2016-VIL-555-BOM-DT

BOMBAY HIGH COURT

Income Tax Appeal No. 498 of 2014

Date: 08.08.2016

THE COMMISSIONER OF INCOME TAX-3

Vs

SICOM LTD.

For the Appellant : Mr. Ashok Kotangle with Ms. Padma Divakar and Mr. Arun D. Nagarjun
For the Respondent : Mr. Nishant Thakkar i/b. PDS Legal

BENCH

M. S. Sanklecha And A. K. Menon, JJ.

JUDGMENT

P. C.

This Appeal under Section 260A of the Income Tax Act, 1961 (the Act), challenges the order dated 22nd May, 2013 passed by the Income Tax Appellate Tribunal (the Tribunal). The impugned order dated 22nd May, 2013 relates to Assessment Year 1997-98.

2 The Revenue urges the following questions of law for our consideration:

“(a) Whether on the facts and in the circumstance of the case and in law, the Tribunal was justified in deleting the disallowance made on account of survey charges amounting to Rs. 19,75,520/without appreciating that the assessee is following Mercantile System of accounting and the said amount has been shown as receivables in the books of account and is not allowable as per the provisions of the Act?

(b) Whether the Tribunal was justified in law in confirming the decision of CIT(A) in deleting the disallowance of deprecation in respect of underlying assets, without appreciating that the lease transactions were transactions of finance/ loan only?

(c) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in setting aside the issue of deprecation claimed in respect of assets involved in sale & lease back transactions entered during the year, to the file of the AO by relying on the decision of the Hon'ble Delhi High Court in the case of Cosmo Films Ltd., (2011) 338 ITR 266 (Delhi), without appreciating that the finding of this case is clearly distinguishable from that of Cosmo Films Ltd., where a sum was retained by the lessor for the security of the leased equipments, whereas in the present case, some of the assets were retained in the name of lessor for securing the financed amount?

(d) Whether the Tribunal was justified in law in confirming the decision of the CIT(A) in allocating the expenses on estimate basis and directing the AO to treat 50% of the expenses as capital and the remaining 50% expenditure as revenue expenditure, without appreciating that for every claim of deduction, burden to proof lies on assessee and in this case assessee failed to discharge its onus?

(e) Whether on the facts and circumstances of the case and in law, the Tribunal was justified in holding that the judgment of this Court in the case of M/s. Emerald Co.Ltd., (2006) 284 ITR 586(Bom.), is in favour of assessee without appreciating that the observation made therein is in favour of Revenue and in case of an investor, while computing deduction u/s. 80M of the Act, interest paid on borrowed funds related to purchase of shares would be deducted out of dividend income?”.

3 Re: Question (a):

(i) The Respondent-Assessee was engaged to implement the port Development Programme of the State of Maharashtra. For the aforesaid purpose, the Respondent-Assessee had incurred expenses with regard to the survey, preparing of offer documents, evaluation of bids for the development of minor ports etc., These expenses were to be recovered by the Respondent-Assessee from the successful bidder as and when the contracts were awarded on acceptance of the tender. These expenses were incurred in the subject Assessment Year. The Assessing Officer held by order dated 31st March, 2000 that as the Respondent-Assessee was following a Mercantile System of Accounting and these expenses pertained to Assessment Year 1997-98, the receivables, cannot be reduced to arrive at the assessable income, even when the same was to be received from the successful bidder.

(ii) Being aggrieved, the RespondentAssesssee carried the issue in appeal to the Commissioner of Income Tax (Appeals) [CIT(A)]. By an order dated 10th October, 2013, the CIT(A) upheld the order of the Assessing Officer and dismissed the appeal of Respondent-Assessee.

(iii) The Respondent-Assessee filed an appeal to the Tribunal. By the impugned order, the Tribunal held that these expenses were debited in the Profit & Loss Account prepared for the Assessment Year 1997-98 and on recovery of the same from the successful bidder offered it to tax in the Assessment Year 1999-2000. In these circumstances, the impugned order holds that there was no reason to disallow the deduction in the subject Assessment Year.

(iv) We find that the impugned order of the Tribunal has deducted the disallowance on a finding of fact that the tax has already been offered on the same for the Assessment Year 1999-2000 on receiving it from the successful bidder.

(v) In view of the above, thequestion (a) being one of finding of fact, does not give rise to any substantial question of law. Thus, not entertained.

4 Re: Question (b):

(i) Mr. Kotangle, learned Counsel appearing for the Revenue states that the issue raised herein is in respect of deprecation on transactions relating to lease of assets by the Respondentssessee. Our attention is drawn to the impugned order of the Tribunal which allowed the Respondent-Assessee's appeal by following the decision of the Apex Court in ICDS Ltd., v/s. CIT 350 ITR 227.

(ii) Mr. Kotangle, learned Counsel appearing for the Revenue very fairly states that the issue raised by the Revenue herein stands concluded against the Revenue by the decision of the Apex Court in ICDS Ltd., (supra).

(iii) In the above view, the question (b) as formulated for our consideration, does not give rise to any substantial question of law. Hence, not entertained.

5 Re: Question (c):

(i) This question pertains to deprecation claimed by the Respondent-Assessee on its assets covered by sale and lease back agreements entered into with the Fujitsu ICIM Ltd., Konkan Railway Corpn.,Ltd., and Datar Switchgear Ltd. The Assessing Officer as well as by the CIT(A) disallowed deprecation on the assets involved in the sale and lease back agreement claimed by the Respondent-Assessee as being not genuine in respect of the Agreement entered into with Fujitsu ICIM Ltd., Konkan Railway Corpn., Ltd. & Datar Switchgear Ltd., So far as the claim for deprecation in respect of assets leased to Maharashtra Esters & Keytones Pvt. Ltd., is covered, the same had been allowed by the CIT(A) on the ground that for the earlier Assessment Year, deprecation on the sale and lease back transactions has been allowed by the Revenue and forms part of the block of assets.

(ii) Both the Revenue and the Assessee filed appeal to the Tribunal. The Tribunal by the impugned order has held that the lower authorities had concluded that the transactions with the three parties mentioned herein above as not being genuine without any material to support the same. Further, it held that the issue had not been properly examined by the Authorities under the Act. In the above view, it restored the issue to the Assessing Officer to decide the nature of transactions on examination of the sale and lease agreement entered into by the Respondent-Assessee with the three aforementioned lessees i.e. Fujitsu ICIM Ltd., Konkan Railway Corpn. Ltd., and Datar Switchgear Ltd.

(iii) We find that the impugned order of the Tribunal restored the issue to the Assessing Officer to decide the nature of transactions on examination of the sale and lease agreement entered into by the Respondent-Assessee with its lessees. This remand was with a specific direction that the Assessing Officer would examine the sale and lease back transactions entered into by the Respondent-Assessee with the three parties and decide the issue afresh, keeping in view the decision of the Delhi High Court in CIT v/s. Cosmo Films Ltd., 338 ITR 266.

(iv) Mr. Kotangle, learned Counsel appearing for the Revenue has not even attempted to show us as to why the decision of the Delhi High Court in Cosmo Films Ltd., (supra) should not be taken into consideration while determining the nature of the transactions entered into by the Respondent-Assessee with its three lessee on examination of the sale and lease agreements. We find that the decision of Delhi High Court in Cosmo Films (supra) is on an identical fact situation and mere taking of security deposits from the lessee in that case is not a distinction which would make it inapplicable to the present facts.

(v) In view of the above, the question (c) as formulated for our consideration does not give rise to any substantial question of law. Hence not entertained.

6 Re: Question (d):

(i) Mr. Kotangle, learned Counsel appearing for the Revenue very fairly states that the issue raised herein stands concluded against the Appellant-Revenue and in favour of the Respondent-Assessee in view of the decision of this Court in CIT v/s. Ogilvy and Mather Pvt. Ltd., (ITA No. 4260 of 2009) dated 26th September, 2011 and Set India (P) Ltd., v/s. CIT, dated 12th July, 2011.

(ii) In the above view, question (d) formulated by the Revenue, is being concluded by decision of this Court, no substantial question of law arises. Hence, not entertained.

7 Re: Question (e):

(i) Mr. Kotangle, learned Counsel appearing for the Revenue very fairly states that the issue raised herein is concluded against the Appellant-Revenue by the decision of this Court in CIT v/s. Emerald Co. Ltd., 284 ITR 586. Moreover, we find that the impugned order itself records the fact that the Appellant-Revenue had before the Tribunal accepted the fact that the issue raised herein, stands concludedin favour of the Respondent-Assessee by the decision of this Court in Emerald Co., Ltd., (supra).

(ii) In the above view, the question (d) as formulated for our consideration, does not give rise to any substantial question of law. Hence, not entertained.

8 Accordingly, Appeal dismissed. No order as to costs.

 

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