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M/S. Upasana Finance Limited Vs. the Joint Commissioner of Income Tax - Court Judgment

LegalCrystal Citation
CourtChennai High Court
Decided On
Case NumberTax Case (Appeal) Nos. 2349 & 2350 of 2006
Judge
Reported in2012(7)MLJ782
AppellantM/S. Upasana Finance Limited
RespondentThe Joint Commissioner of Income Tax
Advocates:For the Petitioner: P.J. Rishikesh, Advocate. For the Respondents: Arun Kurian Joseph, Standing Counsel.
Excerpt:
income tax act - section 131 -.....business. in respect of its claim for depreciation, on the assets leased out to m/s. khoday india limited, the assessee submitted that the boilers were purchased from khoday breweries limited, an associate concern of m/s.khoday india limited on 27.3.1995, and leased out to the khoday india limited. thus, the assessee claimed depreciation in respect of the said boilers. in order to verify the claim of the assessee, summons under section 131 of the income tax act was issued to the khoday india limited and khoday breweries limited to furnish the details of lease transactions of boiler no. nb 1248. the officer also called for the details of the purchase of the boiler by khoday breweries limited and depreciation claimed by it along with the details of written down value and evidence.....
Judgment:

(Prayer: Appeal against the order of the Income Tax Appellate Tribunal Madras 'B' Bench, dated 20.1.2006 in I.T.A.Nos. 1325/MDS/99 and 726/MDS/99 for assessment year 1996-97 and 1995-96 respectively.)

ChitraVenkataraman, J.

1. The assessee is on appeals as against the orders of the Tribunal by raising the following question of law:-

"1. Whether in the facts and circumstances of the case, the Tribunal was correct in disallowing depreciation on the two boilers leased out by the appellant?

2. Whether the Income Tax Appellate Tribunal is right in rejecting the claims of depreciation on boilers which were leased out in accordance with law?"

2. T.C.(A). No. 2349 of 2006 relates to assessment year 1996-97 and T.C.(A). No. 2350 of 2006 relates to assessment year 1995-96. The assessee herein is engaged in the business of financing, hire purchase and bill discounting business. In respect of its claim for depreciation, on the assets leased out to M/s. Khoday India Limited, the assessee submitted that the boilers were purchased from Khoday Breweries Limited, an associate concern of M/s.Khoday India Limited on 27.3.1995, and leased out to the Khoday India Limited. Thus, the assessee claimed depreciation in respect of the said boilers. In order to verify the claim of the assessee, summons under Section 131 of the Income Tax Act was issued to the Khoday India Limited and Khoday Breweries Limited to furnish the details of lease transactions of boiler No. NB 1248. The Officer also called for the details of the purchase of the boiler by Khoday Breweries Limited and depreciation claimed by it along with the details of written down value and evidence regarding delivery of boiler to Khoday India Limited. Similar details were called for from Khoday India Limited. It is stated that the assessee company filed valuation report dated 28.3.1998 by M/s.R.K.Makhija & Co., Chartered Engineers of Bangalore, who gave value of two boilers viz., boiler No. 1248 purchased on 31.12.1989 and boiler No.1275 purchased on 15.3.1990 and the same was determined at Rs.52,50,000/-. The purchase value of new boiler of similar make at that time was mentioned at Rs.42 lakhs. The Assessing Officer pointed out that the assessee company had taken the invoice of Khoday Breweries Limited for boiler No.NB 1248 and even in the lease agreement, it was mentioned as only one boiler. Thus, the claim for depreciation of two boilers could not be granted. The Assessing Officer further pointed out that the boiler was attached to the land and sale could not be completed by mere issue of sale bills. Enquiry conducted through the Assistant Director (Intelligence), Bangalore, and the physical verification of the boiler revealed that the boiler was still lying and functioning in the factory of Khoday Breweries Limited and it was not installed in Khoday India Limited. Letter from Khoday Breweries Limited dated 27.3.1998 and Khoday India Limited confirmed that Khoday Breweries Limited had purchased the boiler on 16.11.89 for Rs.22,24,000/- and that the constructive delivery was given to Khoday India Limited and the boiler was used by Khoday Breweries Limited. The cheque payment by assessee was issued in the name of Khoday India Limited and not in the name of Khoday Breweries Limited. Thus, the Officer arrived at the conclusion that the transactions was only loan transactions which was subsequently given the colour as lease transactions. The sale price shown in invoices were also not commensurate with the written down value or market value of the boiler as on date of sale bill. In the circumstances, doubting the genuineness of the transactions, the claim of depreciation was disallowed. Aggrieved by the assessment, the assessee went on appeal before the Commissioner of Income Tax (Appeals), who confirmed the findings of the Officer on the genuineness of the transactions. The Commissioner further pointed out that the invoices from Khoday Breweries Limited mentioned only one boiler and that 'put to use' certificate dated 31.3.95 also referred to one boiler. Rejecting the claim of the assessee that it was only a typographical error, the Commissioner of Income Tax (Appeals) found that there was no reference at all regarding the second boiler. Thus, the Commissioner of Income Tax (Appeals) came to the conclusion that the transactions were only paper transactions and the payment of the amount by the assessee was in the nature of finance transactions.

3. As regards the contention of the assessee that a suit was filed before this Court on the default committed by Khoday India Limited in paying the lease rentals, the Commissioner of Income Tax (Appeals) pointed out that the suit filed by the appellant on 17.10.97 was as regards the paying of lease rentals in respect of Oak Wooden Casks, as per agreement dated 24.11.1993 for Rs.25,00,000/- and two boilers leased as per agreement dated 31.3.95. There was no finding therein that the two boilers were leased to Khoday India Limited by the appellant. In the circumstances, the Commissioner of Income Tax (Appeals) confirmed the assessment. Aggrieved by this, the assessee went on further appeal before the Tribunal, which, once again in paragraph 15 of the order confirmed the findings of the lower authorities. The Tribunal held that the entire transactions is sham one and going by the elaborate discussion by the Commissioner of Income Tax (Appeals) and the Officer, the Tribunal upheld the order of the lower authorities. Aggrieved by this, the assessee is before this Court.

4. A perusal of the grounds of appeal raised before this Court reveals that nowhere the assessee had questioned the findings of fact as regards the genuineness of the lease transactions. A reading of the various grounds raised as well as the substantial questions of law raised consequently thereon shows that it relate to claim of depreciation. Thus, when the finding of fact on the genuineness of the transaction had not been challenged in the manner known to law and the same having attained finality, we do not find that there exists any ground to interfere with the order of the authorities below rejecting the claim for depreciation.

5. Learned counsel for the assessee submitted that the assessee be permitted to raise additional grounds on the genuineness of the lease transaction. We do not find any useful purpose would be served by permitting the assessee to file additional grounds since the question as regards the genuineness of the transactions is pure and simple factual one, and considering the materials discussed by the authorities below, we do not find any justifiable ground to interfere with the orders of the authorities below.

6. In the result, the above Tax Case (Appeals) are dismissed. No costs.


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