TaxTMI 
TaxTMI 
2019 (6) TMI 1123
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....judice to each other. 1. Claim of depreciation on assets given on lease: 1.1 The learned CIT(A) ought to have allowed the depreciation claim made by the appellant in respect of all the lease transactions entered into by the appellant in accordance with the law and circulars issued by the CBDT, having accepted that the appellant is the owner of the asset in lease transactions. In accordance with the provisions of section 32 of the IT Act, depreciation on assets given on lease should have been allowed to the appellant, being the owner of the assets in the said lease transactions. 1.2 Without prejudice to the above, having accepted that the appellant is the owner of the asset, the learned CIT(A) erred in directing the Assessing Officer to verify and disallow depreciation in lease transactions where either the date of purchase invoice is subsequent to the date of lease agreement or in which the purchase invoices were issued in the names of the concerned lessees. The genuineness of the transaction was not in dispute and therefore he has no jurisdiction to give these directions. 1.3 The learned CIT(A) committed a gross error of law and facts in confirm....
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.... Officer to give effect to the directions relating to the appellant's claim of deduction u/s 36(i)(iii) while considering the claim u/s 80M. Moreover, the learned CIT(A)'s directions relating to section 36 (1)(iii) are themselves contrary to law and unwarranted. 4. Investment in Shares: 4.1 The learned CIT(A) has no jurisdiction to hold that profit on sale of shares of joint stock companies should be taxed as business profit. Moreover, this issue did not arise out of grounds of appeal before the learned CIT(A) and he erroneously assumed jurisdiction to deal with this issue without any authority of law 4.2 The learned CIT(A) erred in holding that the appellant's investments in shares of joint stock companies should be treated as business assets and not capital assets. He has erred in holding that income arising out of sale of these investments should be treated as business profits without giving adequate opportunity to the appellant to explain its case and without considering the written submissions filed by the appellant. 5. Depreciation on guest house: The learned CIT(A) erred in holding that depreciation claimed by....
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....sed by the assessee in seriatim. 3. Insofar as Ground of appeal nos. 1.1 to 1.3 is concerned, the same relates to assessee's claim for depreciation on the fixed assets which have been leased out. The total claim of depreciation was to the extent of Rs. 157,78,82,261/- out of which an amount of Rs. 91,88,25,669/- pertained to assets which were leased out in earlier period and such assets were part of the opening written down value (WDV). The Assessing Officer has disallowed the entire claim of depreciation primarily on the ground that it was a case of 'financial lease' of assets and that it was not a case of an 'operating lease'. This stand of the Assessing Officer was consistent with the stand of the assessing authorities in the past years. It has been explained before us that the said dispute is not unique to the instant assessment year, but arose for the first time in the course of assessment for Assessment Year 1994-95. It has also been pointed out that the matter travelled up to the Tribunal and vide order dated 29.10.2014 in ITA Nos. 1839/M/2004, 3369/M/2004, 3370/M/2004, 1951,3922,39923/M/2006 pertaining to Assessment Years 1994-95, 1995-96 and 1996-97, relief has been all....
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....se'. 6. Further, a perusal of the order of Tribunal dated 29.10.2014 (supra) shows that certain transactions of lease though not classified by the Assessing Officer as 'financial lease', yet the depreciation was denied on some other ground, namely, lack of appropriate evidence, etc. On this aspect, wherein lease with four particular lessees were identified, namely, Kedia Group, REPL Engineering, Patheja Brothers Forging & Stamping Ltd and and Padma Alloys Casting Ltd, the matter was set-aside by the Tribunal to the file of the Assessing Officer for afresh adjudication as per law. It has been further explained that in Assessment Year 1995-96 as well as 1996- 97 certain lease transactions were identified wherein depreciation was denied for similar reasons, such parties being Trudent Steels, Nathan Steels, Pathreja Brothers and Kedia Distilaries for assessment years 1995-96 and Suman Metals, Kedia galleon Ltd and Trident Steels for assessment years 1996-97. At the time of hearing, the Learned Representative for the assessee pointed out that so far as depreciation claim in the instant year pertaining to said seven lease transactions is concerned, the same amounted to Rs. 2,09,04,638....
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....oncerns amounting to Rs. 10545 crores is concerned, interest corresponding to such investments would not fall for disallowance in terms of Sec. 36(1)(iii) of the Act. The CIT(A) has allowed relief on this aspect, whereas he has sustained the interest disallowance proportionate to the investments made in securities of Central and State Governments as well as stocks, shares, bonds and debentures of other financial institutions, which totaled upto Rs. 1400 crores, and the corresponding interest thereon which is disallowed is Rs. 113,38,12,959/-. 11. In this background, we have heard the rival submissions. At the time of hearing, apart from canvassing that the utilisation of funds by the assessee for acquiring the securities of Central and State Government as well as shares and securities of other financial institutions is an activity undertaken in the course of business, the Learned Representative pointed to the position taken by the Assessing Officer in different assessment years on this very aspect. It is pointed out by the Learned Representative that so far as past assessments are concerned, similar investments were made by the assessee and there has been no disallowance unde....
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....industrial concerns by such Corporation or institution which are repayable within a period not exceeding twenty-five years, (ii) any scheduled bank or State Co-operative Bank, by way of refinance of any loans or advances granted to industrial concerns by such bank which are repayable within a period not exceeding fifteen years; by such bank which are repayable 4[within a period not exceeding fifteen years; (iii) any scheduled bank or State Co-operative Bank or the Industrial Finance Corporation or any State Financial Corporation or any other financial institution which may be notified by the Central Government in this behalf, by way of refinance of any loans or advances granted to industrial concerns or group of industrial concerns by such bank or institution which are for the purpose of, or in connection with, the export of capital goods, commodities or merchandise from India or the execution of any turnkey project outside India by any industrial concern as aforesaid or by any person in India, and, in any case, are repayable- (i) within a period not exceeding twelve years in the case of persons outside India, and (ii) within a period not exceedi....
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....ial concern or by any person in India; (db) transferring for consideration any instrument relating to loans and advances granted by it to industrial concerns; (dc) granting loans and advances to any person for purposes of investment in any industrial concern;] (e) guaranteeing deferred payments due from any industrial concern; (f) guaranteeing- (i) loans raised by industrial concerns which are floated in the public market; and (ii) loans raised by industrial concerns from any scheduled bank or State Co-operative Bank or the Industrial Finance Corporation or any State Financial Corporation or any other financial institution which may be approved by the Board in this behalf; which may be approved by the Board in this behalf; (g) guaranteeing the obligations of any scheduled bank or State Cooperative Bank or the Industrial Finance Corporation or any State Financial Corporation or any other financial institution which may be approved by the Board in this behalf arising out of, or in connection with, underwriting the issue of stocks, shares, bonds or debentures of any industrial concern; (ga) granting, opening, issu....
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....rest, remuneration or fees as may be agreed upon. (3) The Development Bank shall not grant any loan or advance or other financial accommodation on the security of its own bonds or debentures. 13. Shorn of other details, so far as is relevant for our purpose, a perusal of the aforesaid sub section (1) of section 9 of the IDBI Act, 1964 shows that granting of loans and advances, financing of or refinancing of State Financial Corporations is one of the primary objects of the assessee, as mandated by the Parliament. Therefore, on this very count itself, we are unable to subscribe to the stand of the income-tax authorities that the investments made for financing or refinancing of State Financial Corporations is not an activity undertaken in the course of assessee's business; in our view the interest expenditure relatable to such investments cannot be disallowed in terms of Sec. 36(1)(iii) of the Act having regard to the fact that such activity is in the tune of assessee's business objects. 14. The only other aspect which is left for determination is interest relatable to investments made in securities of Central and State Governments amounting to Rs. 170 crores. On this a....
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....of dividend income. 18. On the other hand, the ld. DR for the revenue relied upon the order of lower authorities. 19. We have considered the rival submission of the parties and gone through the orders of Tribunal for earlier years. During the assessment, the Assessing Officer asked to furnish the details of deduction under section 80M and issued show-cause notice as to why the deduction under this section should not be recalculated after deducting interest on money borrowed for investment in shares and after deducting other expenses wholly and exclusively for earning dividend. The Assessing Officer recorded that the assessee filed various submission and stated that as a part of their business the assessee advance loan and provides other financial facilities to various persons engaged in business. For this purpose, the assessee raised funds and loans by issuing bonds, debentures etc. on the borrowings, the assessee has paid interest and debited in Profit & Loss Account. Investments in shares are primarily done as part of assessee's lending activities. The Assessing Officer has not given any clear finding. However, the ld. CIT(A) recorded that perusal of assessment order reveal....
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.... was further submitted that from A.Y. 2002-03 to 2012-13, the ld. CIT(A) has not directed the A.O. to assessee income from sale of Joint Stock Company as Business Income. The ld. AR of the assessee submits that a chart showing that profit from sale of share of Joint Stock Company's offered by assessee under Capital Gain has been accepted is filed at page no. 282 of the Paper Book. The ld. AR submits that the the revenue has accepted the order of ld. CIT(A) and has not challenged the same before Tribunal. The ld. AR also relied upon the CBDT Circular No. 6 of 2016 dated 29th February 2016. 22. On the other hand, the ld. DR for the revenue relied upon the order of lower authorities. 23. We have considered the submission of the parties and perused the records. We have noted that the ld. AR of the assessee vehemently submitted that the A.O. taxed the income from sale of Joint Stock Company under the head Capital Gain. However, the ld. CIT(A) has treated the profit on sale of Joint Stock Company as Business Profit. We have further noted that the department has accepted the similar profit on sale of investment as a Capital Gain from A.Y. 2002-03 to 2012-13 as the same has not be....
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.... Agricole Indosuez (supra) the Tribunal discussed the language of section 10(15) which is similar to section 10(23G) of the Act. 26. On the other hand, the ld. DR for the revenue supported the order of ld. CIT(A). 27. We have considered the submission of the parties and gone through the orders of authorities below. We have noted that in the return of income, the assessee claimed income exempt under section 10(23G) of Rs. 8,36,34,794/-. The assessee claimed exemption under section 10(23G) on gross basis. During the course of assessment, the assessee furnished revised working, thereby reduced the claim under section 10(23G) to Rs. 1,86,27,921/-. Before the ld. CIT(A), the assessee raised additional ground of appeal regarding restructuring the assessee's claim under section 10(23G) in respect of infrastructure business to Rs. 1,86,27,921/- as against Rs. 8,36,34,794/- claimed in the return of income. The ld. CIT(A) in para-114 of his order recorded that this ground was not pressed by assessee. Before us, ld. AR of the assessee vehemently submitted that the assessee has raised specific as well as additional ground of appeal and that the finding of ld. CIT(A) that the assessee has....