. 2009-10,2010-11&2011-12 Company u/s. 40(a)(ia) of the Act for non deduction of tax at source. The assessee had purchased the 55,000 copies of its Annual Report from M/s. Rivera Systems, Mumbai, for a consideration of Rs.3,06,563/-. The Annual Reports were printed and sold by the said concern to the assessee firm. The Assessing Officer and learned CIT(A) have observed that the said payment was to carried out of work and therefore, liable to TDS u/s. 194Cof the Act. Appellant had purchased the annual reports from M/s. Rivera Systems on which they have also charged Value Added Tax which has already been paid. In this regard the tax invoice is on record which is lying at page 23 of the paper book. Apparently, it is not a contract for work liable to TDS u/s. 194C of the Act. Accordingly, we are of the view that the learned CIT(A) has passed the order wrongly and illegally. Therefore the finding of the learned CIT(A) on this issue is hereby ordered to be set aside and this issue is decided in favour of the Assessee and against the Revenue.

The assessee has challenged the action of Assessing Officer and learned CIT(A) to not to carry forward the Long Term Capital Loss of Rs.9,50,468/-. The assessee had sustained the Long Term Capital Loss of Rs.9,50,468/-. The claim for carry forward of this loss to the subsequent years was not made in the return of income. However, the same was claimed by way of a letter dated 14.02.2013 during the A.Y. 2009-10,2010-11&2011-12 course of assessment proceedings. The Assessing Officer declined the claim of the assessee on the ground that the same was not raised in the return. The said observations was confirmed by the learned CIT(A) relying upon the decision of the Hon’ble Supreme Court in the case of Goetze (India) Ltd. 284 ITR 323 wherein it has been held that the assessee can raise a further claim before the Assessing Officer only by way of a revised return of income. The contention of the assessee is that the assessee can raised the additional ground to accept the claim before the appellate authorities in view of the law settled by Bombay High Court in CIT Vs. Pruthivi Brokers and Shareholders Pvt. Ltd. 349 ITR 336. It is not in dispute that the assessee did not raise his claim in his return as well as in his revised return. However he raised his claim by way of letter dated 11.11.2011In view of the law settled by Bombay High Court in CIT Vs. Pruthivi Brokers and Shareholders Pvt. Ltd. 349 ITR 336, wherein it is held that it is open to the assessee to raise the additional ground before the appellate authority. In view of the said circumstances, we are of the view that this matter is required to be reconsidered again by the Assessing Officer by giving an opportunity of being heard to the assessee in accordance with law. Therefore, in this regard the finding of the learned CIT(A) is hereby ordered to be set aside and the Assessing Officer is directed to reconsider the matter in accordance with law after giving an opportunity of being heard to the assessee in the interest of justice. A.Y. 2009-10,2010-11&2011-12 Accordingly, this issue is decided in favour of the Assessee and against the Revenue.

The assessee has raised the following grounds:-