Income Tax Appellate Tribunal - Mumbai
Industrial Development Bank Of India, ... vs Jt. Cit Spl. Range 19, Mumbai on 13 September, 2019
IN THE INCOME-TAX APPELLATE TRIBUNAL "C" BENCH MUMBAI
BEFORE SHRI R.C. SHARMA, ACCOUNTANT MEMBER
AND SHRI PAWAN SINGH JUDICIAL MEMBER
ITA No. 37/Mum/2001 (Assessment Year 1997-98)
Industrial Development Bank of Joint Commissioner of Income
India, Taxation Cell, ICBI Tower, -tax, Range -19,
4th Floor, WTC Complex, Cuff 6th Floor, Aayakar Bhavan,
Prade, Mumbai-400005 Vs Mumbai-400020
PAN: AACI 1105 R
Appellant Respondent
Appellant by : Sh. Satish Mody AR
Respondent by : Sh. Awungshi Ginson ( Sr. DR)
Date of Hearing : 29.08.2019
Date of Pronouncement : 13.09.2019
ORDERUNDER SECTION 254(1)OF INCOME TAX ACT
PER PAWAN SINGH, JUDICIAL MEMBER;
1. This appeal by assessee is directed against the order of learned Commissioner of Income Tax (Appeals)-XXVI, Mumbai dated 30.03.2001 for Assessment Year 1997-98.The assessee has raised following ground of appeal ;
The learned Assessing Officer (AO) erred in law and on facts, in adding an amount of Rs. 167,24,01,174/- being the total amount of lease rentals received by the appellant during the relevant previous year, to the chargeable interest of the appellant. The AO ought to have held that the lease transactions entered into by the appellant were not in the nature of loan transactions and should have refrained from making the above addition to the chargeable interest. The AO may be directed to delete this addition.
2 IDBI (ITA No. 37/M/2001) AY 1997-98The appellant craves leave to add to, amend, alter, modify, delete and/or substitute all or any of the above grounds of appeal till the final disposal of the appeal.
2. Brief facts of the case are that the assessee is a financial institution/bank established under the IDBI Act, 1964 and carrying its business and providing long term finance for industrial development. The assessee filed its return of chargeable interest for relevant Assessment Year on 28.11.1997 declaring chargeable interest of Rs. 4323 crore, which was subsequently revised on 30.03.1999 declaring chargeable interest of Rs. 4328 crore. The assessment was completed under section 8(2) of the Interest Tax Act, 1974 on 28.03.2000. The Assessing Officer while passing the assessment order made addition of Rs. 167,24,01,174/- treating the lease transaction as a loan transaction. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed. Thus, further aggrieved by the order of ld. CIT(A), the assessee has filed the present appeal before us.
3. We have heard the submission of both the parties and perused the material available on record. At the outset of hearing, the ld. Authorized Representative (AR) of the assessee submits that the ground of appeal raised by assessee is covered in favour of assessee in assessee's own case under the Income-Tax Act in ITA No. 3626/Mum/2001 dated 21.06.2019 for Assessment Year 1997-98 wherein the assessee is allowed depreciation on leased asset. The ld. AR of the assessee further submits 3 IDBI (ITA No. 37/M/2001) AY 1997-98 that similar relief was granted to the assessee by Tribunal under the Income-tax Act in assessee's own case for Assessment Year 1994-95 to 1996-97 on relying upon the decision of Hon'ble Supreme Court in case of ICDS Ltd. vs. CIT [29 taxmann.com 129 (SC)]. The ld. AR further submits that if depreciation is allowed to the assessee than leasing activity cannot be termed as loan and advance as required under section 2(7) of Interest Tax Act. Therefore, Interest tax is not leviable on the assessee in case of financial lease also.
4. The ld. AR of the assessee further submits that this appeal was initially allowed by Tribunal in order dated 08.08.2008. The revenue challenged the order of Tribunal before the Hon'ble Bombay High Court wherein the Hon'ble High Court vide order dated 28.11.2011, held that in view of the special bench decision of Tribunal in case of Gujarat Gas Financial Services Ltd. vs. ACIT [115 ITD 218 (Ahmadabad)], the matter needs to be considered afresh by Tribunal. Hence, the order of Tribunal was quashed by Hon'ble High Court in Interest Tax Appeal No. 37/2001. During the pendency of this appeal before the Tribunal, the order of such bench in Gujarat Gas Financial Services Ltd. vs. ACIT (supra) was set- aside by Hon'ble Gujarat High Court.
5. The ld. AR of the assessee further submits that the issue has now finally been settled by Hon'ble Supreme Court in case of ICDS vs. CIT [2013] 350 ITR 527 (SC), wherein the Hon'ble Apex Court held that the 4 IDBI (ITA No. 37/M/2001) AY 1997-98 assessee is entitled to claim depreciation on leased machinery and Trucks as the assessee was the owner of the lease asset and asset was used for the purpose of business. The ld. AR of the assessee accordingly submits that the ground of appeal raised by assessee is stand covered in favour of assessee. In view of the legal submission made hereinabove.
6. We have considered the submission of both the parties and perused the material available on record. We have noted that the facts are not in dispute. The assessee is a financial institution established by IDBI Act 1964. The business of the assessee is covered by section 9 of the IDBI Act. It is not in dispute that during the course of its business, the assessee operates a scheme "Equipment Lease Scheme". Under the said scheme, the assessee leased various assets to Industrial Group/concerned. During the assessment, the Assessing Officer noted that the assessee has received a leased rental of Rs. 167,24,01,174/-. The Assessing Officer further held that lease transactions are financial transaction. The entire leasing rental was brought to tax under the Interest Tax Act. On appeal before the ld. CIT(A), the action of Assessing Officer was confirmed holding that the issue of treating the lease transaction came up for his consideration in assessee's appeal under the Income-tax Act, wherein certain directions were issued to the Assessing Officer to decide the matter.
7. We have noted that under the appeal for same Assessment Year under Income-tax Act, the Assessing Officer disallowed the claim on 5 IDBI (ITA No. 37/M/2001) AY 1997-98 depreciation on the ground that it was a financial lease, which was confirmed by First Appellate Authority/CIT(A) and the Tribunal allowed the relief to the assessee by following the decision of Hon'ble Supreme Court in ICDS Ltd. vs. CIT (350 ITR 527). We have further noted that by following the order of Tribunal for Assessment Year 1994-95 & 1995-96, the similar relief was allowed to the assessee in appeal for Assessment Year 1997-98 for completeness of the order in the relevant part of order of Tribunal is extracted below:
3. Insofar as Ground of appeal nos. 1.1 to 1.3 is concerned, the same relates to assessee's claim for depreciation on the fixed assets which have been leased out. The total claim of depreciation was to the extent of Rs.157,78,82,261/- out of which an amount of Rs.91,88,25,669/- pertained to assets which were leased out in earlier period and such assets were part of the opening written down value (WDV). The Assessing Officer has disallowed the entire claim of depreciation primarily on the ground that it was a case of 'financial lease' of assets and that it was not a case of an 'operating lease'. This stand of the Assessing Officer was consistent with the stand of the assessing authorities in the past years. It has been explained before us that the said dispute is not unique to the instant assessment year, but arose for the first time in the course of assessment for Assessment Year 1994-95. It has also been pointed out that the matter travelled up to the Tribunal and vide order dated 29.10.2014 in ITA Nos.
1839/M/2004, 3369/M/2004, 3370/M/2004, 1951,3922,39923/M/2006 pertaining to Assessment Years 1994-95, 1995-96 and 1996-97, relief has been allowed to the assessee. It was, therefore, contended that the dispute in the instant year be decided in that light. The Ld. CIT-DR appearing for the Revenue has not contested the factual matrix brought out by the Learned Representative for the assessee, but supported the stand of the lower authorities in denying the claim of depreciation. 6 IDBI (ITA No. 37/M/2001) AY 1997-98
4. In order to impart completeness to the order on this Ground, we may further notice that the CIT(A) has affirmed the action of the Assessing Officer in denying the claim of depreciation on both aspects, i.e. on fixed assets leased out during the year under consideration as well as the opening WDV of fixed assets, which were hitherto leased out in the earlier assessment years.
5. In this background, we have heard the rival stands, perused the relevant material and proceed to dispose of the issue in the following manner. As briefly noted by us earlier, the appellant is a public financial institution which is, inter-alia, engaged in the activity of providing finance including leasing also. In pursuance to such objects, the assessee had leased out assets to various entities and claimed depreciation on the value of such assets leased out. So far as the terms and conditions of the lease are concerned, both the lower authorities have converged that the same are on similar terms and conditions as was in the past years. In fact, there is a convergence between the two sides to the effect that the facts and circumstances of the dispute stand on an identical footing as was considered by the Tribunal in the earlier years, notably in Assessment Years 1994-95 to 1996-97 by way of a combined order dated 29.10.2014 (supra). We have perused the said decision and find that the Tribunal referred to various decisions, inter-alia, the judgment of the Hon'ble Supreme Court in the case of I.C.D.S. Ltd. Vs CIT [2013] 350 ITR 527 (SC), wherein Hon'ble Court held that even in cases of 'financial leases', the depreciation allowance contemplated under Section 32(1) of the Act is allowable to the lessor. It has not been shown by the Ld. CIT-DR that any of such precedents in assessee's own case has been altered by any higher authority. Therefore, so far as this aspect of the matter is concerned, we do not find any hesitation in directing the Assessing Officer to allow the claim of depreciation on lease of assets where it involves 'financial lease'.
6. Further, a perusal of the order of Tribunal dated 29.10.2014 (supra) shows that certain transactions of lease though not classified by the Assessing Officer as 'financial lease', yet the depreciation was denied on some other ground, namely, lack of appropriate evidence, etc. On this aspect, wherein lease with four particular lessees were identified, namely, Kedia Group, 7 IDBI (ITA No. 37/M/2001) AY 1997-98 REPL Engineering, Patheja Brothers Forging & Stamping Ltd and and Padma Alloys Casting Ltd, the matter was set-aside by the Tribunal to the file of the Assessing Officer for afresh adjudication as per law. It has been further explained that in Assessment Year 1995-96 as well as 1996-97 certain lease transactions were identified wherein depreciation was denied for similar reasons, such parties being Trudent Steels, Nathan Steels, Pathreja Brothers and Kedia Distilaries for assessment years 1995-96 and Suman Metals, Kedia galleon Ltd and Trident Steels for assessment years 1996-97. At the time of hearing, the Learned Representative for the assessee pointed out that so far as depreciation claim in the instant year pertaining to said seven lease transactions is concerned, the same amounted to Rs. 2,09,04,638/-.
7. It has also been explained that subsequent to the setting aside of the matter by the Tribunal on this aspect for Assessment Years 1994-95 to 1996-97, no further order has been passed by the Assessing Officer till date. Considering the aforesaid, we deem it fit and proper to direct the Assessing Officer to decide about the admissibility of depreciation of Rs. 2,09,04,638/- pertaining to the aforesaid seven lease arrangements in the light of decision in the earlier years following the order of Tribunal dated 29.10.2014 (supra). Needless to mention, on this aspect the Assessing Officer shall allow the assessee a reasonable opportunity of being heard and thereafter recompute the depreciation allowable to the assessee keeping in mind the directions of the Tribunal in the earlier years, and as per law.
8. Accordingly, insofar as Ground of appeal nos. 1.1 to 1.3 are concerned, the same are allowed to the above extent.
9. Considering the decision of Tribunal, wherein deprecation on lease asset is allowed to the assessee on the basis of decision of Hon'ble Supreme Court in ICDS (supra) we hold that equipment lease transaction which is a part of business activities of the assessee are not in the nature of loan transaction and the lease rental cannot be 8 IDBI (ITA No. 37/M/2001) AY 1997-98 considered as interest income under section 2(7) of the Interest Tax Act, hence, we direct the Assessing Officer to delete the addition.
10. In the result, appeal of the assessee is allowed.
Order pronounced in the open court on 13/09/2019.
Sd/- Sd/-
R.C. SHARMA PAWAN SINGH
VICE-PRESIDENT JUDICIAL MEMBER
Mumbai, Date: 1309.2019
SK
Copy of the Order forwarded to :
1. Assessee 2. Respondent
3. The concerned CIT(A) 4.The concerned CIT
5. DR "C" Bench, ITAT, Mumbai
6. Guard File
BY ORDER,
Dy./Asst. Registrar
ITAT, Mumbai