TaxTMI 
TaxTMI 
2021 (8) TMI 688
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.... on 24.02.2020. He, therefore, asked the assessee to substantiate its claim of depreciation by way of adequate documentary evidences. 2.1. The assessee, in response to the same, submitted that it had purchased the plant and machinery i.e., Oxygen Plant from M/s. Bhushan Steel Limited ["M/s. BSL" in short] at an amount of Rs. 952,50,00,000/- during the year under consideration. The assessee filed an "Agreement to Transfer Certain Equipments" executed by the assessee with M/s. BSL on 23.02.2015. From the said agreement, the A.O. noted that assessee intended to acquire certain equipments from M/s. BSL for Rs. 1000,12,50,000/-. He noted that the assessee immediately on "Transfer" of the asset on 23.02.2015 vide "Agreement to Sale", again leased back the said assets to its original owner i.e., M/s. BSL and in this process the assessee has claimed to have earned Rs. 2,13,10,000/- on account of lease of the said asset during the year. 2.2. The A.O, therefore, proceeded to examine the claim of depreciation on the said 'Plant and Machinery' and noted the following : (A) The assessee company has no financial worth since its paid-up share capital is only Rs. 1 lakh for A.Ys. 2013-2014 to ....
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....hypothecation documents with the State Bank of India lead to the vital revelation that while the book value of said "Equipments" as on 31.10.2014 [as Certified by M/s. Bhushan Steel Limited to the SBI] was Rs. 437.47 Crores, the assessee had purchased the same at Rs. 1000 Crores from M/s. Bhushan Steel Limited as per the "Agreement of Sale" submitted by the assessee. He observed that while "Plant and machinery" of the oxygen Plants were of value Rs. 437 crores, the remaining land, Building, civil work and pre- operative capital expenses formed the remaining Rs. 563 crores, which were not transferred to the assessee. The Agreement to sale executed between the parties was meant only for certain equipments, and not the land, building and the ancillary infrastructure. (H) The asset hypothecation documents with the State Bank of India lead to another startling revelation that the assessee had incurred a debt over Rs. 850 crores to purchase equipments which were worth Rs. 437.47 crores, and these assets were not even transferred by way of registered sale deed. (I) The valuation report and C.A. Certificate submitted by M/s. BSL before the State Bank of India for hypothecation of asset....
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....epreciation at higher value on recomputed asset, by recording the following conclusion : "4.10. Conclusions sought to be drawn : 1. It is abundantly clear from the above discussion that the assessee company was merely a paper entity, which had no real business, and no financial capacity of its own, It is very clear that the assessee company was acting in collusion with M/s Bhushan Steel Limited and, the real objective of the assessee company was to further the business interests of M/s Bhushan Steel Limited. Accordingly, a sequence of financial transactions between assessee and M/s Bhushan Steel Limited were ingeniously planned with the pre-designated objective of benefiting M/s Bhushan Steel Limited, it is in this background that the assessee company despite having no real worth, sought to purchase second hand Plant & Machinery of M/s Bhushan Steel Limited at an inflated cost of Rs. 1000 Crores, when the actual book value, of the said Plant & Machinery in the books of M/s Bhushan Steel Limited (as certified by M/s Bhushan Steei Limited to the State Bank of India) was merely Rs. 437 Crores. Thus, the assessee in collusion with M/s Bhushan Steel Limited, falsely inflated the val....
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....n up in repayment of loan. It is also essential to note that a future cost benefit analysis of the said business arrangement also shows that since assessee had incurred a debt of Rs. 1000 Crores to purchase these assets, it would take several years (15-20 years) to re-pay the loans, and in the meanwhile the already depreciated second hand equipments would lose their worth in financial market as they would not even have any re-sale value in market. Even, the effective life of these equipments was not more than 10-15 years. Further, for the repayment of loan, the assessee was totally dependent upon M/s Bhushan Steel Limited. The entire assets were mortgaged with the Banks, and in any eventual failure to re-pay the loan, the assets were to be confiscated by the Banks. Thus, in this deal, there was absolutely no advantage accruing to the assessee, and, no prudent businessman would have entered into a deal which was to its own disadvantage. 7. The assessee company and M/s Bhushan Steel Limited have willfully denied this office details with regard to rate at which these assets were originally purchased by M/s Bhushan Steel Limited and its W.D.V. as on the 31.03,2014 and on the date o....
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.... observed that the equipments have not been put to use for appellant's own business purposes. The appellant has neither a business premises nor an employee nor it has purchased the entire oxygen plant which could be used for business purposes. It has purchased only equipments forming part of the oxygen plant which cannot be utilised in isolation by the appellant without a premises and installation. 6.8. Further, leasing out equipments is neither the business objective of the appellant nor is coincidental to its business. The only source of income shown by the appellant*" is rental from leased assets. As the appellant has not utilised these equipments for business purposes, it is not entitled for claim of depreciation on the equipments which have been used for earning rentals. 6.9. On the basis of factual matrix, observations and the decisions on sham transactions as quoted above, the addition is confirmed. These grounds are ruled against the appellant." 4. So far as the addition of Rs. 1,10,82,175/- on account of disallowance of up-front fees is concerned, the Ld. CIT(A) dismissed the same by observing as under : "6.12 As discussed in the Ground no. 2 & 3 above, the appellant ....
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....the Appellant and BSL Ltd. is in-genuine in nature on the alleged basis that since the Appellant has no financial worth, no prior experience, no infrastructure or employees, etc., - it thereby renders the same to be in the nature of a mere paper transaction. 5. That the Ld. A.O. and the Ld. C.I.T.(A) have erred in disallowing depreciation on the factually incorrect assumption that the Appellant has only purchased certain equipments forming part of the oxygen plant, that allegedly cannot be used on their own without a business premises and installation. 6. That the Ld. A.O. has made and the Ld.CIT(A) has sustained the impugned disallowance of depreciation on the factually incorrect basis that the total value of the oxygen plants stands at Rs. 437 Crs as per the valuation certificate but the said Assets were purchased from BSL for an allegedly inflated value of Rs. 1000 Crs. 7. That the Ld. A.O. has erred and the Ld.CIT(A) has wrongly sustained the impugned addition w.r.t. Rs. 1,10,82,175/- claimed as a business expenditure on account of the payment of the one time non refundable fee for the processing of the loan, prior to the execution of the term loan taken by the Assessee f....
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....ng with all its auxiliaries, jigs and fixtures, agricultural machinery, ships, trawlers, vessels, barges, automobiles and vehicles of every kind of description, air conditioning plants, aircrafts and electronic equipment of all kinds and descriptions and for this purpose to buy, take on lease or otherwise acquire and hold for improvement, investment, development or trade and sell, lease or otherwise dispose of, all or any of the aforesaid things and to render leasing, consultancy and advisory services to clients in the field of plant and equipment and leasing. Carrying -out operations and maintenance of equipment/ oxygen plants etc., and Carrying out sale of oxygen, other gasses, services." 7.1. He submitted that M/s Bushan Steel Ltd. [hereinafter referred to as "M/s BSL"] underwent Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 and was acquired by Bamnipal Steel Ltd., a wholly owned subsidiary of Tata Steel Ltd and was subsequently renamed as Tata Steel BSL Ltd. with effect from November 27, 2018. However, even prior to the undergoing insolvency, M/s BSL had availed financial assistance in the form of secured term loan, secured working capi....
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.... and leading "Asset Finance and Leasing" institutions, the SREI Infrastructure Group, enter into a multitude of such "Sale cum Lease Back" transactions and/or other similar [Finance and/or Leasing] transactions in the infrastructural sector. Referring to paper book pages 315 to 334, he submitted that a simultaneous Lease Agreement Dated 26.02.2015 was entered into between the Assesses and (then) M/s BSL wherein the Assets, comprising of the 4 Oxygen Plants along with the allied accessories as found in Schedule-I of the Lease Agreement were leased-out by the Assessee to (then) M/s BSL, for a period of 10 years [along with the option of renewal available to the lessee for a further period of 5 years] at the agreed monthly lease rental specified in Schedule-2 of the Lease Agreement. 7.3. He submitted that a "Sale -cum- Lease Back" transaction is one where the owner of an asset engaged in manufacturing activities [who subsequently becomes the Lessee] sells that asset at market value [as per Approved Valuer's Report] and acquires it back from the purchaser [who subsequently becomes the Lessor] on lease. Here, the SCLB transaction is completed without effecting delivery of the conce....
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....and 4 of the said decision which reads as under: "3. The respondent prior to undergoing insolvency and resolution process had availed financial assistance in the form of secured term loan, secured working capital loans and other secured fund and non fund based facilities front various Banks / Financial Institutions t 'Lenders for shorn Subsequently as part of deleveraging exercise and decisions taken at the meeting of Lenders of the respondent held on August 18. 2014, the respondent was required to monetize four oxygen plants having capacity of 120(1,1120:405 and 340 tom per day (TPD) ('Oxygen Plants for short), which are part of integrated steel facility at Menmuuhdi. Odisha ('Integrated Steel Facility for short) through Sale and Lease Back Arrangement. 4. The Lenders of the respondent thereafter issued an NOC on February 21, 2015 permitting respondent to execute a Sale and Lease Back Agreement with the petitioner on the condition that interest over the Lease for the Oxygen Plants shall be charged for the benefit of the Lenders In pursuance, respondent sold the Oxygen Plants situated at the Integrated Steel Facility to the petitioner. " 7.6.1. He submitted that at P....
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....gal and contractual obligations of timely rental payments, thereby committing fundamental breach of the Lease Agreement and crippling the petitioner from timely servicing its loans. It is also stated that the respondent has forced the petitioner to opt for moratorium on its bank dues, thereby increasing its liability. ..... ..... ..... ...... 17. As per the petitioner, the respondent for the first time demanded, for a payment of Rs. 41.79.48.852/- towards repair and maintenance of the leased equipment vide letter dated June 23, 2020; (ii) a payment of Rs. 10,19,91,600/- towards alleged outstanding for a period prior to CIRP vide its letter dated July 5, 2020 That apart, it is stated by the petitioner that it is on the basis of these assertions that the respondent started excusing its defaults in payment of rent under the Lease Agreement " 7.6.5. The Learned Counsel for the Assessee submitted that although the default in rental payments by the lessee is not the issue at hand before this Hon'ble Tribunal, however, it is now evident that the factual basis of both the present appeal and Decision rendered by the Hon'ble Delhi High Court are one and the same, since they originate ....
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....for a monthly lease rental of INR 15 Crones till March 31, 2020 and subsequently INR 18 Crores excluding the applicable taxes. The transaction, when entered into by the erstwhile Bhushan Steel Limited, was not as per the market value of leased equipment and that it was primarily entered into for the reason that an amount of INR 1000 Crore was needed, lest erstwhile Bhushan Steel Limited would have turned into a Non-Performing Asset. It is submitted that keeping these considerations in mind, rentals were pegged to the loan amount / finance cost, and hence do not represent the true and correct lease rental amount as per the prevailing market standard ' 7.6.8. The Learned Counsel for the Assessee drew the attention of the Bench to the finding of Hon'ble Delhi High Court which starts from Para-65 of the Decision, where the said para summarises the arguments made by both parties with reference to the maintainability of the present petition under Section 9 of the Arbitration and Conciliation Act as well as on merits. Referring to following paragraphs of the Order, the Learned Counsel for the Assessee submitted that after giving due consideration to the arguments of both sides, the....
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....Suffice to state that this Court in the facts and circumstance of those cases refused to exercise its power under Section 9 of the Act. 80. On the other hand, Mr. Sibal is justified in relying upon the judgment of this Court in Supertrack Hotels Pvt. Ltd. (supra), wherein the Division Bench upheld the judgment of the Single Bench, directing the appellant therein to pay a sum of Rs. 1,30,44,960/- which was the outstanding amount of agreed rent as per the lease deed from November 2015 till April 2016...... 85. On this aspect of adjustment of Rs. 10,19,91,600 against the lease rent, it is noted that the said amount is disputed by the petitioner. Mr. Sibal is right in stating that there is no unequivocal or categorical admission by the petitioner of the said amount. .... 86. In view of the above, it is clear that Rs. 18 crores being the contractual amount w.e.f April 01, 2020, the said amount is prima facie payable by the respondent atleast till such time the parties seek adjudication of the disputes as per the contractual provisions. 87. So, it is directed that the respondent shall pay the arrears of lease rent (net of all taxes / TDS), after adjusting the amount already paid,....
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....ent wherefrom it is clear that the Assesses is the qualified and unequivocal owner of the Assets. Furthermore, (then) M/s BSL in its Annual Report of the Financial Year ending 31.03.2015 [Pages 80-183 of the Paper Book] has at Note No.51 [At Page-141 of the Paper Book] categorically outlined the sold equipment [being 4 Oxygen Plants with accessories] as being taken over by (then) M/s BSL under an "operating lease" for a period of 10 years from 26.02.2015. Thus, the assessee, in his capacity as the lessor-owner is entitled to claim depreciation under section 32 of the I.T. Act, 1961 which allows for depreciation on specified tangible assets and intangible assets, when such assets are owned, wholly or partly, by the assessee and are used for the purpose of business or profession carried on by the said assessee. Referring to the Asset Purchase Agreement Dated 23.02.2015 [Copy placed at Pages 184-195 of the Paper Book], he submitted that since the Assets involved herein are indeed owned by the assessee and since the assets are indeed utilized for the purpose of business of the Assessee [since the Assessee Company is in the business of leasing assets, as visible from its MOA], therefor....
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....ss Profession' of the Income Tax Return and Computation of Income for the A.Y. 2015-2016 and Page-56 of the Original Income Tax Return for A.Y. 2018-2019, Pg.56 of the revised Income Tax Return and the revised Computation of Income for A.Y. 2018-2019, annexed to the submission, the Learned Counsel for the Assessee drew the attention of the Bench to the table below and submitted that the claim of depreciation was later on reworked by the Assessee to be a sum of Rs. 68,84,30,676/- on the basis of WDV of the assets. Assets Original Cost Written Down Value Date put to use Oxygen Plant of 1120 & 1200 TPD with accessories Rs. 849,24,73,177 Rs. 849,24,73,177 17.02.2015 Oxygen Plant of 340 & 405 TPD with accessories Rs. 120,86,67,595 Rs. 68,66,02,504 27.03.2015 TOTAL Rs. 970,11,40,772 Rs. 917,90,75,681 7.6.14. He submitted that this reworked claim of depreciation of Rs. 68,84,30,676/- had been accounted for in AY 2018-2019. where the assessment and computation of the Assessee has been revised by taking the impact of depreciation claimed on the WDY of the Assets. The same is also evident and visible from the requisite extract....
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....ported in [1959] 37 ITR 271 [SC] 4. Judgment of Hon'ble Calcutta High Court in the case of CIT vs., Lakshmangarh Estate & Trading Co. Limited in ITA.No.270 of 1999 vide Judgment Dated 07.10.2013. 7.6.18. The Learned Counsel for the Assessee submitted that the A.0. has arrived at this conclusion, without considering that SCBL arrangements are in fact a very common undertaking that is entered into in the leasing sector, where the typical advantages of such an SCLB transaction to the lessor, would be a higher return rate, benefit of residual value, predictable and secured return rate, greater ease in handling the seller default, and results in the avoidance of any such usury problems. 7.6.19. He submitted that the Revenue has erred in ignoring that the Assessee Co. had been incorporated with the objective of entering into such leasing arrangements. In line with its main objective, as soon as the Assessee found an attractive business opportunity, it purchased the Assets from (then) M/s BSL and then immediately leased the same back out. In other words, in the case at hand, when the Assessee had realised that (then) BSL was undergoing a financial crunch, it capitalised on the busines....
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....Co. cannot in any manner be accused of entering into the SCLB transaction with BSL as a tax evasion mechanism. 7.6.22. He accordingly submitted that this particular SCBL transaction can in no manner be called as a device to avoid the payment of legitimate taxes, when both the intention and the documentation/evidences at hand and which have gone unrefuted by the A.O. point towards the legitimate nature of the SCBL arrangement. The A.O. cannot merely on surmises and conjectures opine that the Assessee has acted in a collusive manner to avoid any form of genuine tax liability. 7.6.23. The Learned Counsel for the Assessee submitted that it is well within the rights of the Assessee to run its business activities in any such manner that it may deem fit and proper, and so the very allegation that the SCBL transaction is a paper and dubious transaction sans any such conclusive evidence brought on record by the A.O. to that effect, would show that the A.O. is exceeding his/her powers of stepping into the shoes of the business man, and going into the correctness, business prudence and commercial expediency of the decision making process. Thus any such attempt by the A.O. to disregard the ....
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....o the case of the Assessee, is erroneous, since as detailed for the facts above, there does not arise any such necessity to lift the corporate veil or consider the surrounding circumstances, or apply the principle of preponderance of probabilities - since the A.O. has not even rebutted/questioned the genuineness/ authenticity of the documentation/evidences brought on record by the Assessee, and when the A.O. has made some fundamentally incorrect factual assumptions as to the valuation of the Assets involved, and when the A.O. has completely overlooked the rationale and commercial viability of this SCBL arrangement (that was taken as a business decision by the Assessee as part of its leasing business), and when further, the A.O. has completely ignored the fact that the claimed depreciation, would result in a tax neutral situation had the same been claimed by the Assessee as part of this SBL arrangement or by (then) M/s BSL independently, by not entering into this SCBL arrangement. 7.6.25. He submitted that the very theory of "preponderance of probability" is only applied to weigh the evidences of either side and draw a conclusion in favour of a party which has more favourable facto....
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....he same as a Revenue Expenditure. He submitted that the Assessee relies upon Section 36(1)(iii) of the I.T. Act, 1961 - that provides a deduction of the amount of interest in respect of capital borrowed for the purposes of business. 8.1. He submitted that interest as defined u/s 2(28A) of the I.T. Act, 1961. is interest payable in any manner in respect of any moneys borrowed or debt incurred [including deposit, claim or other similar right or obligation] and includes any service fee or other charge in respect of the money borrowed or debt incurred or in respect of any credit facility which has not been utilised. Accordingly, to qualify as an interest the costs should be incurred in connection with the borrowing of funds, and thus since the Assessee herein has made the payment of upfront fee vis-a-vis the Term Loan obtained, the said 'upfront fee' does fall within the definition of 'interest' and is allowable as a deduction under section 36(1)(iii) of the I.T. Act, 1961. 8.2. He submitted that it is now a settled law, that 'upfront fees' can be claimed as revenue expenditure. Referring to the decision of Hon'ble Madras High Court in the case of CIT vs., Meenakshi Mills Ltd., ....
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....penses incurred with reference to the same also should not be allowed to the Assesses. However, when the Assesses has effectively rebutted the contention(s)/ allegation(s) raised by the Department with reference to the SCBL transaction, then, the issue of claiming the interest expenses as a deductible business expenditure is corollary/ contingent claim that ought to be allowed for the same reasons. He accordingly submitted that the grounds raised by the assessee should be allowed. 10. The Ld. D.R, on the other hand, while heavily relying on the Orders of the A.O. and Ld. CIT(A) filed the following written synopsis which reads as under : "May it please your honours Brief facts of the case:- 1. The assessee and BSL (Bhushan Steel Limited) have entered into "Agreement to transfer certain equipments" dated 23/02/2015 as per which BSL claimed to have sold certain specific equipments to the assessee and then the assessee entered into loan agreement with the bank on 26/02/2015 by mortgaging such equipments/assets and thereafter on the same date, such equipment was claimed to be leased back to BSL for lease rent. ` Issue Involved:- 2. The issue involved is that whether the asses....
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....gement. If it is a simple borrowing on the security of the assets, the assessee would not be entitled to depreciation, * that it is nothing more than a mere finance transaction - and that the entire documentation is a smoke screen to create an illusion as if it is a lease." * The real question would be whether the consideration moving from RSEB to the assessee represents compensation for the use of the monies (as in a finance lease) or represents compensation for the use of the assets (as in an operational lease) * The judgment of the Supreme Court in Shaan Finance Pvt. Ltd. (231 ITR 308)(SC) relied on by the assessee is not applicable to the facts of the present case since that decision related to the claim of investment allowance and the business of the assessee was that of leasing only. The other decisions, particularly orders of the Tribunal relied on by the assessee were not applicable to the present case. * In Mcdowell case, His Lordship Justice Ranganath Misra held as under :- (page 171 of the report) "Tax planning may be legitimate provided it is within the framework of law. Colourable devices cannot be part of tax planning and it is wrong to encourage or entertain ....
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....rcumstance which one considers relevant for reaching the soul of the matter must necessarily be taken into account. Ultimately, it is the inference to be drawn on a cumulative consideration of all the facts and circumstances of the case which is material. We have therefore perused the various orders of the Tribunal placed before us only in this perspective viz., whether any guidelines or principles of general application could be called from them which could be usefully applied to the cases before us for the purpose of ascertaining the genuineness of the SLB transaction. We have eschewed the temptation "to match the colour of one with the other" and draw our inferences or superficial similarities. * assessments are not made merely on arithmetical calculations; they are to be made on legal principles. The view to be taken with regard to a particular transaction cannot differ, depending on whether the parties have made a profit or have incurred a loss in the same. The assessments cannot be made solely on the basis of the figures or arithmetical calculations. In the cases before us, in fairness to the income-tax authorities, they have realised this position and have therefore not ....
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....ement to transfer the equipments and does not convey or transfer the equipments to the purchaser. The relevant clauses are reproduced as under :- A.2 Thus, it flows from the above that the agreement did not deal with actual transfer of equipments and the assessee did not produce any evidence to showcase that there was handing over of the equipments from seller to purchaser. A.3. Further, the agreement to sell does specify the specific equipments which are to be transferred. A part of the list as sample is as under :- A.4. Keeping in mind that all such equipments are part of the oxygen plant which is in operations for number of years by BSL. All these equipments are interconnected and form part of integrated plant. The question arises as to how such equipments could be handed over to the purchaser after dismantling each one out of the integrated oxygen plant along with supporting civil structures? Whether dismantled equipments would have any value left in it? The simple answer is that it is not a feasible option to dismantle the equipments for sale of the same and then leasing it back. The lessor has no experience in dealing with such equipments technically or otherwise. A.5....
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....nsferred for sale and lease back? C.1. At page 6 of the AO order, cost break up of oxygen plant and building is there which shows that plant and machinery costed Rs. 437.47 Cr, civil & structures costed Rs. 252.93 Cr, duties and taxes of Rs. 10.11 Cr and Pre-operative cost of Rs. 273.17 Cr. The total cost comes to Rs. 941 Cr. C.2. "Agreement to transfer Equipments" nowhere talks of transfer of civil and structures (building). It only talks of equipmentsas per schedule I of the agreement which constitute plant and machinery. Civil structure is not included in the list as per schedule-I of the agreement. Thus, the AO rightly concluded that the sale consideration has been inflated because where civil structure has not been transferred, the cost for the same can not form part of list of specific equipemnts claimed to have been sold. Accordingly, the equipments have been transacted at Rs. 1000 crore as against its actual worth/cost of Rs. 437.47 Cr. C.3. It may be added that this fact of inflation of cost of equipments is a part of SFIO complaint and investigation report. The fact that the transaction was not at arm's length has been duly captured in the Delhi High Court decisio....
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....ve possession, control and commercial usage of the oxygen plants and is responsible for the routine and operation costs of the Oxygen Plants and the Lenders in the appraisal memo have clearly noted that the routine maintenance and operation and maintenance charges are on the respondent." D.4. Para 73 of the aforesaid decision (as reproduced above) clearly mentions that Tata BSL incurred maintenance expenditure on its own and the lessor did not provide maintenance services. The plea taken by the respondent that the petitioner (the assessee) did not comply to the obligation cast on it as per clause 6.1 (vii) of the lease agreement and clause 6.1.7 of common loan agreement. This particular clause deals with fact of responsibility to maintain the equipments in good working condition and shall undertake routine maintenance of equipments. The relevant extracts of the lease agreement [clause 6.1 (vii)] are reproduced as under :- D.5. Further at para 74 of the Hon'ble Delhi High Court decision(as reproduced above), the respondent pointed out that the petitioner(the assessee) has failed to even appoint a single technical person to oversee the operation of the Oxygen Plants since incepti....
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....TATA BSL before Hon'ble Delhi High Court at para 66 of the decision which reads as under :- "On merits, it is stated that: 7.1. The entire transaction was clearly not an arm's length but rather a friendly transaction which has led to payments of exaggerated amounts as lease rentals that were artificially fixed to meet the requirement of INR 1000 Crore (sale price), making it further into nature of a financial lease;" E.7. So, it was in the nature of finance lease as against operational lease. F. Whether the assessee (lessor) and lessee are group concerns? F.1. In this regard, it may be relevant to take note of para 47 of Hon'ble Delhi High Court decision in respect of dispute between the assessee and Tata BSL group wherein it is mentioned that erstwhile promoters of BSL group did not want to sell the oxygen plants to any outside entity as it would adversely affect the running of the steel plant, they identified one of their controlled entities i.e. Brace Iron and Steel Private Limited. The relevant extracts of para 47 are reproduced as under :- "47. On the merits, it is submitted by the Counsels that this entire transaction was clearly not at an arm's length but rather ....
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....the appellant has rebutted on factual as well as legal points. 2. As regards factual points, the appellant has summarily rejected the written submission dated 17/05/2021 without any basis. It is prayed that the Hon'ble Bench may duly consider written submission dated 17/05/2021 in addition to the AO order and CIT(A) order. 3. As regards legal points, it is to highlight that certain decisions relied upon by the appellant are not relevant to the facts of the case. The same are discussed as under :- 3.1. Decision in the case of Consortium Finance Ltd. vs. Joint Commissioner of Income Tax (30.04.2002 - ITAT Delhi) : MANU/ID/0285/ 2002. Submission :- 3.1.1 It is relevant to take note of the facts of the cited case. In this regard, it is noted that the assessee in the cited case took a plea that there was no basis or justification to treat the transaction to be collusive in nature since M/s. KPCL was a Government enterprise and there could be no collusion between a Government enterprise and a private company" (refer para 11(ii) of the order). 3.1.2. Keeping this fact in mind, the tribunal held as under:- "24. Further, a transaction in which one of the parties is the Central....
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.... a finance agreement or an operating lease and the question cannot be decided by merely looking at the title of the agreement or the nomenclature given to the said agreement. The terms and conditions mentioned in the agreement may be relevant but the surrounding circumstances & type and nature of the asset have also to be considered. 4. Decision in the case of Poddar Cement:- 4.1 It is argued by the appellant that the CIT-DR has erroneously quoted the passages extracted by the Hon'ble S.C. in Poddar Cement (supra) of a decision belonging to the Hon'ble Patna H.C. (See Para 30 of the decision) to then erroneously call the same as the finding of the Hon'ble S.C. 4.2. In this regard, the Hon'ble bench may like to take note that Hon'ble SC categorically observed (para 30 of the order) that "We may usefully extract certain passages from the judgment of the Patna High Court." This clearly shows that the Hon'ble SC considered it relevant for taking decision in the cited case. 4.3. Further, it is also noteworthy that the concept of "ownership" has been taken from passages from G.W. Paton on Jurisprudence, Dias on Jurisprudence, Stroud's Judicial Dictionary and Pollock on Juri....
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....ions relied on by the Ld. D.R. by filing the following written synopsis : AVERMENTS OF THE CIT(DR) IN THE COUNTER COMMENTS DATED 30.05.2021 OUR RESPONSE "Decision in the case of Consortium Finance Ltd. vs. Joint Commissioner of Income Tax (30.04.2002 - ITAT Delhi): MANU/ID/0285/2002 Submission :- 3.1.1. It is relevant to take note of the facts of the cited case. In this regard, it is noted that the assessee in the cited case took a plea that there was no basis or justification to treat the transaction to be collusive in nature since M/s. KPCL was a Government enterprise and there could be no collusion between a Government enterprise and a private company" (refer para 11(ii) of the order). 1. The Special Bench in the case of ICICI Ltd. vs. Dy.CIT, Special Range 36 (14.08.2003 - ITAT Mum):MANU/IU/5032/2003 (That the CIT(DR) is seeking to rely upon) has itself held that there could be no pigeonholing of the facts in order to mean that if a particular factual pattern is followed then the conclusion will be the same. The Hon'ble S.B. thereby held that no common and/or exhaustive rules of universal application can be arrived at towards finding out the genuineness of an SCBL transa....
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....n fulfilled since the assets had not come into physical possession of the assessee cause the same were affixed to the ground and thus incapable of being transferred (See Para 6, Para 9 and Para 20). c. Intention of M/s KPCL (the Govt. party/lessee) was to get finance from the assessee since it was in the red and badly needed resources to run its business. The SCBL was entered into to get the undue benefit of depreciation (See Para 6 and Para 14(i)). d. The assets were not identifiable (See Para 14.1.). 4. The decision of Consortium Finance (supra) in the context that the Assessee is seeking to rely upon is w.r.t. the following ratio decendi propounded by the Hon'ble ITAT: a. The settled position of law that has been reiterated by the Hon'ble ITAT by relying of the decision of the Hon'ble S.C. in Arvid Norattam (1988) 173 ITR 479 (SC) which is that commercial expediency has to be adjudged from the POV of the businessperson, where the Department cannot hold a grudge against the assessee in order to question his/her decision making process, solely on suspicion, surmises and conjectures. See Para 23. b. The holding of the Hon'ble ITAT that in the case of an SCBL transaction, physi....
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.... the decision of Industrial Development Corporation of Orissa Ltd., 268 ITR 130 (Ori) to hold that the Revenue could only discard a transaction if material or evidence exists before it to show that the intention of the parties was different from what has been incorporated in the documents forming part of the SCBL transaction. The Hon'ble Delhi H.C. agreed with the finding of the Hon'ble Ori H.C. by holding that the real intention of the parties entering into such an SCBL transaction has to be "gathered from the words of the agreement in a tangible and objective manner and not upon a hypothetical assessment of the supposed motive of the assessee to avoid tax."See Para 18. 4. The CIT(DR) cannot escape the express findings of the jurisdictional H.C. of Delhi, that has clearly held that the onus lay on the Department to discard an SCBL arrangement by bringing evidence on record. However, instead of bringing any such material/evidence on record, the CIT(DR) has merely reverted to his Written Submissions dt.17.05.2021 where at Para A.7 and A.8 he has alleged that despite the specific clauses of the Lease Agreement, possession of the equipment was not transferred to the Assessee herein, ....
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....t but the surrounding circumstances & type and nature of the asset have also to be considered." 1. In this case, information was received from Additional Director of Income Tax (Investigation) that a biogas plant purchased from and leased back to Western Pacques (India) Limited, Pune was not to be found at the site, where it was stated to be installed. Accordingly the Notice u/s 148 was issued. (See Para 4). 2. Subsequently, on 30thMarch, 1998, the assessee made a declaration under the Voluntary Disclosure of Income Scheme, 1997(VDIS, 1997). In this declaration, the assessee withdrew its claim and offered for taxation depreciation claimed on the assets purchased from and leased back to Western Pacques (India) Limited. This transaction was treated as a Finance Lease by the assessee. (See Para 5). 3. The issue at hand pertains to a similar arrangement between the assessee and HCL Hewlett Packard Limited, where considering the background facts of the case, the Hon'ble H.C. held that the question was whether the transaction was in the nature of a finance or an operating lease. See Para 11. . 4. In that regard the Hon'ble H.C. held that "the aforesaid question cannot be decided by m....
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....features of a finance lease like, the lease is cancellable; the lessor provides services, maintenance and/or insurance; total of all the lease payments by the lessee does not provide for the recovery of the investment with interest, etc. These factors the CIT(DR) has nowhere refuted. "Decision in the case of Podar Cement, 1997 92 Taxman 541 (SC) - 4.2 In this regard, the Hon'ble bench may like to take note that Hon'ble SC categorically observed (para 30 of the order) that "We may usefully extract certain passages from the judgment of the Patna High Court." This clearly shows that the Hon'ble SC considered it relevant for taking decision in the cited case. 1. Firstly, the decision of Podar Cement (supra) is a landmark case that has been cited by numerous courts over the years. In the decision of Mysore Minerals Limited, M.G. Road, Bangalore vs. CIT, MANU/SC/0540/1999, the Hon'ble S.C. has made the following observations w.r.t. Podar Cement (supra): "13. Podar Cements case (Supra) is under the Income-tax Act and has to be taken as trend-setter on the concept of ownership. Assistance from the law laid down therein can be taken for finding out meaning of the term 'owned' a....
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.... of Section 22 of the Act the property should be such "of which the assessee is the owner". This Court upon a juristic analysis of the underlying scheme of the Act and resorting to contextual and purposive interpretation, also having reviewed several conflicting decisions of different High Courts, held that the liability to be assessed was fixed on a person who receives or is entitled to receive the income from the property in his own right. Vide para 55, this Court has held: "we are conscious of the settled position that under the common law owner means a person who has got valid title legally conveyed to him after complying with the requirements of law such as Transfer of Property Act, Registration Act etc. But in the context of Section 22 of the Income-tax Act having regard to the ground realities and further having regard to the object of the Income -tax Act namely, "to tax the Income", we are of the view, owner is a person who is entitled to receive income from the property in his own right." 3. The finding of the Hon'ble S.C. in Mysore Minerals Limited (supra) starts from Para 14, where after considering various decisions, and dictionary meanings of the term 'owner....
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....ar Cements (Supra) reviewed several conflicting decisions of different High Courts, the S.C. at Para 22 held that the controversy revolves around the meaning to be given to the words 'of which the assessee is the owner' occurring in section 22 of the Act. b. At Para 23-24 the Hon'ble S.C. has discussed the case of R.B. Jodha Mal Kuthialav. CIT [1971] 82 ITR 570 (SC),to hold at Para 25 that: "25. In our opinion, the above observations of this Court clearly fixes the liability on a person who receives - or is entitled to receive the income from the property in his own right. In spite of this, the Assessing Officers of various circles instead of uniformally following the ratio laid down in this case have taken different diametrically opposite views depending upon the pronouncements of the concerned High Courts in the circles on the scope of section 22. The High Courts of Allahabad, Punjab and Haryana, Rajasthan, Calcutta and Patna have taken the view by correctly understanding the ratio laid down in R.B. Jodha Mal Kuthiala's case (supra) and the High Courts of Bombay, Delhi and Andhra Pradesh have taken a different view wrongly distinguishing on facts in R.B. Jodha Mal....
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....passed on to the assessee to have and to hold forever and absolutely with the power to use the same in whatsoever manner it thinks best and the assessee shall derive all income and benefits together with full power of disposal of the properties as well as the income thereof. Can it then be said that the recipient of the income being the assessee only having an absolute and exclusive control over the property without any let or hindrance on the part of the so-called vendor which, indeed, under law, it was not entitled to do, as we shall presently show, shall be immune from the taxing provision in section 22 of the Act? The answer in our view is clearly in the negative. The reason is simple. The consideration money has been paid in full. The assessee has been put in exclusive and absolute possession of the property. It has been empowered to deal with the income as it likes.................................. It may bear repetition to say that it was on account of these facts that juristic principles have now emerged saying that one of the most important of the powers of ownership is the right to exclude others from possession and the property right is essentially a guarantee of the exc....
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....m the property in his own right." 11.1. He, accordingly, submitted that the Order of the Ld. CIT(A) be set aside and the grounds raised by the assessee be allowed. 12. We have considered rival arguments made by both the sides, perused the Orders of the A.O. and the Ld. CIT(A) and the paper book filed on behalf of the assessee. We have also considered the various decisions relied on by both the sides. The first issue to be decided as per the Grounds of Appeal Nos.1 to 6 relates to the disallowance of claim of depreciation of Rs. 71,43,75,000/-. We find the A.O. disallowed the claim of depreciation on the ground that purchase of Plant and Machinery i.e., Oxygen Plants from M/s. BSL at an amount of Rs. 952,50,00,000/- by obtaining loan from Banks by mortgaging such equipments/assets and thereafter on the same day leasing back of the asset to M/s. BSL for lease rent is nothing, but, a "sham transaction" basically on the following grounds : 1) Assessee herein has no financial worth, no capital, no assets and had no business activities prior to this SCBL transaction to partake a term loan of'Rs. 850 crores. 2) The Assessee despite having no real worth - purchased second hand &#....
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...." wherein the assessee is arranging transaction in such a manner to claim a high rate of depreciation and to avoid taxes is illegal, arbitrary and erroneous finding in view of the decision of the Hon'ble Delhi High Court in the case of the Assessee i.e., M/s. Brace Iron & Steel Pvt. Ltd., New Delhi vs., Tata Steel BSL Ltd., vide OMP(1)(COMM) 285/2020 vide Order Dated 14.12.2020 wherein the Hon'ble Delhi High Court after considering various clauses of the very same agreement which have been relied on by the A.O. and Ld. CIT(A) has upheld the validity and veracity of the Lease Agreement Dated 26.02.2015 and the terms stipulated therein and held the same to be binding on both the parties. Therefore, it is his submission that the very reasoning adopted by the A.O. to show the existence of alleged modus operandi/collusion between [Then] M/s. BSL and the Assessee does not survive since the entire factual background of the matter that why the Sale-cum-Lease Back transaction was entered into has been discussed by the Hon'ble Delhi High Court along with the terms of the Lease Agreement Dated 26.02.2015 and it has upheld the transaction as valid in spite of the fact that the respondent there....
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....n Plants. 12.4. We find M/s. Bhushan Steel Limited underwent Corporate Insolvency Resolution Process under the Insolvency and Bankruptcy Code, 2016 and was acquired by Bamnipal Steel Ltd., a wholly owned subsidiary of Tata Steel Ltd., and was subsequently renamed as Tata Steel BSL Ltd., w.e.f. November 27, 2018. We find dispute arose between the Assessee i.e., M/s. Brace Iron & Steel Pvt. Ltd., and M/s. Tata Steel BSL Limited regarding payment of lease rentals. The matter went up to the Hon'ble Delhi High Court and the Hon'ble Delhi High Court decided the issue in favour of the Petitioner i.e., the Assessee and against the Respondent i.e., M/s. Tata Steel BSL Limited by holding the Lease Agreement as valid which is the very same Lease Agreement treated by the Revenue as sham and colourable. 12.4.1. The Hon'ble Delhi High Court has at Para No.8 of the Order reproduced the following Clause of the said Lease Agreement which reads as under : "8. To bring out the broad scheme of the Lease Agreement, the petitioner has relied upon the following Clauses of the Lease Agreement: "2.1. Subject to the provisions of the Lease Agreement and in consideration of the Rent to be paid by the L....
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.... in Delhi and the arbitration shall be conducted under, and in accordance with, the Arbitration and Conciliation Act, 1996. The language of arbitration shall be English." 12.5. We find after considering various arguments made by both the sides the Hon'ble Delhi High Court upheld the validity and veracity of the Lease Agreement Dated 26.02.2015 and the terms stipulated therein and held that the same is binding on both the parties. The Hon'ble Delhi High Court has also held that transaction is valid in spite of the fact that the respondent therein i.e., Tata Steel BSL Limited had also raised the exact plea as raised by the A.O. i.e., the transaction was not at arms length and has thus lead to exaggerated amounts being paid as lease rentals that were artificially fixed to meet the requirement of INR 1000 Crores. Although some of the paragraphs have already been reproduced in the preceding paragraphs, however, at the cost of repetition, the relevant observation of the Hon'ble Delhi High Court from Paras 65 to 89 are reproduced which read as under : 65. Having heard learned counsels appearing for the parties, I shall encapsulate their submissions in brief. The submissions of Mr. Siba....
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....equires to be put to trial and even otherwise the petitioner's liability as per the standalone financial statement is neither unequivocal nor covered within the ambit of arbitral proceedings. 66. On the other hand, the submissions of Dr. Singhvi and Mr. Nigam (Counsels) are as follows: 1. Petitioner is trying to circumvent judicial dicta and established principles surrounding Section 9 as the said provision cannot be used to secure a decree to the tune of a final relief, nor can it be misused to nullify the arbitration proceedings by seeking a final relief. Reliance placed on Avantha Holdings Limited (supra). 2. The payment for Rs. 18 crores per month is disputed fact to be decided by the Arbitrator. 3. Granting of the reliefs under this petition would amount to negating the entire insolvency proceedings through which the respondent revived a sick unit; 4. Respondent facility has been deemed to be a Public Utility Service vide a Government of Odisha Notification dated July 16, 2020 in the times of COVID-19 and therefore, no injunction or restraint from using the Oxygen Plants can be granted considering the fact that the Steel Facility cannot be run without its Oxygen ....
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....on appointed to oversee the functioning of the Oxygen plants until September, 2020; 7.10. Various communications between the parties whereby petitioner is informed about required repairs, requirement of spares, maintenance cost since 2019; 7.11. As per the ledger/statement of accounts of the Company, as well as stand-alone financial statement of petitioner for FY-2017-18 an outstanding amount of Rs. 10,19,91,600/- is payable by the petitioner to the respondent. Demand for its payment was made by respond on July 03, 2020 and the liability was acknowledged by one of the official of petitioner's Lenders. Reliance place on ESPN Software India Pvt. Ltd. (supra) and Shahi Exports Pvt. Ltd. (supra) to contend that admission in balance sheet is per se an admission of liability. 8. The plea that the respondent is attempting to force the petitioner into being declared an NPA by the lender bank is ill-founded as the petitioner had undertaken the moratorium on debt repayment and has also received close to 70% of the renal amount from the respondent through part payment made every month. Moreover, Supreme Court has currently stayed declaring loan facilities NPA. 67. Having noted t....
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....to the credit of the Lessor's Designated Bank Account. XXX XXX XXX SCHEDULE 2 RENT PAYMENT DETAILS The monthly Rent to be paid by the Lessee shall be as follows: (a) Rs. 150,000,000 (Rupees Fifteen Crores only) (net of all taxes and tax deduction at source) for the period commencing on the Rent Commencement Date and ending on 31 March 2020; and (b) Rs. 180,000,000 (Rupees Eighteen Crores only) (net of all taxes and tax deduction at source) for the remaining duration of the Lease Term, provided that the Parties may revise the monthly Rent as agreed between them from time to time. Notwithstanding the foregoing: (i) for the first month of the Lease Term, in addition to the Rent payable for that month, the Lessee shall also pay an amount of Rs. 15,00,00,000/= (Rupees Fifteen Crore only) as one month's advance Rent. This shall be adjusted by the Lessor only against the Rent payable for the last month of the Lease Term or against any other amounts as may be agreed in writing by the Lessee, and (ii) if the Lease Commencement Date is a day other than the first date of the month, then the Rent payable for that month shall be pro-rata to the number of remaining days of tha....
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....nt are utilised for servicing the loans taken by petitioner from the Lenders and there is obligation to pay the GST/TDS to the concerned authorities as well. If that be so, there is a prima facie liability on the respondent to pay to the petitioner/Lenders for the usage of the Oxygen Plants in the manner stipulated in the Lease Agreement i.e., Clause 5.1 read with Schedule 2. 73. At this stage, I may also refer to the plea of the Counsels that despite specific obligation, the petitioner has failed to undertake routine maintenance measures of the Oxygen Plants and keep the same in good working condition in accordance with best industry practice. In support of their submission, they had relied upon the Clause 6.1.(vii) of the Lease Agreement and Clause 6.1.7 of the Common Loan Agreement. 74. According to them, the petitioner has failed to even appoint a single technical person to oversee the operation of the Oxygen Plants since inspection of the Lease Agreement in 2015. It is only after repeated requests made by the respondent that at a very belated stage in July 2020, the details of technical appointee were provided. That apart, it is also stated that the petitioner has failed t....
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....able to the respondent. 79. So, it follows that there is a dispute between the parties as to whether the expenses of Rs. 41,79,48,852/- said to be incurred on the plants by the respondent are payable and need to be adjusted against the lease rent payable by the respondent. The same has to be decided; not by this Court but by the Ld. Arbitrator, as decision on such dispute shall amount to a final determination. The Counsels have relied upon the judgments of this Court to contend that no prima facie case has been made out by the petitioner for grant of the reliefs as prayed for. I have perused the said judgments carefully viz., Goodwill Non-Woven Pvt. Ltd. (supra), Avantha Holdings Ltd. (supra) and Nirbhay Pratap Singh (supra). Suffice to state that this Court in the facts and circumstance of those cases refused to exercise its power under Section 9 of the Act. 80. On the other hand, Mr. Sibal is justified in relying upon the judgment of this Court in Supertrack Hotels Pvt. Ltd. (supra), wherein the Division Bench upheld the judgment of the Single Bench, directing the appellant therein to pay a sum of Rs. 1,30,44,960/- which was the outstanding amount of agreed rent as per the le....
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....ted. The denial by the appellant of the entire rent as agreed, on the ground of having determined the tenancy of one of the two office units taken on rent, is clearly vexatious, as in law the appellant as a tenant could not determine tenancy of part of the premises taken on rent. It is not the case of the appellant that it was entitled to do so as part of terms of its tenancy. In that view of the matter, the appellant could under Order XV-A of the CPC have been directed to pay the rent of the entire premises notwithstanding having given notice of termination of tenancy of part thereof We are therefore satisfied that the impugned order satisfies the test of being in exercise of the same power for making orders as the Court has for the purpose of a Civil Suit and is thus within the ambit of Section 9 of the Arbitration Act." 81. The aforesaid judgment was primarily pivoted on the settled position of Law as stated by the Supreme Court in its judgment of Alopi Prashad and Sons Ltd. (supra), wherein the Apex Court inter-alia held that the Indian Contract Act, does not enable a party to a contract to ignore the express covenants thereof and to claim payment of consideration of performa....
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....irect payment during the pendency of the suit at a rate other than admitted rate also, empowers the Civil Court to direct payment which is apparently wrongfully disputed. The denial by the appellant of the entire rent as agreed, on the ground of having determined the tenancy of one of the two office units taken on rent, is clearly vexatious, as in law the appellant as a tenant could not determine tenancy of part of the premises taken on rent. It is not the case of the appellant that it was entitled to do so as part of terms of its tenancy. In that view of the matter, the appellant could under Order XV-A of the CPC have been directed to pay the rent of the entire premises notwithstanding having given notice of termination of tenancy of part thereof. We are therefore satisfied that the impugned order satisfies the test of being in exercise of the same power for making orders as the Court has for the purpose of a Civil Suit and is thus within the ambit of Section 9 of the Arbitration Act. 83. That apart, a submission was made by the Counsels that as per the past ledger / statement of accounts maintained with the Company, an amount of Rs. 10,19,91,600 is outstanding/payable by the pe....
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....uilders, in its written statement, reply to the application under Order XII, and in its reply to the present review petition, has contested the existence of the ICDs, and MGF's case is based on a debt arising from the ICDs, this Court does not find merit in the argument that debt is established, while only the nature of the security is dispute. Neither is Mr. Nanda's alleged admission categorical, in that he specifically avers wrongdoing on behalf of Mr. Mehra, a fact which, whether ultimately true or not, deserves to be tested during the ordinary course of trial. The fact that Mr. Nanda and his lawyers have allegations of forgery pending against them in unrelated trials, or that FIRs have been registered against them, does not allow this Court to reach the conclusion that its findings based on well-established jurisprudence surrounding decree on admissions are to be reviewed or set aside. Crucially, this Court, neither in its judgment of 10.04.2012 nor in the present review expresses any opinion on the merits of the claims advanced by either party, but only reiterates that these claims must be tested at trial...." (Emphasis supplied.) 86. In view of the above, it is ....
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....or to its decision to purchase the plant and machinery of M/s. BSL at the end of 2014-2015 is also has no basis especially when the assessee belongs to the famous SREI International Group of Companies engaged in business of leasing, hire purchase etc., having huge net worth. Further, being the subsidiary of SREI Alternative Investment Trust, the assessee-company has backing of the SREI International Group of Companies and, therefore, the observations of the Revenue Authorities on this issue does not hold any merit. 12.5. We further find from Clause-2.1 of the Lease Agreement that this Lease Agreement entered into is in the nature of an operating lease where the idea is not to finance the lessee, but, to enable the lessee to operate the asset and earn profits and where the assessee-lesser would be entitled to depreciation on the asset leased-out, since his business would be that of leasing and not mere money lending. We further find from Clauses 9.1, 9.2 and 9.3 of the Lease Agreement wherefrom it is clear that the assessee is the qualified and unequivocal owner of the assets. We further find from the annual report of M/s. BSL for the year ending 31.03.2015 that at Note-51 [Page-14....
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....ing of vehicles [while the assets were directly used by the lessee company] would be business income derived in the course of business of the lesser. 12.5.5. We find the Hon'ble Delhi High Court in the case of CIT vs., Reetu Finlease Pvt.Ltd., (supra) has held that once machines are shown to have been handed-over to lessee, same must be deemed to have been utilised for business of assessee especially when assessee is engaged only in leasing business, and the assessee would be entitled to claim depreciation thereon. 12.5.6. We find the Hon'ble Andhra Pradesh High Court in the case of CIT vs., Orient Longman (Pvt.) Ltd., (supra) has held that for the purpose of claiming benefit under section 32 of the I.T. Act, the requirement of ownership by the assessee will be deemed to be fulfilled if the assessee has the domain and control over the property in his own right and not in the right of others. 12.5.7. We find the Hon'ble Supreme Court in the case of Liquidators of Pursa Ltd., vs., CIT (supra) has held that for the purpose of section 32, the expression "used for the purpose of business" means uses for the purpose of business during the accounting year. The machine and plant must be....
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....rrangement can be entered into without the physical movement of the assets depending on the commercial viability of the transaction. Since the A.O. in the instant case has not disputed the genuineness of the Asset Purchase Agreement Dated 23.02.2015 and the simultaneous Lease Agreement Dated 26.02.2015 entered into between both the parties for the SCLB transaction, therefore, we find merit in the arguments of the Learned Counsel for the Assessee that the transaction cannot be doubted by the A.O. in absence of any valid and sufficient material available to support such a conclusion. 12.5.11. We further find some fundamental errors in the findings of the lower authorities. So far as the allegation of the Revenue that the total value of the oxygen pants stands at Rs. 437 crores as per the C.A. Certificate is concerned the same is factually incorrect. We find the said C.A. Certificate Dated 12.12.2014 reveals the value of the oxygen plants to be at Rs. 981.68 crores as has been extracted by the A.O. at Pages-5 and 6 of the assessment order. So far as the allegation of the A.O. that the assessee herein has purchased only oxygen plant devoid of building, civil work and other accompanime....
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....d opinion that the assessee is entitled to claim depreciation on the assets leased. Therefore, the Order of the Ld. CIT(A) on this issue is set aside and the first issue raised in the grounds of appeal challenging the disallowance of depreciation is allowed. Ground of Appeal Nos. 1 to 6 of the assessee are accordingly allowed. 13. Grounds of Appeal No.7 relates to the disallowance of Rs. 1,10,82,175/- being up-front fee debited in the Profit & Loss Account. 14. After hearing both the sides, we find the A.O. disallowed the payment of up-front fee of Rs. 1,10,82,175/- on the ground that the assessee was required to pay the same as a lump sum one time non-refundable fee for processing of the loan prior to the execution of the Loan Agreement, therefore, it is a capital expenditure. We find the Ld. CIT(A) upheld the action of the A.O. on the ground that the assessee has neither carried-out any business operation nor utilised the machinery for any business purposes. According to him the claim itself is under question rather than the nature of the claim. He, therefore, held that the payment of up-front fee does not qualify as business expenditure. In the preceding paragraphs while adj....