TaxTMI 
TaxTMI 
2011 (7) TMI 32
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....o 100% depreciation on the equipment purchased by it from the Haryana State Electricity Board (hereinafter referred to as 'HSEB), which was already installed at the said Boards Thermal Power Station at Faridabad and immediately thereupon leasing the said equipment back to the HSEB on certain terms and conditions. The assessing officer had placed reliance on the Supreme Court decision in the case of McDowell and Company Limited v. Commercial Tax Officer: 1985 (154) ITR 148. The Assessing Officer came to the conclusion that the transaction was not a case of purchase and lease back of equipment, but was a pure financial and loan transaction and, accordingly, the claim of 100% depreciation to the tune of Rs. 2,30,40,000/- claimed by the respondent / assessee was disallowed. The Commissioner of Income-tax (Appeals) by virtue of his order dated 31.07.2003, placed reliance on the decision of the Income-tax Appellate Tribunal in the case of Consortium Finance Limited v. JCITD: 82 ITD 808 and held that a genuine transaction of purchase and lease back had taken place and that, as the assessee was carrying on the business of leasing also, apart from other businesses, it was entitled to the cl....
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....ce on a letter dated 26.09.1995 written by the Chief Accounts Officer, Haryana State Electricity Board, Panchkula to the Financial Commissioner and Secretary to the Government of Haryana, Irrigation and Power Department, Civil Secretariat, Haryana where, it is stated that the transaction was entered into by the HSEB as a means of raising finance. She also placed strong reliance on the decision of the Karnataka High Court in the case of Avasarala Automation Ltd (supra) as also on the decision of the Supreme Court in the case of Asea Brown Boveri Ltd v. Industrial Finance Corporation of India: AIR 2005 SC 17 to submit that the transaction in the present case was not of a sale and lease back, but merely one of a financial lease, where all the risks and rewards incident to the ownership of an asset are transferred to the lessee. Consequently, she submitted that the respondent / assessee was not entitled to claim depreciation in respect of the equipment in question and that the Assessing Officer had taken the correct view in the matter. She, therefore, submitted that the question be answered in favour of the revenue and the appeal be allowed. 6. On the other hand, Mr Ajay Vohra, appe....
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....to be decided in favour of the assessee and against the revenue and the revenue's appeal is liable to be dismissed. Mr Vohra placed reliance on the following decisions: 1) Industrial Development Corporation of Orissa Limited v. Commissioner of Income-tax and Others: 268 ITR 130 (Ori); 2) Commissioner of Income-tax v. Rajasthan State Electricity Board: (2006) 204 CTR 415 (Raj); 3) Commissioner of Income-tax v. Gujarat Gas Company Limited: (2009) 308 ITR 243 (Guj); 4) SBI Home Finance Limited v. Commissioner of Income-tax: 280 ITR 6 (Cal); 5) Commissioner of Income-tax v. Zuari Finance Limited and Another: 271 ITR 538; 6) Commissioner of Income-tax v. George Williamson (Assam) Limited: 265 ITR 626 (Gau). 7. Mr Vohra also referred to the decision of the Income-tax Appellate Tribunal, Mumbai (A) Bench in the case of West Coast Paper Mills Limited v. Joint Commissioner of Income Tax: (2006) 100 TTJ 833 (Mumbai) where, in an identical case, which also partly involved the Haryana State Electricity Board, was considered and decided in favour of the assessee by allowing the assessee therein the benefit of 100% claim of depreciation. M....
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....invoice-cum-delivery challan dated 28.09.1995 is - Instrumentation and Monitoring System for Monitoring Energy Flows - Automatic Electrical Load Monitoring System at Thermal Power Station Faridabad. A valuation certificate dated 23.09.1995 had been obtained by the respondent / assessee through Virtuous Finance Limited Bombay, who had facilitated the transaction with HSEB, from M/s M. Chaudhary and Associates, Registered Valuers and Chartered Engineers, New Delhi, which gave the replacement value of the said equipment as on 15.09.1995 to be at Rs. 2,30,40,000/-. On the purchase of the said equipment, the respondent / assessee entered into an agreement for lease of the same with HSEB on 29.09.1995, whereby the entire said equipment was leased back to HSEB for a period of 72 months w.e.f. 29.09.1995. A sum of Rs. 1,38,24,000/- was paid by the respondent / assessee to HSEB by cheques dated 30.09.1995 with regard to the purchase of the said equipments. The respondent/assessee also retained a sum of Rs. 92,16,900/- as interest free security deposit for the leased equipments. Thus, the sum of Rs. 1,38,24,000/- paid by the respondent / assessee to HSEB and the sum of Rs. 92,16,000/- retain....
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.... / assessee). 10. From a plain reading of the sale deed, the invoice-cum-delivery challan and the lease agreement, we are inclined to agree with the submission made by the learned counsel for the respondent / assessee that the ownership of the equipment in question was that of the respondent / assessee. The sale of the equipment by HSEB to the respondent / assessee resulted in the transfer of title from HSEB to the assessee. The lease evidences the fact that the right of purchase and use of the equipment in question was transferred from the respondent / assessee to the lessee (HSEB), for which purpose, a security deposit was taken and the lessee (HSEB) had covenanted to pay the lease rentals as per the schedule totaling to Rs. 1,55,38,176/- for the duration of the lease. When the lease agreement was entered into, while the possession of and the right to use the equipment was transferred to the lessee, the lessor (respondent / assessee) retained its title and ownership over the said equipment as also the right of reversion of possession at the end of the lease period. 11. Section 19 of the Sale of Goods Act, 1930 also makes it clear that when there is a contract for the sale o....
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.... it had purchased the equipment which was already installed at HSEBs Thermal Power Plant at Haryana and immediately thereafter, it had leased back the said equipment to HSEB for a period of 72 months on condition of the payment of lease rentals as well as an interest free security deposit. If, in doing so, it was attracted by the prospect of availing 100% depreciation on the value of the equipment ( Rs. 2,30,40,000/-), the respondent / assessee cannot be denied the benefit merely because it did so. In order to deny the claim of depreciation, it would have to be held that the transaction was not genuine and that the same was a subterfuge. Merely because an assessee gets a commercial advantage because of the factoring in of a tax benefit, it cannot be said that the transaction is not genuine. There is no finding in the present case or evidence to indicate that the transaction was not genuine. 14. The decision of the Karnataka High Court in the case of Avasarala (supra) is clearly distinguishable because in that case, there was a clear finding of fact, which had been conclusively arrived at by the lower authorities, including the Income-tax Appellate Tribunal, that the transaction ....
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....1); is dead, or that its ghost has been exorcised in England. The House of Lords does not seem to think so, and we agree, with respect. In our view, the principle in Duke of Westminster's case [1936 (AC-1)] is very much alive and kicking in the country of its birth. And as far as this country is concerned, the observations of Shah, J, in Commissioner of Income-tax v. Raman: 1968 (67) ITR 11 (SC) are very much relevant even today." 17. Thus, after the Supreme Court decision in the case of Azadi Bachao Andolan (supra), the observations of O. Chinnappa Reddy, J, in McDowell and Company (supra) would not hold good. This is also the position taken by the Orissa High Court in the case of Industrial Development Corporation of Orissa Limited (supra) as also the Gauhati High Court in the case of Commissioner of Income-tax v. George Williamson (supra). Clearly, therefore, the reliance placed by the Assessing Officer on the said observations in McDowell and Company Limited (supra) was misplaced. 18. We also note that in Industrial Development Corporation of Orissa Limited (supra), the Orissa High Court was dealing with a case which was similar to the one before us where, in place of the....