2004 (10) TMI 51

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....essment year 1992-93; and by assessment order dated March 26, 2001 for the assessment years 1993-94, 1994-95 and 1998-99, (i) found that the change of method of accounting of overdue charges from mercantile basis to cash system was not justified and therefore, added overdue interest on mercantile basis; (ii) rejected the claim of the respondent/assessee with reference to 100 per cent, depreciation on bottles purchased in bulk and leased out to others; (iii) 100 per cent. depreciation on steel rollers purchased and leased back to the same persons by the respondent during the assessment year 1993-94 and 1994-95 was also rejected; (iv) the issue of cost under section 43(1) of the Income-tax Act (for brevity "the Act") of the assets purchased and leased back during the assessment year 1994-95 was also rejected; (v) the interest was levied for the delay in filing the revised return under section 234A of the Act; and (vi) the higher depreciation on vehicles leased out as claimed by the respondent/assessee was also rejected. Aggrieved by the said assessment orders of the Assessing Officer, the respondent/assessee preferred an appeal before the Commissioner of Income-t....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....pparent consideration should be accepted by the Assessing Officer as the cost in a sale and lease back transaction, although the amounts specified as lease amounts were not received by the assessee? (vii) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that no interest under section 234A can be charged for delay in filing the return in response to notice under section 148, as the original return was on file all the time? (viii) Whether, on the facts and circumstances of the case, the Tribunal was right in holding that leased out commercial vehicles are eligible for higher rate of depreciation?" After hearing learned counsel for the appellant/Revenue and perusing the orders of the authorities below, we are inclined to pass the following order on the above substantial questions of law. Questions Nos. (i) to (iii): Question No. (i):- Whether, on the facts and circumstances of the case, the Tribunal was right in holding that the Assessing Officer did not have the jurisdiction to reopen the assessments for the assessment years 1992-93, 1993-94 and 1994-95? Question No. (ii):- Whether, on the facts and circumstances of the case, th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....hod of accounting is permissible in law. In the said case, the assessee was engaged in the business of manufacturing electrical appliances. It followed the accounting year ending September, 20. The assessee was also engaged in exporting its products. The assessee received cash assistance and duty drawbacks from the Government of India. Prior to the assessment years 1977-78 and 1978-79, the assessee was accounting for receipts of cash assistance and duty drawbacks on the mercantile basis as its accounts were maintained on the mercantile basis. In the revised returns for these years cash assistance and duty drawbacks were accounted on the cash basis. The Assessing Officer held that the assessee could not maintain a mixed system of accounting for different types of income. The Commissioner, however, held that the change in the method of accounting was bona fide and no loss was sustained by the Revenue. This was upheld by the Tribunal. The matter was taken on reference to the High Court. The Division Bench of the Bombay High Court held that the view of the Tribunal was justified in law holding that the export of duty drawback and cash assistance from the Government was assessable in th....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....ing citizens to engage themselves in dealings and transactions designed primarily for the purpose of non-payment of tax only." In the instant case, learned counsel for the Revenue is not in a position to demonstrate or satisfy us that due to the change of accounting method adopted by the respondent/assessee, which is permissible in law as per the ratio laid down in (i) CIT v. Matchwell Electricals (I.) Ltd. [2003] 263 ITR 227 (Bom) and (ii) Hela Holdings Pvt. Ltd. v. CIT [2003] 263 ITR 129 (Cal), the Revenue suffered any loss or such a change of methodology attracts tax evasion. Concededly, there is no finding to that effect in the assessment order or in the order of the Commissioner of Income-tax (Appeals). The change of method of accounting of overdue charges from the mercantile basis to cash system, method of accounting, as followed by an assessee, does not create any income; but the method of accounting only recognizes income. Therefore, either to apply the accrual system or cash system, recognition of income is a paramount factor. In the present case, the disputed amount is the overdue charges receivable by the assessee from various parties on the basis of hire-purchase ....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....er upon the Assessing Officer to initiate reassessment proceedings upon a mere change of opinion. Accordingly, questions Nos. (i) to (iii) are answered in the affirmative, against the Revenue and in favour of the assessee. Question No. (iv): Whether, on the facts and circumstances of the case, the Tribunal was right in allowing 100 per cent, depreciation on bottles purchased in bulk by the assessee and leased out to others? This question is settled by a decision of this court in First Leasing Co. of India Ltd. v. CIT (No. 2) [2000] 244 ITR 238, wherein this court held that each bottle was an independent unit and was not dependent for its user on the availability of other bottles whether empty or filled. The use of one bottle was not interconnected with the use of other bottles. Since each bottle was an individual unit and all bottles together did not constitute a single integrated unit depreciation under the proviso to section 32(1)(ii) of the Act was allowable. Even in the instant case, the issue is relating to the allowance of 100 per cent. depreciation on each bottle and the said decision squarely applies. That apart, the case of the assessee is also supported with anot....

X X   X X   Extracts   X X   X X

Full Text of the Document

X X   X X   Extracts   X X   X X

....eration payable after such date shall be deemed to be the discounted value of such consideration as on the date of such agreement or transfer, determined by adopting such rate of interest as may be prescribed in this behalf. Therefore, unless and until there are reasons to believe that the cost in a sale or an amount in a lease back transaction, as specified, was received, but not disclosed, we do not see any error, on the part of the Tribunal, in accepting the apparent consideration. This question is, therefore, answered in the affirmative and against the Revenue. Question No. (vii)- Whether, on the facts and circumstances of the case, the Tribunal was right in holding that no interest under section 234A can be charged for delay in filing the return in response to notice under section 148, as the original return was on file all the time? Since, when the very reopening of the case for the assessment years is based on change of opinion and on irrelevant, illogical and unsustainable reasons, without any jurisdiction, the question of demanding interest under section 234A of the Act does not arise. This question is also answered in the affirmative, against the Revenue. ....