TaxTMI 
TaxTMI 
2026 (4) TMI 1322
X X X X Extracts X X X X
X X X X Extracts X X X X
.... in connection with the same issue, but for the Assessment Year 1995-1996 to 1997-1998. The Assessee, who is in the business of construction activity, had filed its return of income on 26.12.1997 disclosing income for a sum of Rs. 61,070/- for the Assessment Year 1996-1997. The return was processed under Section 143(1)(a) of the Income Tax Act, 1961(in short "IT Act") making an addition of Rs. 7,43,936/- on account of excess depreciation. After notice under Section 143(2) of the IT Act, the Assessment Order was passed holding:- (i)In respect of the land development account, the assessee claims expenses of Rs. 44,63,562/-. The perusal of its accounts would show that these expenses have not been debited by assessee to the Profit and ....
X X X X Extracts X X X X
X X X X Extracts X X X X
....ilms, the appeals were partly allowed. 4. In sofar as the next assessment year 1997-1998, the appeal filed by the Assessee was allowed in respect of depreciation claimed on cinematographic films purchased. The Revenue had preferred appeal against this order before the ITAT raising various grounds including deletion of the disallowance of construction expenses and deleting the disallowance of depreciation on cinematographic films. 5. With regard to the issue relating to construction expenses and adoption of hybrid system of accounting (i.e.) receipt based on sale and on accrual basis for expenses, the Tribunal confirmed the view of the Appellate Authority by holding that such hybrid method of accounting is permissible in view of the ju....
X X X X Extracts X X X X
X X X X Extracts X X X X
....t and referred to pages 7 & 12 of the paper book which shows that the construction expenses were booked in the profit and loss accounts for so many years and this was accepted by the Department in the previous years. The Assessing Officer though rejected the estimation made but did not specifically point out the defect in the estimation of the Assessee." 7. As far as the depreciation on purchase of cinematographic films, the ITAT has approved as below: "34. After considering the rival submissions and the material on record, we note that the Assessing Officer has disallowed the depreciation claim of the Assessee on the ground that the transaction itself is not genuine transaction but in the nature of sale and lease back transacti....
X X X X Extracts X X X X
X X X X Extracts X X X X
....se permissible in law. Therefore, on the facts and in the circumstances of the case when the transaction itself is permissible under law, then merely because the same is suspected by the Department, as a devise to evade tax, the said transaction cannot be held as lawful or colourable. In view of the above discussion, we find no error or illegality in the order of the CIT(appeals) on this issue. The issue is decided against the Revenue and in favour of the Assessee." 8. Revenue has filed these appeals on the ground that the Tribunal failed to take note of the fact that the Assessee has prepared its accounts in such a manner that a rosy picture has been given to the public and the share holders by showing a net profit of Rs. 2.04 crores in....
X X X X Extracts X X X X
X X X X Extracts X X X X
....uent to the date of leasing them out, and no evidence was produced regarding the original sale of the same? 3.Whether on the facts and in the circumstances of the case, the Tribunal was right in holding that the sale and lease back transaction of cinematograph film is only with a motive to save tax and so cannot be treated as a colourable device? 10. Heard the learned Senior Standing Counsel appearing for the Revenue/appellant and the learned counsel appearing for the respondent/the assessee. 11. In so far as the question of adopting hybrid system of account in respect of receipt on sale of flats and expenditure of the construction, the said issue has been considered by the Hon'ble Supreme Court in Calcutta Company Ltd., case....
X X X X Extracts X X X X
X X X X Extracts X X X X
....fits and gains of the business of the appellant under Section 10(1) of the Act, there being no prohibition against it, express or implied in the Act. 12. Therefore, in view of the affirmative judgment of the Hon'ble Supreme Court, which has been duly followed by the Appellate Authority and the Tribunal, we find no reason to interfere with the concurrent finding of the Appellate Authority and the Tribunal, based on the above said Judgment of the Hon'ble Supreme Court. 13. In case of depreciation claimed on purchase of cinematograph film, no doubt, the Assessee, who has purchased the cinematograph film from one M/s Sri Veeru Creations production, had immediately leased it back to the very same party. However, the fact remains the status....