Income Tax Appellate Tribunal - Chandigarh
M/S Fastway Transmissions Pvt.Ltd., ... vs Acit,Circle-2(1), Chandigarh on 26 March, 2021
I N T H E I NC OM E T A X A P PEL L A TE T RI B U N AL
D I VI SI O N B E N C H, " B " CH A ND I G AR H
BEFORE SHRI N.K. SAINI, VICE PRE SIDENT &
SHRI R.L NEGI, JUDICIAL MEMBER
आयकर अपील सं./ITA Nos. 315 & 316/Chd/2020
/ Assessment Years : 2016-17 & 2017-18
िनधा रण वष
The ACIT, बनाम M/s Fastway Transmissions Pvt. Ltd.,
Circle-2(1), Plot No.17, Industrial Area-1,
Chandigarh Chandigarh
थायीलेखासं./PAN NO: AABCF1854B
अपीलाथ /Appellant यथ /Respondent
C.O. Nos 1 & 2/Chd/2021
आयकर अपील सं ./ITA Nos. 315 & 316/Chd/2020
िनधा रण वष / Assessment Years : 2016-17 & 2017-18
M/s Fastway Transmissions बनाम The ACIT,
Pvt. Ltd., Circle-2(1),
Plot No.17, Industrial Area-1, Chandigarh
Chandigarh
थायीलेखासं./PAN NO: AABCF1854B
अपीलाथ /Appellant यथ /Respondent
Hearing through video Conferencing
राज वक ओरसे/ Revenue by : Smt. C.Chandrakanta, CIT
िनधा रतीक ओरसे/Assessee by : Shri Ashwani Kumar, CA &
Shri Bhavesh Jindal, CA
सुनवाईक तारीख/Date of Hearing : 22.03.2021
उदघोषणाक तारीख/Date of Pronouncement : 24.03.2021
आदेश/Order
Per R.L. Negi, Judicial Member:
The Revenue and the assessee have filed the captioned appeals and cross objections against the common order dated 22.6.2020 passed by 2 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh the Commissioner of Income Tax (Appeals)-1, Chandigarh [(for short 'the CIT(A)], pertaining to the assessment years 2016-17 & 2017-18 vide which the Ld. CIT(A) has partly allowed the appeals filed by the assessee against the assessment orders passed u/s 143(3) of the Income Tax Act, 1961 (for short 'the Act'). Since these appeals and cross objections pertain to the same assessee for two assessment years and the Revenue has raised identical grounds in both the appeals and the assessee has raised identical grounds in both the cross objections, these were clubbed, heard together and are being disposed of by this common and consolidated order for the sake of convenience. I TA N o. 3 1 5 /C h d /2 0 2 0 A .Y . 2 0 1 6 - 17
2. Th e b r ie f f act s o f th e c as e p er ta in in g to th e ass ess m en t y e ar 2 0 1 6 - 1 7 a r e th a t th e a ss es s e e eng a g ed in th e b u s i n es s as M u lt i S ys te m O p e r at o rs an d d ig i ta l ca b l e, fi l ed it s r e tu r n o f in c o me f o r t h e as s ess m en t y ea r u n d er co n s i d er a ti o n d ecl ar in g to t al i n co m e o f R s . 6 0 , 7 9, 9 8, 8 0 0 0 / - Th e ca s e o f t h e as s ess e e w as s el ec te d f o r s c r u t in y an d th e A O p as s ed as s es s me n t o r d er d et er m in i n g t h e to t al i n co m e a t R s . 1 3 3, 0 3, 8 0, 1 2 0 /- i n t er a li a ma k in g a d d i ti o n o f Rs . 9 0 , 9 1 , 3 4 , 7 4 1 /- o n ac co u n t o f d is all o w a n ce o f le as e re n ta l c la ime d b y th e a s ses s e e on s et t o p b o x es t ake n o n l ea s e, a d d itio n o f R s . ( - ) 5, 52 , 3 9, 4 0 3 / - on ac co u n t o f d e p r e c ia ti o n c al cu l at ed o n eq u ip m en t s p r o c u r ed fr o m 3 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh C I S CO o n leas e h o ld b a s is , ad d i ti o n o f R s . 9, 8 9, 0 7 7 /- o n ac co u n t o f d i s a ll ow an c e o f in t er es t at tr ib u tab le t o w o r k i n p r o g r es s an d ad d i t ion o f R s . 1 , 8 3, 1 7, 3 25 / - u / s 1 4 A r e ad w it h R u le 8 D o f t h e I n c o me Tax R u l es .
3. Th e a ss es s e e c h alle n g e d th e A s s es sm en t o r d e r b e fo r e th e ld . C I T ( A ) . Th e l d. CI T( A ) af te r h e ar i ng th e a ss ess e e p ar tly al l o w e d t h e ap p ea l an d d el et ed t h e ad d i ti o n o f R s . ( - ) 5, 5 2 , 3 9 ,4 0 3 /- m ad e o n ac co u n t o f d e p r e c ia ti o n c al cu l at ed o n eq u ip m en t s p r o c u r ed fr o m C I S CO o n leas e h o ld b a s is , ad d i ti o n o f R s . 9, 8 9, 0 7 7 /- o n ac co u n t o f d i s a ll ow an c e o f in t er es t at tr ib u tab le t o w o r k i n p r o g r es s an d ad d i t ion o f R s . 1 , 8 3, 1 7, 3 25 / - u / s 1 4 A r e ad w it h R u le 8 D o f t h e I n c o me Tax R u l es , h o w e v er , co n fir m ed t h e ad d it io n o f R s . 9 0 , 9 1 ,3 4 , 7 4 1 / - ma d e o n ac co u n t o f d is all o w a n ce o f le as e re n ta l c la ime d b y th e a s ses s e e on s et to p b o x es t ak e n o n le as e. Th e R ev e n u e i s i n ap p e al a g ai n s t t he s ai d fin d in g s o f th e ld. C I T( A ).
4. Th e R e v en u e h a s ch a ll en g e d t h e im p u g n ed o r d er b y r a is i n g t h e fo l lo w i n g g r o u n ds o f ap p e al :
1. Whether Ld. CIT(A) has erred to allow the additional ground of appeal w.r.t. allowing depreciation @60% on STBs as legal question and thus admitted it for adjudication when all the necessary facts regarding claim of @60% depreciation for AY 2012-13 to AY 2015-16 were never examined by any Income Tax authority before?4
ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh
2. Whether Ld. CIT(A) has erred to adjudge that STBs fulfill conditions laid in case law DCIT vs Data craft India Pvt. Ltd (Supra), and hence STBs are computers?
3. Whether the Ld. CIT(A) has erred to not examine how STBs do not fall under the 'plant & machinery' block of assets ?
4. Whether the Ld. CIT(A) has erred to not examine the facts that all other MSO s(Multi System Operators) are treating STBs as 'plant and machinery ' and claiming depreciation @ of 15% only.
5. Whether Ld. CIT(A) has erred to put its focus entirely on one relative argument of Revenue in its assessment order i.e. economic life of STBs as per TRAI guidelines is 3 years w.e.f. date of installation of STBs in customer's premises to determine applicable rate of depreciation allowed on STBs while not examining whether STBs fall under Plant and Machinery category of block of assets?
6. Whether LD. CIT(A) has erred to overlook the current utilization of various funds available with assessee as on 31.03.2016 while deleting addition u/s 36(l)(iii) for software CWIP for the AY 2016-17.
7. Whether Ld. CIT(A) has erred to delete u/s 14A of IT Act made in the light of Circular 05/2014 dated 11.02.2014 in case where the assessee has not earned any exempt income for the AY 2016-17.
5. Vide Ground No 1 to 5 of the appeal, the Revenue has challenged the action of the Ld. CIT(A) in allowing depreciation @ 60% on STBs following the decision of the Chandigarh Bench of the ITAT rendered in assessee,s own cases for the assessment years 2012-13 to 2015-16.
5
ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh
6. At the outset, the ld. Counsel for the assessee submitted before us that this issue is covered in favour of the assessee by the decision of the Chandigarh Bench of the Tribunal in assessee's appeals for the assessment years 2012-13,2013-14, 2014-15 and 2015-16. The ld. Counsel further submitted that since the ld. CIT(A) has allowed the claim of the assessee by following the order dated 06.05.2020 passed by the ITAT Chandigarh in assessee,s appeals for the aforesaid assessment years, there is no merit in this ground of the revenue's appeal, therefore this ground of appeal is liable to be dismissed.
7. On the other hand, the ld. Departmental Representative (DR) fairly admitted that the jurisdictional Tribunal has decided the identical issue in favour of the assessee in assessee's cases for the previous years, however, supported the action of the AO.
8. We have gone through the material on record including the decision of the coordinate Bench rendered in assessee's cases referred above. As pointed out by the ld. Counsel for the assessee, the coordinate Bench has decided this issue in favour of the assessee in ITA No.547/Chd/2017 for AY 2013-14, ITA No.139/Chd/2019 for AY 2012-13, ITA No. 842/Chd/2018 for AY 2014-15 and ITA No.140/Chd/2019 for AY 2015-16. The findings of the coordinate Bench read as under:
6
ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh "43. Even otherwise, it is the own case of the Department that the STBs has a short life of three years. Referring to the clauses of the Master Lease Agreement with CISCO, as discussed above, it has been vehemently contended by the Department that the lease deed was so devised that the term of lease ends with the life of the equipment; that after the payment of the last installment, the equipment is rendered valueless;
That the average life of the STBs is three years only and that is why the lease deed also ends at three years. In this respect, in the written submissions filed on 13.12.2017 by the Department, strong reliance has been placed on the observations of the Assessing officer in the assessment order in this respect, which reads as under:-
"The economic life span of asset namely Set Top Box (STB) is 3 to 4 years. This fact is ascertained as per the TRAI guideline (page 232, Para 19 & 21 of DPB-II) and the sworn statement recoded u/s 131 on 20.2.2014 of Sh Sushil Thakur S/o Sh. Karam Singh Thakur working as Assistant Manager (accounts) in the assessee company since 2008 (page 143 of DPB-III) wherein he had categorically stated that 'that usage life of STB is approx. 3-4 years only and lease tenure is also 3-4 years'. The tenure as per lease schedule is nearly the same as economic life of the equipment. Thus, lease period is settled in such a way so that the CISCO fully recovers the investment in the asset together with interest thereon within the life span of the asset."
Further, in the written submissions dated 26.2.2018, it has been submitted as under:-
"The physical life of the assets is not relevant here. It is the economic life span of STB which is relevant as per ITAT Special Bench decision in Indus Ind Bank and accounting standard. As per TRAI guideline and sworn statement u/s 131 of Shri Sushil Thakur the economic life span is 3 to 4 years. Even otherwise the assessee has charged depreciation of these assets @ 27.82% (page 176 7 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh of DPB 1 on STB / Headends) in its books viz-a-viz charging of depreciation on other assets @ 14%. Thus major part of the life of STB is covered in 3 to 4 years."
Further, the assessing officer has also placed reliance on TRAI notification No. 1-19/2012-B&CS dated 27.3.2013 as reproduced in the assessment order as under:
Sl. Particulars Tariff
1. Rent per month per set top box Rs.32.93 (exclusive of
for the first three years taxes)
2. After three years from the date of No rent. The set top
installation box shall become
the property of the
subscriber except
3. Security Deposit (Adjustable) smart
Rs. card/viewing
800/-
4. Amount of Security Deposit As per attached Table-
refunded on return of the Set Top B
5. Box
Installation Charges Nil
6. Activation charges Nil
7. Smart Card/Viewing Card Charges Nil
8. Repair and Maintenance Nil
Charges for three years from
the date of installation
The Assessing Officer has observed that as per the above tariff plan adopted by the assessee with the consumers, at the end of 3 years from the date of installation of the STB in consumer's premises, the consumer becomes the owner of the property. The assessing officer in this respect has observed that if the assessee was not the owner of the equipment, how can it pass on the ownership to the consumer after 3 years from the date of installation. We have already agreed in this respect with the contention of the Department.
However, as per the TRAI notification also, the life of the STBs has been taken at 3 years. As per the said notification of the TRAI, after 3 years, the consumer becomes the owner of 8 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh the equipment but at the same time, the service provider (assessee herein) is also absolved of the liability of any warranty / guarantee or maintenance of the equipment, meaning thereby the assessee recovers the rent for 3 years from the consumer and further the security deposit received from the consumer is forfeited/appropriated to the assessee at the end of 3 years and on the other hand the consumer becomes the owner of the equipment. As observed in the assessment order, at the end of the 3 years, the security deposit so forfeited or appropriated to it is offered as income by the assessee. The equipment thus is deemed to be sold to the consumer. Thus, the agreement of the assessee with consumers in substance is a hire purchase agreement for a term of 3 years. The equipment remains on hire for 3 years with the consumer but is deemed to be sold at the end of 3 years. Here, the interesting point is that when at the end of 3 years, the equipment is sold and the receipt / sale price along with the hire charges received from the consumer during the period already offered to the income tax, how can the deduction of corresponding investment / expenditure incurred for the purchase of such equipment can be postponed beyond such date of sale of equipment? The income under the Income Tax Act is the resultant profit after deduction of the investment / expenditure incurred from the total sale price received / receivable. Therefore, when the total receipt relating to the equipment either in the shape of hire charges or sale price in the shape of security deposit appropriated at the end of 3 years, is accounted for as receipt/income, then the deduction of the corresponding expenditure either in the shape of depreciation or in the shape of revenue expenditure, under no circumstances, can be delayed or postponed beyond the date of sale of equipment. The expenditure incurred for the purchase of such equipment is required to be set off from the final receipt / sale price by whatever manner either as a deduction on account of depreciation or as revenue expenditure. When the assessee no more remains the owner of the equipment, how can it claim depreciation on the same, 9 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh which is sine qua non for claim of depreciation. The entire cost incurred by the assessee on the equipment is required to be squared off at the time of sale of equipment. Hence, under the circumstances, the assessee will be entitled either to the deduction of the cost of the equipment either as revenue expenditure and if the same is to be treated as capital asset, then depreciation cannot be postponed beyond the actual life / ownership of the equipment and the assessee will be entitled to the deduction of the written down value of the equipment at the end of 3 years from the sale price received. However, the peculiar facts and circumstances of the case are that it is the own case of the department that the life of the equipment is 3 years and that the asset in the hands of the assessee is a capital asset, then we cannot understand, how can the department press an argument for the grant of depreciation at a lower rate which may be extended beyond the life of the asset. Under these circumstances also, the assessee, in our view, is entitled to the higher rate of depreciation which is commensurate with the life of the asset.
In view of our findings given above, it is held that the assessee is entitled to deprecation @ 60% as applicable to the computers for the year under consideration. This ground is accordingly stands allowed."
9. We notice that in the present case t h e as s es s ee r ais ed ad d i t io n a l g r o u n d b e fo r e th e ld . C I T(A ), w h ich r e ad s as u n de r :
" Wi th o u t p r ej u d ice, t h a t t h e L d. As s es s i n g O f f ic er w a s n ot j u s t i fi ed to r es tr ic t t h e cl a i m o f de p r ec ia t io n o n s et o f b o x es a t 1 5 % w h er e a s r i g h tl y al lo w ab le a t 8 0 %"
10. The ld. CIT(A) allowed the addition ground for adjudication, holding that neither any new fact nor any new evidence is required to be produced for 10 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh adjudicating the said ground. So, the ld. CIT(A) after hearing assessee decided the aforesaid additional ground in favour of the assessee by following the decision of the coordinate Bench in assessee's appeals for the assessment years 2013 to 2015-16. In our considered view, since there is no material change in the facts of the present case and the issue involved is identical to the issue involved in the assessee's appeals for the assessment years 2013 to 2015-16, the ld. CIT(A) has rightly followed the decision of the coordinate Bench and decided in favour of the assessee. Hence, we do not find any reason to interfere with the findings of the ld. CIT(A). We accordingly uphold the findings of the ld. CIT(A) and dismiss this ground of appeal of the Revenue.
11. Vide Ground No. 6, the Revenue has challenged the action of the ld. CIT(A) in deleting the addition of Rs. 9,89,077/- out of the total interest claimed by the assessee. The ld. Counsel for the assessee pointed out that this ground of appeal is covered in favour of the assessee by the order of the ITAT Chandigarh, in assessee's own appeals for the assessment years 2012-13 to 2015-16 referred above. The ld. Counsel further submitted that since the ld. CIT(A) has decided this issue in favour of the assessee by following the decision of the Tribunal, there is no infirmity in the impugned order passed by the ld. CIT(A).
12. The ld. DR on the other hand admitted that this issue is covered in favour of the assessee by the order of the Tribunal, however, supported the 11 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh findings of the AO.
13. We have carefully perused the material on record in the light of the submissions made by the ld. Counsel. We notice that this issue came up before the coordinate Bench in assessee's appeals for the assessment years 2012-13 to 2015-16 and the coordinate Bench decided the same in favour of the assessee holding as under:
" 5 4. We h a ve h ea r d t h e r i va l co n t en ti o ns . We fi n d m er it i n t h e c o n t en t io n o f th e L d. c o u n s el f o r as s es s ee. T h e L d. C o u n s e l h as d em on s tr a te d th a t t h er e w e r e s u f fi ci en t o w n f u n d s a va il a b le w ith t h e as s es s ee com p a n y in th e f orm o f s h ar e ca p i t a l a n d r es er ves t o t h e tu n e o f Rs . 1 0 5 c r or es a n d Rs . 1 0 7 cr o r es r es p e ctiv el y t o m ee t th e a d v a n ce g ive n o f R s . 3. 2 0 cr o r es . T h e is s u e is n o w s q u ar el y co v er e d b y t h e va r io us d e cisio n s o f th e H ig h Co u r ts as w e ll a s o f th e a p e x co u r t o f t h e co u n t r y in c lu d ing th a t o f th e H o n ' b l e Ju r is d ic ti o n a l H i g h C o ur t i n t h e ca s e o f ' Br ig ht En te r pr is es Pv t. L td Vs . C I T, J a lan d h a r ' (s u pr a ), 'C IT Vs . K a ps o ns As s o ci a te s ' ( 2 0 1 6 ) 3 8 1 I T R 2 0 4 ( P &H ) a n d t h e l a t es t d ec is io n o f th e C o o r d i n a t e B en c h o f th e T r ib u n a l in th e cas e o f ' AC IT Vs . Ja n a k G lo b a l Res o ur c es Pv t L td ' I T A N o. 4 7 0 /C h d /2 0 1 8 o r de r d a t ed 1 6 . 1 0. 2 01 8 , h o l d in g t h a t t h a t if th e a s ses s ee is po s s es s ed o f s uf fi cien t o w n i n t er es t fr e e fu n d s t o m e et t h e in v es tm en ts / in t er e s t f r e e a d va n c es , th e n , u n d er th e ci r cu m s tan ces , p r es um p t io n w il l b e t h a t in t er e s t fr e e a d va n c es / i n ve s tm en ts h a v e b ee n m a d e b y t h e a s s es s ee o u t o f o w n f u n d s / i n ter es t fre e fu n d s . Re li a n ce i n th i s r es p e ct c a n a l s o b e p la c ed o n t h e d ec is io n o f th e H o n ' b l e S u p r em e C o u r t in t h e c a s e o f ' H er o C yc les ( P) L t d Vs . C IT ' 3 7 9 I T R 3 4 7 ( S C ) a n d a l s o o n t h e l a te s t d ec is i o n o f t h e 12 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh H o n ' b le S u pr em e C o u r t in t h e c as e o f ' C IT ( L TU ) Vs . Re li a n c e I n d u s tr i es L td. ' [ 2 0 1 9] 4 1 0 IT R 4 6 6 ( S C ).
T h us , as p er th e s ett le d la w n o d is a l lo w a n ce u / s 3 6 ( 1 ) ( iii ) o f t h e A ct is w ar r a n t ed o n th is is s u e. T h is gr o u n d is a c co r d i n g ly a ll o w ed i n f a v o ur of th e a ss es s e e. "
14. During the year relevant to the assessment year under consideration, the assessee has shown capital work in progress amounting to Rs. 2,32,75,003 but had not capitalized the interest on the same for the reason that the appellant had huge interest free reserves and own funds. As pointed out by the ld. CIT(A), ld. AR demonstrated during the appellate proceedings that the assessee had share capital and reserves to the tune of Rs. 145.34 crore and Rs. 63.52 crore respectively to meet the capital work in progress. Since, there is no material change in the facts of the present case, the Ld. CIT(A) has rightly deleted the addition made by the AO by following the decision of the coordinate Bench. In our considered view, the findings of the ld. CIT(A) are in accordance with the decision of the coordinate Bench rendered in the assessee's own appeals for the assessment years 2012-13 to 2015-16 discussed above. Hence, we find no merit in the contention of the Revenue. Accordingly, we uphold the findings of the ld. CIT(A) and dismiss this ground of appeal of the Revenue.
15. Vide Ground No. 7 of the appeal, the Revenue has challenged the action of the ld. CIT(A) in deleting the addition made by the AO u/s 14A. The ld. 13
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M/s Fastway Transmissions Pvt. Ltd, Chandigarh counsel for the assessee pointed out that this issue is covered by the decision of the Chandigarh Tribunal in assessee's appeal for the assessment years 2014-15 and 2015-16. Since the ld. CIT(A) has decided the issue in favour of the assessee, by following the decision of the Tribunal, there is no merit in the contention of the Revenue.
16. On the other hand, the ld. DR admitted that the Tribunal has decided this issue in favour of the assessee in assessee's appeals. However, the ld. DR supported the findings of the AO.
17. We have gone through the material available on record including the order passed by the coordinate Bench in assessee's appeal referred above. As pointed out by the ld. CIT(A) the assessee had no exempt income, during the previous year, however, the AO computed the disallowance of Rs. 1,83,17,325/- u/s 14 A read with rule 8D of the Income Tax Rules. The Ld. CIT(A) by following the decision of the Tribunal in assessee's appeals referred above, deleted the addition. We notice that this issue came up before the coordinate Bench for consideration in assessee's appeals for the assessment years 2014-15 and 2015-16 and the Bench deleted the addition made u/s 14A of the Act holding as under:
"76. Ground No.11: Vide ground No.11 the assessee has agitated the confirmation of disallowance made by the AO u/s 14A of the Act in respect of the expenditure incurred for earning of tax-exempt income.14
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M/s Fastway Transmissions Pvt. Ltd, Chandigarh The Ld. Counsel for the assessee has submitted that the assessee did not earn any tax exempt income during the year. Hence, no disallowance u/s 14A was warranted.
1 . We find that the issue is now squarely covered by the various decisions of the High Courts in favour of the assessee viz.'CIT, Faridabad Vs. Lakhani Marketing Inc.' 226 Taxman 45 (P&H ), 'CIT Vs. Winsome Textiles' (2009) 319 ITR 204 (P&H), 'Cheminvest Ltd Vs. ITO' (2015) 378 ITR 33 (Delhi), 'Corrtech Energy P. Ltd.' (2014) 45 Taxman.com 116 (Gujarat High Court) 'CIT Vs. M/s Shivam Motors (P) Ltd' (2014) 27 2 CTR (All) 277. In all the above referred to case laws, the Hon'ble High Courts have been unanimous to hold that no disallowance is attracted u/s 14A of the Act in case the assessee has not earned any income not forming part of the total income. This issue is accordingly decided in favour of the assessee. The disallowance made by the lower authorities on the above issue is ordered to be deleted."
18. We notice that the coordinate Bench has decided the identical issue in favour of the assessee in assessee's own appeals for the assessment years 2014-15 and 2015-16. Since, the findings of the ld. CIT(A) are in accordance with the decision of the coordinate Bench in assessee's appeals referred above, we do not find any reason to interfere with the findings of the ld. CIT(A). Accordingly, we uphold the findings of the ld. CIT(A) and dismiss this ground 15 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh of appeal of the Revenue.
C ros s ob j ect ion No s. 1 /C h d /2 0 2 1 : -
Th e as s es s ee h as c h al le n g ed th e fin d in g s o f th e ld. C I T ( A ) b y fi li n g C r o s s O b j ecti o n o n th e f o ll ow in g g r o u n ds :
" T h a t or d er p a s s ed u / s 2 5 0 ( 6 ) o f t he I n c o me T a x Act, 1961 ( in s h o rt 'the Act ' ) by the Ld. C IT ( A) - 1 , C h a n d i g a r h is a g a in s t l a w a n d fa c ts o n t h e fi l e in a s s u ch as h e w as n ot j u s ti fi ed to u p h ol d t h e a ct io n o f the L d. As s es s i n g O ffic er i n n o t a ll o w in g le a s e r e n ta l o n s et t o p b o xes a m ou n t i n g t o Rs 9 , 9 1,3 4 , 7 4 1 / - ( A. Y . 2 0 16 - 1 7 ) a n d R s . 5 0, 23 , 7 5, 4 7 6 /- ( A.Y . 2 0 1 7 - 1 8 ) ta k en on l ea s e b y t h e a p p el la t e co m p a n y fr om M . /s C is co S ys t em s C a p i ta l I n d i a P vt. L t d."
2. The ld. DR pointed out that this issue is covered against the assessee by the decision of the Tribunal rendered in assessee's own appeals for the assessment years 2012-13 to 2015-16. The ld. Counsel fairly admitted that the Tribunal has decided the identical issue against the assessee in assessee's own appeals for the earlier years.
3. We have gone through the material on record including the order of the coordinate Bench. The assessee had claimed depreciation on the custom duty component and all incidental costs for acquiring assets from CISCO. The AO observing that since the assessee has claimed depreciation it cannot claim deduction u/s 37 of the Act for the amount of lease rent paid to CISCO. The 16 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh ld. CIT(A) confirmed the action of the AO by following the decision of the coordinate Bench in assessee's appeals for the assessment years 2012-13 to 2015-16. The findings of the coordinate Bench read as under:-
" 2 7. C o n s i d er in g t h e a b o v e cl a u s es o f th e l ea s e d e ed i n q u e s t i o n a n d i n th e l i g h t o f p r o p os i ti o n s et t le d th r ou g h va r i o us d ec is io ns o f t h e h i g h er co u r ts a n d h i g h es t c o ur t o f t h e co u n tr y t h a t wh e n t h e t er m s o f t he c o n tr a ct l o o ke d in t o w i th t h e r el ev a n t ci r c um s t a n c es th a t a r e d e ter m i n a t ive o f t h e n a tu r e o f th e s u ch co n t r a cts , w e h a v e n o h e s i ta ti o n t o h o l d th a t th e tr a ns a c ti o n in t h e pr es e n t c as e is t h a t o f a l o a n /F in a n ce . After g o i n g thr o u g h t he va r i o us t erm s o f th e d e ed , w e fi n d th a t th e o n ly r o l e o f t he l es s or i n th e p r es en t a r r a n g em e n t is t o f in a n ce t h e t r a ns a ct io n o f p u r c h as e o f eq u ip m en t, w i th th e le s s e e s elec ti ng th e e q u i p m e n t to b e s u p p l ie d b y th e d ea l er , us i n g it f or it s ex p ec te d ec o n om ic l if e, p a yin g b a c k th e en ti r e c os t o f th e eq u ip m en t o v er th e l ea s e te n ur e a n d ex er cis in g a l l r igh t s o f o w n er s h ip o ve r t h e a s s e t a n d a ls o b ea r i n g t he r is k s o f lo ss es , d am a g es , et c. as s o ci a t ed w ith t h e o w n e r s h ip o f th e a s s e t a n d n o o p t io n to t h e l es s ee to term i n a te th e l eas e a n d r et ur n th e a s s et b e for e th e en d o f t h e le a s e t er m . T h us , it i s n eith e r a le a s e, n or a h ir e p u r c h as e a gr eem en t , b u t a l o a n /f in an ce a r r a n g em e n t b e twe en th e p ar ti es .
S o fa r as th e c o n ten t io n o f th e L d. C o u n s el f or th e a s s es s ee t h a t th e tit le o f t h e a ss e t r em a i ns w i th th e l ess or i s co n cer n e d, w e f in d f r o m th e c lau s es o f t h e a gr eem en t t h a t t h e s a id t it le is r et a in e d for th e p u r p os e of s e cur i ty f o r r ec o ver y o f pr in ci p a l a m o u n t.
S o fa r a s t h e co n te n ti o n o f th e L d . co u n s el fo r th e a s s es s ee t h a t i n v ie w o f th e m a n d a t o r y r eq u ir em en t for th e co m p a n i es A ct as p er C o m p a n i es A ct t o fo l lo w th e Ac co u n ti n g S t a n d a r d AS - 1 9, th e lea s e tr a ns a cti o n w it h C I S C O w a s b o o k ed a s Fi n a n c e L e as e is c o n c er n ed , th o u g h 17 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh t h e l a w is w e ll s et t le d t h a t t h e en t r i es in th e b o o ks of a c co u n t a r e n o t d e te r m i n a ti ve of th e n a t u r e o f th e t r a n s a c ti o n , h o w ev er w e d o n o t a g r e e w it h t h e co n t en ti o n t h a t th e a s s es s ee i n t h is c a s e w as m a n d a t o r i ly r e q u ir ed t o t r e a t t h e l eas e as F in a n ce l ea s e in t h e b o o k s o f a c cou n t . We a g r ee w i th th e s u bm is s i o n o f th e L d . D R t h a t AS - 1 9 o n l y d ef in es th e na t u r e o f t h e l ea s e t r a n s a c ti o n ; h o w ev er , i t d o e s n o t m a n d ate th a t ev er y l eas e tr a ns a ct io n is to b e t r e a te d a s fi n a n ce le as e i n th e bo o ks o f a c co u n t. T he a s s es s ee i n th is ca s e, fu l ly kn o w i n g th e fa c ts a n d as p e r t h e a c tu a l in t en t io n a l b e tw e en t h e p a r ti es r el a t in g t o th e n a t u r e o f t h e t r a ns a ct io n, o u t o f it s o w n w i ll , h a s tr ea te d t h e t r a ns a ct io n in q u es ti o n a s fi n a nce l ea s e. H o w e ver , we h a v e a lr e a d y h e ld th a t s a id tr e a tm en t b y t h e a s s es s ee o f t h e t r a ns a ct io n in q u e s t io n as p er AS - 1 9 h a s n o r el eva n ce s o f ar as t h e cl a im o f d e d uct i o ns un d e r I n co m e T a x Ac t i s co n ce r n e d.
T h e co n te nti o n o f th e L d. C o u ns el f or th e as s ess e e th a t th e l es s or , C I S CO ha d b ee n a l l o w ed d ep r e ci a ti o n o n th e a s s ets b y th e I T AT fr om A .Y 2 0 0 8 - 0 9 to 2 0 1 0 - 1 1 , t h u s p r o vi n g th a t i ts o w n er s h ip o f th e a s s ets s to o d a c ce p ted b y t h e Re ve n u e, in o u r v ie w, is o f n o co n s e q u e n ce s i n ce th e p r es e n t l eas e a gr eem en t w as en t er e d in t o o n 0 7 - 1 2 - 2 0 1 1 , r el a ti n g to A. Y . 2 01 2 - 1 3 w h i ch is a s u b s eq u en t as s es s m en t ye a r . Eve n o t h er wi s e o n g o in g t hr ou g h th e or d er s o f th e I T AT i n t h e ca se o f C I S C O it is r ev ea l ed th a t th e iss u e b e fo r e t h e C o - or din a te Be n ch o f th e I T AT r el a te d o n ly t o t h e r a te o f d e pr ec ia t io n t o w h i ch t h e a s s es s ee w as e li gi b le o n th e l ea s e d a s s ets a n d th e q u es ti o n r e g ar d i n g en ti tl em en t o f cl ai m o f d e pr ec ia t ion w a s n ev er b ef or e it. T h er e for e, it c a n no t b e s a i d t h a t th e I T AT h a d d ec id e d th e a l lo w a b il it y o f cl a i m o f C I S C O o f b ei n g o w n er o f th e a s s et.
Ev en o t h er w is e, i f t h e C I S C O h as r eta i n ed s om e o w n er s h i p r ig h ts o v er th e as s ets f or t h e p ur p os e o f s ec ur i t y o f th e l o a n a m o u n t a n d t h e r e fo r e, as s u mi n g , fo r th e s a ke o f 18 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh a r g um en ts th a t th e a s s ets ar e n o t f u l ly o w n ed b y th e a s s es s ee, ev en th en t h e p r o vis i o ns o f s e ct io n 3 2 w i ll b e a t tr a c te d a s it pr ovi d es for cl a im o f d e p r ec ia t io n o n as s ets o w n e d f u l ly o r p ar t ly b y a n as s es s e e.
T h e co nte n ti o n of t h e L d. C o u n s el t h a t t h e L d. C I T ( A) h ims e lf h a s m e n ti o n ed , " t h er e is n o d o u b t a b o u t t h e g en u in e n es s o f th e le a s e a g r eem en t" , i n o u r v ie w, is o f n o h el p t o t h e a s s e ss e e. T h e im p u g ne d o r d er is t o b e r e a d a s a w h o l e, a n d a s i n g le l in e or w or d ca n n o t b e ch os en t o i n te r p r e t a d if fer en t m e a n i n g. Wh a t t h e L d. C IT ( A) h a s co n ve ye d is t h a t th o u g h t h e ex ec u tio n o f t h e l ea se d eed i s n o t d o u b te d b u t t he r ea l i n t en t io n b eh in d th e d ee d is to b e g a t h er e d fr o m th e v a r io us cl a u s es o f t h e d e ed a n d f a ct s a n d ci r cum s ta n c es o f th e c a s e. T h u s , w e h a v e n o h e s i ta ti o n in h o l d in g th a t th e a r r a ng em en t in t h e p r es en t ca s e w as a lo a n / fi n a n ce ar r a n g em en t in th e g u is e of a l ea s e a gr e em ent.
28. H o w ever , t h e co n tr o ver s y d o es n o t en d h e r e. T h o u g h t h e a s s es s e e is h eld t o b e th e o w n e r o f t h e a s s e t, h o w ev er , t h e n ex t q u es t io n th a t a r is e is w h et he r th e a ss e t is h eld b y t h e ass es s e e as b u s i n es s /tr a d in g a s s et or as a c ap i ta l a s s et. T h e a ss es s ee, a dm it te d ly, f ur th er g iv es o n h ir e th e S T Bs t o va r io u s co n s um ers a n d i n s ta l ls th o s e i n t h ei r p r em is es . T h e co n s um er s d e p os it r e fu n d a b le s e cu r i ty a m o u n t a lm os t eq u a l t o th e co s t o f t h e S T Bs t o th e a s s es s ee. As s es s e e c h a r g es m o n th l y r e n t fr om th e co n s u m er s for thr ee yea rs . A ft er th e e xp i r y o f t hr ee y ea r s , t h e S T Bs b ec om e th e p r o p er t y o f th e c o n s um er s a n d at th e s am e tim e t h e s ec ur it y d e p os it g et s f or fe it ed a n d a p p r o pr i a te d to the in c o m e o f th e a s s es s ee, w h ic h is a l s o o f fe r e d /s u b ject ed to i n co m e t a x. T h e tr a ns a c ti o n w it h co n s u m er s, th us , a p p a r en t ly a p p ear s to b e o f a " h ir e - p u r ch as e" , th e a ss ess e e b ei n g t h e le s s er c um s el ler , th e d e ta i l o f th e t r a n sa ct io n w e w il l d i s cu s s i n th e la t er p a r t o f th e or d er. H o we ve r, t h e q u es t io n th a t w i ll ar is e a t th is s ta g e as to a n a s s et, h e ld o r f u r th er g iv en o n h ir e -19
ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh p u r ch as e b y a n a ss ess e e w h o is i n th e b u s in es s o f lett i n g & s e ll in g a p a r tic u la r t yp e o f go o d ( S T Bs ) o n hir e - p u r ch as e b as is w hi ch is ess e n ti a l t o a n d in t eg r a l p ar t o f m a in b us i n es s o f ' b r o a d cas ti n g o f ch a n n e ls ' o f th e a s s es s ee, is to b e tr e a te d as b us i n ess / tr a d i n g a ss e t o f th e a s s es s ee e li g i b le f o r cl a im o f d ed u ct io n o f e xp e n d itu r e u / 3 7 o f t h e Ac t o r as a c a p it a l a s s et o f t h e as s es s ee el i g ib l e f or c la im o f d e d u ct io n o f d e p r e ci at io n un d er s ec ti o n 3 2 o f t h e Ac t. S i n c e, n o a r g um en ts h a v e bee n a d v a n ce d o n t h is is s u e b y a n y o f th e p a r t ies , h en c e, i n vi ew o f t h e d is c us s i o n m a d e i n e ar lier p ar as o f t h is or d er , w e p r o c ee d to d eci d e t h e n e xt co n t r o vers y tr ea t i n g th e a s s et a s a ca p it a l a s s et in th e h a n d of t h e as s es s ee.
T h e as s es s ee, th er ef or e, is en t itl ed o n ly t o c la im i n te r es t p a i d as p a rt o f t h e s a i d l ea s e r e n ta ls as ex p e n d it u r e u /s 36 ( 1 ) ( i ii ) o f t h e I n co m e T a x Ac t. T h e a s s es s ee, i n vi ew o f th e d is c u ss i on m a d e a b o v e, is n o t en ti tl ed to c la im th e p r i nci p a l co m po n en t o f a ll eg ed lea s e r en t p a i d as 'r even u e e xp e n d i tur e ' u / s 3 7 ( 1 ) o f t h e Ac t. H o w ev er , th e a s s es s ee is a ls o en t it le d to c l a im d e p r e ci a t io n o n t he s a i d as s ets p ur ch a s ed fr om b or r ow e d ca p it a l. "
4. Since, the findings of the ld. CIT(A) are in accordance with the decision of the coordinate Bench rendered in assessee's appeals for the assessment years 2012-13 to 2015-16, we do not find any reason to interfere with the findings of the ld. CIT(A). Hence, we uphold the findings of the ld. CIT(A) and dismiss the Cross Objection filed by the assessee. I TA N o. 3 1 6 /Ch d /2 0 2 0 f o r A. Y . 2 0 1 7 - 1 8 Ground No 1 to 4 of this appeal are identical to Ground No. 1 to 5 of the 20 ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2016-17. Since there is no material change in the facts of the present case except the addition made by the AO, we do not find any reason to take a different view. Hence, consistent with our findings in Revenue's appeal for the AY 2016-17 we dismiss ground No 1 to 4 of the present appeal for the same reasons.
2. Similarly, Ground No 5 this appeal is identical to Ground No. 6 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2015-16. Since there is no change in the facts of the present case except the addition made by the AO, we dismiss ground No 5 of the present appeal for the same reasons.
3. Further, Ground No 6 of this appeal is identical to Ground No. 7 of the Revenue's appeal for the assessment year 2016-17 aforesaid. We have dismissed the identical ground raised by the Revenue in its appeal for the assessment year 2015-16. Since there is no change in the facts of the present case except the addition made by the AO, we dismiss ground No 6 of the present appeal of the Revenue for the same reasons. C ros s ob j ect ion No s. 2 /C h d /2 0 2 1 : -
21
ITA No. 315 & 316-c-2020 for AY 2016-17 & 2017-18 & C.O. Nos 1 & 2-C-2021 AY 2016-17 & 2017-18 -
M/s Fastway Transmissions Pvt. Ltd, Chandigarh Ground raised by the assessee in the present Cross Objection is identical to the Ground raised by the assessee in its Cross objection raised in its CO No 1/Chd/2021 for the assessment year 2016-17. We have dismissed the Cross Objection No 1/Chd/2021 filed by the assessee. Since there is no material change in facts of the present case, we do not find any reason to take a different view. Hence, consistent with our findings in the Cross Objection for AY 2016-17, we dismiss the present Cross for the same reasons.
In the result, appeals filed by the Revenue and Cross objections filed by the assessee are dismissed.
O r d e r p r o n o u n ced o n 2 4 . 0 3. 2 0 2 1 .
Sd/- S d /- ( N.K. SAINI) (R.L.NEGI) उपा य /Vice President याियक सद य/ Judicial Member Dated : 24.03.2021 आर.के ." "
आदेशक "ितिलिपअ#ेिषत/ Copy of the order forwarded to :
1. अपीलाथ / The Appellant
2. "$यथ / The Respondent
3. आयकरआयु&/ CIT
4. आयकरआयु& (अपील)/ The CIT(A)
5. िवभागीय"ितिनिध, आयकरअपीलीयआिधकरण, च*डीगढ़/ DR, ITAT, CHANDIGARH
6. गाड फाईल/ Guard File आदेशानुसार/ By order, सहायकपंजीकार/ Assistant Registrar