Income Tax Appellate Tribunal - Ahmedabad
Gujarat State Financial Services ... vs Department Of Income Tax
IN THE INCOME TAX APPELLATE TRIBUNAL
AHMEDABAD "B" BENCH AHMADABAD
Before Shri D.K.Tyagi, Judicial Member and
Shri T.R. Meena, Accountant Member
ITA No. 1129/Ahd/2009 & 153/Ahd/2010
Assessment Years : 2005-06 & 2006-07
Gujarat State Financial V/s. The Jt. Commissioner of
Services Ltd. Incom e Tax, Ahm adabad,
W ing "B", 3 r d Floor, Khanij Range-4, Ahm edabad
Bhavan, 132 Ft Ring Road,
Near Universit y Ground,
Vastrapur, Ahmadabad -
380 052
P AN No. AAACG5581B
(Appellant) .. (Respondent)
ITA No. 1557/Ahd/2009 & 293/Ahd/2010
Assessment Years : 2005-06 & 2006-07
The Jt. Commissioner of V/s. Gujarat State Financial
Incom e Tax, Ahm adabad, Services Ltd.
Range-4, Ahm edabad W ing "B", 3 r d Floor, Khanij
Bhavan, 132 Ft Ring Road,
Near University Ground,
Vastrapur, Ahmadabad -
380 052
(Appellant) .. (Respondent)
राजःव कȧ ओर से Shri Alok Joshi, CIT. D.R.
By Revenue
आवेदक कȧ ओर से/By Assessee Shri Sanjay R. Shah, A.R.
सुनवाई कȧ तारȣख/Date of Hearing
25.10.2012
घोषणा कȧ तारȣख/Date of Pronouncement 28.12.2012
ORDER
I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0
A. Y . 2 00 5- 06 & 0 6- 07 Page 2
PER : T.R.Meena, Accountant Member
These are cross appeals filed by the Assessed in ITA Nos. 1129/Ahd/09 & 153/Ahd/10 and by the Revenue in ITA Nos. 1557/Ahd/09 & 293/Ahd/10, which have emanated from the orders of CIT(A)-VIII, Ahmedabad, dated 30.01.2009 for A.Y. 2005-06 & 29.09.2009 for A.Y. 2006-07. These two cross appeals were heard together and are being disposed of by way of this common order for the sake of convenience. The effective grounds of both cross appeals are as under:
( For A.Y. 05-06) Grounds of ITA No.1129/Ahd/2009
1. The order passed by the Commissioner of Income Tax (Appeals) is erroneous and requires to be modified. It is submitted that be so done now.
2. The Commissioner of Income Tax (Appeals) erred in upholding the addition made by AO in respect of the reversal of "provision for Diminution in value of Investment"
of Rs.16,77,234/- on the ground that the appellant's claim was purely notional & it was not proved that the investment were stock in trade and the same would be allowed only on transfer takes place. On the facts & circumstance of the case it is submitted that the findings of the CIT(A) are incorrect as the appellant's plea was for exclusion of the reversal of provision made in earlier year which had been taxed in that year and again taxed in the year under consideration by the AO as appeal for those years were pending. It is submitted it be so held now. I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 3 2.1 In the facts & Circumstances of the case, the Commissioner of Income Tax (Appeals) ought to have directed the AO to exclude the said reversal of the "provision for Diminution in value of Investment" while computing the total income as non exclusion has led to taxing the same amount in twice in two different years. It is submitted it be so held now.
3. The Commissioner of Income Tax (Appeals) erred in confirming the disallowance under section 14A of the Act in respect of interest paid on borrowings made for investments in tax free securities of Rs.4.47 crores (91.45 - 86.98) crores. In the facts and circumstances of the case it is submitted that the provisions of section 14A are not applicable. It is submitted it be so held now. 3.1 The Commissioner of Income Tax (Appeals) has erred in reducing gross block of asset out of own funds for determining own funds available for investment in tax free securities. Appellant submits that in the facts and circumstances of the case no such reduction was required to be made. It is submitted that it be so held now. 3.2 The Commissioner of Income Tax (Appeals) erred in confirming the disallowance of Rs.4,48,429/- out of administrative expenses under section 14A of the Act as relating to earning of income from tax free securities. In the facts and circumstances of the case it is submitted that no disallowance was required to be made out of the administrative expenses under section 14A of the Act. It is submitted that it be so held now.
4. The Commissioner of Income Tax (Appeals) erred in confirming the disallowance of the bad debts written off amounting to Rs.13,50,40,960/- for the reason that it has I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 4 not been proved that the same have become bad during the year. On the facts & circumstance of the appellant's case it is submitted that the amended section does not require the appellant to prove that the debt has become bad during the year but requires writing off of the bad debt or part thereof as irrecoverable in the books of account. It is submitted that it be so held now.
4.1 The Commissioner of Income Tax (Appeals) erred in confirming that the appellant had not fulfilled the conditions u/s 36(2) of the Act. It is submitted that the bad debt written off was debt which represents money lent in the ordinary course of business of money lending which is carried out by the appellant and accordingly the appellant had fulfilled the conditions of section 36(2) of the Act and was hence entitled to deduction under section 36(1)(vii) of the Act. It is submitted that it be so held now.
5. The Commissioner of Income Tax (Appeals) erred in confirming that the appellant was not entitled to depreciation @ 40% on the vehicles given on lease. It is submitted that the appellant satisfied the conditions prescribed in appendix I to the Income Tax Rules and hence was entitled to higher rate of depreciation. It is submitted that it be so held now.
5.1 The Commissioner of Income Tax (Appeals) erred in holding that the appellant had made the claim for depreciation @40% for the first time in the year under consideration. In the facts and circumstance of the case, the appellant submits that it has been granted depreciation @ 40% on these assets in all the earlier year and during the year it had only sought depreciation on the WDV on those assets. It was accordingly entitled to deprecation in I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 5 the year under consideration @ 40%. It is submitted it be so held now.
6. The Commissioner of Income Tax (Appeals) erred in holding that interest charged under section 234B was consequential. In the facts and circumstances of the case it is submitted that interest u/s 234B is not chargeable. It is submitted that it be so held now."
Grounds of ITA No.1557/Ahd/2009 "1. The learned CIT (A) erred in law and on facts in deleting the disallowance of provisions for doubtable debts amounting to Rs.1,29,66,421/- (1999-2000) and Rs.6,04,18,812/- (2001-02) as the issue has not become final.
2. The learned CIT (A) erred in law and on facts in directing the Assessing Officer to allow depreciation amounting to of Rs. 63,06,996/- on sale and lease back transactions."
( For A.Y. 06-07) Grounds of ITA No.153/Ahd/2010 "1. The order passed by the Commissioner of Income Tax (Appeals) is erroneous and requires to be modified. It is submitted that be so done now.
2. The Commissioner of Income Tax (Appeals) erred in confirming that the appellant was not entitled to depreciation @ 30% on the vehicles given on lease. It is submitted that the appellant satisfied the conditions prescribed in appendix I to the Income Tax Rules and hence was entitled to higher rate of depreciation. It is submitted that it be so held now.
I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 6 2.1 The Commissioner of Income Tax (Appeals) erred in holding that the appellant had made the claim for depreciation @30% for the first time in A.Y. 2005-06. In the facts and circumstance of the case, the appellant submits that it has been granted depreciation @ 30% on these assets in all the earlier year except A.Y. 2005-06 and during the year it had only sought depreciation on the WDV on those assets. It was accordingly entitled to deprecation in the year under consideration @ 30%. It is submitted it be so held now.
3. The learned Commissioner of Income tax (Appeals) erred in directing the AO to work out disallowance u/s 14A by applying Rule 8D of the Income Tax Rules. 14A. In the facts & circumstances of the case it is submitted that no disallowance u/s 14A is required to be made. It is submitted that it be so held now.
3.2 The learned Commissioner of Income Tax (Appeals) has erred in not upholding that section 14A was not applicable to the appellant's case as the investments in securities yielding tax free income were made from own funds of the appellant and no expenses are incurred in relation to the exempt income. It is submitted it be so held now.
3.3 The learned Commissioner of Income Tax (Appeals) erred in directing to apply Rule 8D with retrospective effect when the rule was inserted in statute book w.e.f. 24.03.2008 and hence was not applicable to year under consideration. It is submitted that it be so held now.
4. The Commissioner of Income Tax (Appeals) erred in holding that interest charged under section 234B, 234C and 234D was consequential. In the facts and circumstances of the case it is submitted that interest u/s I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 7 234B, 234C and 234D are not chargeable. It is submitted that it be so held now."
Grounds of ITA No.293/Ahd/2010 "1. The CIT(A) has erred in law and on facts in deleting the addition of Rs.28,22,430/- being bad debts which had been written off in earlier years.
2. The CIT(A) has erred in law and on facts in deleting the addition of Rs.47,95,000/- on account of reversal of income (diminution in value of investment).
3. The CIT(A) has erred in law and on facts in deleting the disallowance of depreciation amounting to Rs.28,38,136/-." The assessee company is a state owned enterprise engaged in the business of providing financial assistance to industrial units.
2. The first ground of appeal is general, which is dismissed.
3. The second ground of assessee for A.Y. 05-06 is against provision for Diminution in value of Investment of Rs. 16,77,234/-, which has not been pressed by ld. Counsel for the appellant because the CIT(A) had rectified his order dated 30.10.2009 whereas in Revenue's ground no.2 for A.Y. 06-07, the ld. A.O. made addition on account of reversal of provision for Diminution in value of Investment of Rs.47,95,000/-. Ld. Counsel for the appellant claimed that this provision had already been added back in the income of the assessee in earlier year. Therefore, he has reduced this amount from computation of income. This aspect is required to be verified by the A.O. Therefore, this issue for A.Y. 06-07 is set aside to the A.O. The A.O. is I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 8 directed to give reasonable opportunity of being heard to the appellant and allow the claim as per law.
4. The third ground of assessee in both assessment years i.e. 05-06 & 06- 07 are against confirming the disallowance u/s.14A of the IT Act in respect of interest paid on borrowings made for investments in tax free securities of Rs.4.47 crores for A.Y. 05-06 & Rs. 5.22 crores in A.Y. 06-07. Ld. A.O. observed that the appellant company had shown exempt income u/s.10(15)(iv)(h) & 10(23G) at Rs. 7,54,13,707/- in A.Y. 05-06 & Rs. 7,95,36,982/- in 06-07. The appellant had also claimed dividend income as exempted at Rs.69,86,140/- u/s. 10(34) & Rs. 68,66,000/- u/s. 10(35) of the IT act. Thus, total exempted income claimed by the assessee was at Rs. 8,23,99,847/- in A.Y. 05-06 & Rs. 8,94,20,000/- in A.Y. 06-07. As assessee has not debited any expenditure on account of earning of exempted income u/s. 14A of the IT Act. The A.O. had given reasonable opportunity on this issue. The appellant filed reply before the A.O., which was considered by him. After considering the legal position on this issue, he disallowed Rs.4,96,91,759/- in A.Y. 05-06 & Rs. 5,27,99,753/- in A.Y. 06-07 u/s. 14A of the lT Act.
5. Being aggrieved by the order of the A.O., the appellant carried the matter before CIT(A), who had partly confirmed the addition in A.Y. 05-06, which is observed as under:
"7.4 I have considered the facts of the case and submissions of the Ld. A.R. carefully. It is seen that the A.O. has made the proportionate disallowance of interest amounting to Rs.4,92,43,330/- I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 9 by considering the entire tax free investments amounting to Rs.91.45 crores on the presumption that same were made out of interest bearing funds. The appellant during the relevant period was having own funds consisting of share capital and free reserves amounting to Rs.86.07 crores, depreciation fund at Rs.66.77 lakhs and provision for diminution at 10.77 lakhs. Therefore treating the entire investment as out of borrowed funds ignoring the availability of own fund is not supported by factual links. Therefore, in the given circumstances without any supporting material it can not be held that the entire interest cost worked out by the A.O. is attributable to the interest free income. It would be logical to allow credit of the funds available to the appellant during relevant period for working out the interest cost on the investment in tax free securities. Since, the investment in tax free securities has been shown at Rs.91.45 crores as against own funds to the tune of Rs.86.98 crore, the interest on excess investment is required to be disallowed u/s.14A of the Act accordingly. The A.O. is directed to work out such interest on Rs.91.45 crore - Rs.86.98 crore (after taking into account investment in Gross Block) accordingly. The disallowance to that extent is, therefore confirmed."
For A.Y. 06-07, he relied upon the order of Special Bench ITO vs. Daga Capital Management Pvt. Ltd. 312 ITR (AT) 01 and A.O. was directed to apply Rule 8D for disallowance u/s.14A.
6. Now the assessee is before us. Ld. Counsel for the appellant contended that there was no direct nexus between borrowings and investments in tax free securities. As per assessee, the Section 14A is not applicable. He also placed reliance on following decisions:
I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 10
(i) Gujarat Industrial Investment Corporation Limited in ITA No. 4378/Ahd/2007 (ITAT Ahmadabad)
(ii) CIT v. Hero Cycles Ltd. (2010) 323 ITR 518 (P & H)
(iii) Metalman Auto (P.) Ltd. (2011) 11 taxmann.com 51 (P & H)
(iv) Gujarat Power Corporation Limited in Tax Appeal No. 1587 of 2009.
He further argued that own funds should have been compared directly with the investments without reducing the value of gross block of fixed assets from the same. If there are sufficient own funds then no disallowance u/s. 14A is called for. He also placed reliance on Bombay High Court decision, in case of Reliance Utilities & Power Ltd. 313 ITR 0340 (Bom). The ld. Counsel argued that disallowance made by the A.O. out of administrative expenses were not called for as there was no nexus, had been established by the A.O. between them. From the side of the Revenue, ld. CIT DR vehemently relied upon the orders of lower authorities and requested to confirm the addition made by A.O. At the outset, ld. Counsel for the assessee as well as ld. CIT DR fairly agreed that the issue is squarely covered by the assessee's own case in ITA No. 403/Ahd/2005 for A.Y. 01-02, ITA No. 865/Ahd/ 2006 for A.Y. 02-03, ITA No. 2158/Ahd/2006 for A.Y. 2003-04 & 2176/Ahd/2007 for A.Y. 04-05, wherein the Tribunal has set aside the issue to the file of the Assessing Officer by observing as under:
"6. We have heard learned DR and learned AR. We noticed that the assessee entered into five lease transactions with GSRTC. They are - first transaction was in financial year 1993-94 when, depreciation was claimed at Rs.59,97,155/-. I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 11 The second lease transaction was also entered into in A.Y. 1994-95 wherein depreciation of Rs.40,18,720/- was claimed and allowed. The third lease transaction was entered into in F.Y. 1996-97 on which the depreciation approx. of Rs.2,00,06,325/- was claimed. Forth transaction took place in A.Y. 1998-99 in which depreciation of Rs.4,01,38,576/- was claimed and allowed. Fifth also took place in A.Y. 1998-99 in which the depreciation of Rs.7,99,42,946/- was claimed. It is stated by the learned AR of the assessee that no fresh lease transaction has taken place this year and depreciation in respect of old lease transactions has only been claimed this year. Therefore, following the principle of consistency, as propounded in CIT vs. H.P. Cotton Textile Mills Ltd. 311 ITR 436, CIT vs. Malborough Polychem Pvt. Ltd., 309 ITR 43; CIT vs. Moonlight Builders and Developers 307 ITR 197 and ACIT vs. Gendalal Hazarilal & Co. 263 ITR 679 wherein it is held that even though in income-tax proceedings principle of res- judicata is not applicable, but consistency has to be maintained unless there is manifest distinguishable facts. In earlier years, claim of depreciation was accepted by the revenue which has now become final, the revenue cannot disallow the present claim, unless facts and circumstances are distinguishable. Therefore, the revenue is required to maintain a judicial consistency between itself and taxpayers. As a result, we do not find any merit in the claim of the revenue and this ground of the revenue is dismissed."
In view of the above we set aside this issue to the file of Assessing Officer to decide in terms of Tribunal's decision of assessee's own case (supra) for assessment year 2001-02 after providing reasonable opportunity of being I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 12 heard to the assessee. This ground of assessee's appeal is allowed for statistical purposes for both assessment years."
7. Assessee's ground no. 3.2 for A.Y. 05-06 & ground no. 3.1 & 3.3 for A.Y. 06-07 were against confirming the addition u/s. 14A on account of administrative expenses and applicability of Rule 8D. At the outset, ld. Counsel for the assessee as well as ld. CIT DR are agreed with in view of the decision by this Tribunal in assessee's own case (supra). The issue is squarely covered in ITA No. 403/Ahd/2005 for A.Y. 2001-02, wherein the Tribunal has disallowed the proportionate administrative expense at 1% by giving following finding in para 10 as under:
"10. We have heard learned DR and learned AR. This is undisputed fact that the administrative expenses have been incurred on tax free securities. The AO disallowed pro rata expenses at Rs.92.97 lakhs as per the working given by him and referred above. The claim of administrative expenses and other expenses amounted to Rs.9,91,10,622/- and not Rs. 92,97,250/-. If it is considered that 10% disallowance is to be made out of administrative and other expenses, then total disallowance would amount to Rs.99,11,062/-. Since learned CIT(A) has restricted the disallowance to Rs.9.91 lakhs, which is only about 1% of the total claim and not 10% and revenue has not filed any appeal against this working, the disallowance is to be treated as most reasonable, and no interference is called for in the impugned order on this issue. This ground of the assessee is rejected."
I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 13 Rule 8D is applicable from the A.Y. 08-09 as held by Hon'ble Bombay High Court in case of Godrej & Boyce Manufacturing Co. Ltd. v. CIT (2010) 234 CTR 001.
8. We find that in the present year, the facts are not available, accordingly, this issue is being set aside to the file of the Assessing Officer to follow the decision taken in assessee's own case in ITAT No. 403/Ahd/2005 for assessment year 2001-02 dated 10.07.2009 after providing reasonable opportunity of being heard to the assessee. This issue of the assessee's, appeal in both assessment years, is allowed for statistical purposes.
9. Ground no.4 & 4.1 of assessee for A.Y. 05-06 & Ground no.1 of Revenue for A.Y. 06-07 is against confirming the disallowance of bad debt written off amounting Rs. 13,50,40,960/- in A.Y. 05-06. For the reasons that the appellant had not proved the debt become bad and also the bad debt related to money lending business and had not fulfilled the condition laid down u/s.36(2) of the IT Act. The A.O. in A.Y. 05-06 had observed that the assessee had claimed bad debt at Rs.13.5 crore. The A.O. had given reasonable opportunity of being heard to verify the condition prescribed u/s. 36 of the IT Act. The appellant also responded to the A.O. and relied upon the various cases. The A.O. also analyzed the fact and various case laws relied upon by him on page no.12 of the assessment order. After relying the decision of Hon'ble Gujarat High Court in case of Dhall Enterprises and Engineers Pvt. Ltd. vs. CIT, 207 CTR 729 and held that the assessee had acted unilateral and written off debts as irricoverable in the books of account I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 14 for the previous year relevant to the assessment year. The assessee had not made out any case to record the case as irrecoverable. The judgment of the assessee in regarding debts as bad debt is only regarded as convenient judgment to suit in claim but not an honest judgment having regard to the financial position of the assessee. Thus, he made addition of Rs.13,50,40,960/- in the income of the assessee. He further observed that without prejudice to above, the bad debt, claimed by the appellant represented the principal portion of loan amount. The details were given by the A.O. at page no. 13 of the assessment order. According to him, the assessee had not made full compliance of Section 36(2) of the IT Act. Thus, both ways, he held that bad debt of Rs.13,50,40,960/- is not allowable.
10. Being aggrieved by the order of the A.O., the assessee carried the matter before CIT(A), who has confirmed the addition by following the Hon'ble Gujarat High Court decision in case of Dhall Enterprises and Engineers Pvt. Ltd. (supra).
11. Now the appellant is before us. The ld. Counsel for the appellant contended that the post amendment to Section 36(1)(vii) carried out the Finance Act, 1987. It is no longer necessary for the assessee to establish that the debt had become bad during the year under consideration. He also relied upon the Circular No. 551, dated 23.01.1990 & in case of T.R.F. Ltd. vs. CIT (2010) 323 ITR 397 (SC) and claimed that the assessee had written off these debts as irrecoverable during the year under consideration in book of account, whatever debt written off represented money lending in the original course of I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 15 business of money lending carried on by the appellant. The appellant earned interest income from the money lending in course of its business which had been offered to tax as business income and so had accepted by the Department. If any loss incurred by the appellant was a trading loss and had been incurred in the ordinary course of business of money lending. Then, it is allowable. The appellant had fulfilled the condition prescribed u/s. 36(2). He also relied on Ajar Entrade (P.) Ltd. v. ACIT 2 SOT 511 (TAHD). He further relied upon the decision of ITAT, Delhi 'A' Bench in case of DCIT vs. Srei International Finance Ltd. in ITA Nos. 4643 & 4881/Del/2003 for A.Y. 2000-01, wherein any advances made by the NBFC become irrecoverable as held allowable as bad debt. Similar views had been held by ITAT 'D' Bench in case of Tulip Stars Hotels Ltd. Vs. ACIT in ITA Nos. 2007/Del/2002, 5025/Del/2004 & 3007/Del/2006 for A.Y. 1998-99, 99-00 & 03-04. Thus, he claimed that it should be allowed as per ruling of the various Hon'ble High Courts. Ld. CIT DR vehemently relied upon the orders of lower authorities and requested to confirm the addition.
12. We have heard the rival contentions and perused the material on record and gone through the legal position. The appellant had written off the bad debts as irrecoverable in the books of account. The legal position for the claim of bad debt is that the appellant had to write off the bad debt in the books of account as held in by the Hon'ble Supreme Court in case of T.R.F. Ltd. vs. CIT (supra). The facts of the appellant are identical with the case of Srei International Finance Ltd. (supr) as NBFC. However, the assessee had I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 16 recovered 28.22 lacs in subsequent year from 13.5 crore. Thus, the bad debts are allowed as claimed to the extent of Rs.13,22,18,530/-. Accordingly, ground nos. 4 & 4.1 of the A.Y. 05-06 of the appellant are allowed partly and ground no. 1 of the Revenue for A.Y. 06-07 is allowed. The A.O. is directed to exclude the amount of Rs.28,22,430/- from the income of the A.Y. 06-07.
13. Ground nos. 5 & 5.1 for A.Y. 05-06 of the appellant & ground no. 2, 2.1 & 3 for A.Y. 06-07 of the revenue are against confirming the higher rate of depreciation @ 40% on vehicle given on lease and claim has been made in first time. The A.O. observed that company is a state owned enterprise engaged in the business of providing financial assistance to industrial units. The appellant had claim for higher depreciation on leasing transaction. The assets had been leased out in earlier years to various companies i.e. buses to GSRTC, plant & machinery to Gujarat Electricity Board, Larsen & Turbo, Puja Exports, Rajasthan Breweries and Rajesh Textile Industries. The appellant claimed depreciation on sale and lease transaction at Rs.63,06,966/- in A.Y. 05-06 & Rs. 28,38,136/- in A.Y. 06-07. The ld. A.O. gave reasonable opportunity of being heard. The appellant also filed reply but he disallowed the depreciation on the basis of findings given in assessee's own case in A.Y. 04-05. The depreciation claimed by the appellant in A.Y. 06-07 @ 30% because change in the rate of depreciation in place of 40%.
14. Being aggrieved by the order of the A.O., the assessee carried the matter before the CIT(A), who had confirmed the addition by observing that the appellant had run these buses on hire. As per Income Tax Rule, the I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 17 higher rate of depreciation can be allowed on vehicles used for running hire by the appellant. He also relied upon Hon'ble Bombay High Court decision in case of Kotak Mahindra Finance Ltd. vs. DCIT 265 ITR 114 (Bom.), wherein the difference between lease and hire had been considered by the Hon'ble Court. The assessee is a leasing and finance company. Its income is from lease rent, bill discounting and service charges. Therefore, Hon'ble Bombay High court held that merely because the assessee lets out motor buses, motor trucks and motor vans to its customers, it cannot be stated that the assessee is using the said vehicles in the business of running them on hire. By considering the above judgment, the ld. CIT(A) confirmed the addition.
15. Now the assessee is before us. Ld. Counsel for the appellant contended that no assets have been given on lease during the current year. The depreciation had been claimed on WDV of assets on which depreciation was allowed in earlier year @ 40%. He also placed reliance on following decisions:
(i) CIT v. Bansal Credits Ltd. & Ors. (2003) 259 ITR 69 (Del)
(ii) CIT v. Goodwill India Ltd. (2004) 268 ITR 480 (Del.)
(iii) CIT v. Madan & Co. (2001) 254 ITR 544 (Mad.)
(iv) Agarwal Finance Co. (P.) Ltd. v. CIT (2009) 28 DTR (Cal) 102 He further, argued that when different views held by the various Courts on same issue, it should be decided in favour of the assessee as held by the Hon'ble Supreme Court in case of Vegetable Products Ltd. (1973) 88 ITR 192 I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 18 (SC), in favour of the assessee. From the side of Revenue, ld. CIT DR vehemently relied upon the orders of the lower authorities.
16. We have heard the rival contentions and perused the material on record. The assessee had not sold and leased back the new assets during the year, the depreciation claimed by the appellant on written down value of sale and lease back assets. The identical issue in assessee's own case in ITA No. 2763/Ahd/2007, wherein Revenue's appeal had been dismissed by the Co-ordinate 'C' Bench, Ahmadabad for A.Y. 04-05. The similar issue was considered by 'C' Bench, Ahmadabad in assessee's own case in ITA No. 865/Ahd/2006 & ITA No.1927/Ahd/2007 for A.Y. 02-03 and held that sale and lease back is a continuing transaction addition admitted by both the sides. Respectfully, following the Tribunal's decision, we dismiss this issue of Revenue's appeal. The revenue had not distinguished the findings of Co- ordinate Bench given for earlier year when transactions are same and depreciation claimed on written down the value of the same assets on sale and lease back transaction, then, we have to follow the earlier decision otherwise material facts are different. Thus, we are of considered view that by following the Co-ordinate Bench decision in earlier year, we allow the appeal of the assessee in his favour and dismiss the revenue's appeal on these grounds.
17. Assessee's ground nos. 6 for A.Y. 05-06 & ground no.4 for A.Y. 06-07 are against charging of interest u/s.234B, 234C & 234D are consequential to the above finding. Therefore, the A.O. is directed to take decision as per law. I T A No s . 1 12 9 & 15 5 7/ A hd /0 9 & 15 3 & 29 3/ A hd / 20 1 0 A. Y . 2 00 5- 06 & 0 6- 07 Page 19
18. In the result, the Assessee & Revenue's appeals for both assessment years are partly allowed.
This Order pronounced in open Court on 28.12.2012 Sd/- Sd/-
(D.K.Tyagi) (T.R. Meena)
Judicial Member Accountant Member
True Copy
S.K.Sinha
आदे श कȧ ूितिलǒप अमेǒषत / Copy of Order Forwarded to:-
1. अपीलाथȸ / Appellant
2. ू×यथȸ / Respondent
3. संबंिधत आयकर आयुƠ / Concerned CIT
4. आयकर आयुƠ- अपील / CIT (A)
5. ǒवभागीय ूितिनिध, आयकर अपीलीय अिधकरण, अहमदाबाद / DR, ITAT, Ahmedabad
6. गाड[ फाइल / Guard file.
By order/आदे श से, उप/सहायक पंजीकार आयकर अपीलीय अिधकरण, अहमदाबाद ।
Strengthen preparation & delivery of orders in the ITAT
1) Date of taking dictation 19 & 20.12.2012
2) Direct dictation by Member straight on XXX computer/laptop/dragon dictate
3) Date of typing & draft order place before Member 21.12.2012
4) Date of correction 26.12.2012
5) Date of further correction XXX
6) Date of initial sign by Members 28.12.2012
7) Order uploaded on ,, ,,
8) Original dictation pad has been enclosed in this file Yes
9) Final order and 2nd copy send to Bench Clerk on 28.12.2012