MITCO MANAGEMENT SERVICES PVT.LTD.,MUMBAI vs. I.T.O.1(2)(3), MUMBAI

This appeal filed by the assessee on 7.5.2009 is against the order of the CIT (A)-1, Mumbai dated 19.2.2009 for the assessment year 1997-98. In this appeal, assessee raised the following grounds which read as under: “1. The CIT (A) erred in upholding the disallowance of the appellant‟s claim for depreciation of Rs. 15,26,800/- on automatic load monitoring system.

Briefly stated relevant facts of the case are that that the assessee is engaged in the business of sales organizer for Ambuja Cement / Gujarat Ambuja Cement. Assessee filed the return of income declaring the total income of Rs. 5,01,770/-. In the first round of the assessment proceedings, AO disallowed the assessee‟s claim of depreciation on Automatic Load Monitoring System under section 32 of the Act. In the second round of the proceedings, AO confirmed the earlier disallowance of depreciation. Aggrieved with the said decision of the AO, assessee carried the matter in appeal before the first appellate authority. On appeal, after considering the submissions of the assessee, CIT (A) dismissed the appeal. Again aggrieved with the said decision of the CIT (A), assessee is in further appeal before the Tribunal by raising the above mentioned original grounds as well as additional ground.

During the proceedings before us, at the outset, Ld Counsel for the assessee brought our attention to the grounds and mentioned that the issue raised in the grounds relates to the taxability of various aspects of lease of the assets. Mentioning the aspects of „final lease‟ and „operating lease‟ Ld Counsel for the assessee submitted that the nature of lease is required to be freshly adjudicated in the light of the recently pronounced judgment of the Hon‟ble Supreme Court in the case of M/s. I.C.D.S. Ltd vs. CIT in Civil Appeal No.3282 of 2008, dated 14th January 2013 reported in 350 ITR 527.

On perusal of the said grounds and after considering the arguments of the Ld Counsel for the assessee as well as the Ld DR for the Revenue, as discussed in the open court, the grounds raised by the assessee are set aside to the file of the AO for de novo assessment on the issue relating to the „nature of lease of the assets‟. AO is directed to go strictly with the principles laid down in the said judgment of the Apex Court in the case of M/s. I.C.D.S Ltd (supra) while adjudicating the issue under consideration. AO shall grant a reasonable opportunity of being heard to the assessee as per the set principles of natural justice. Accordingly, grounds raised by the assessee are allowed for statistical purposes.

With reference to the additional ground, we find it relevant to admit the same and adjudicate in favour of the assessee. It is unfair that all the receipts received by the assessee constitutes income, when the lease payments includes of the capital, which falls in the capital zone and should be excluded. Considering the same, additional ground raised