THE HIGH COURT OF DELHI AT NEW DELHI
% Judgment delivered on: 15.10.2008
+ ITA 458/2007
COMMISSIONER OF INCOME TAX
DELHI- VI ... Appellant
- versus -
TULIP FINANCE LTD ... Respondent
Advocates who appeared in this case:
For the Appellant : Mr R. D. Jolly For the Respondent : Mr V. P. Gupta with Mr Basant Kumar CORAM:- HON'BLE MR JUSTICE BADAR DURREZ AHMED HON'BLE MR JUSTICE RAJIV SHAKDHER
1. Whether Reporters of local papers may be allowed to
see the judgment ?
2. To be referred to the Reporter or not ?
3. Whether the judgment should be reported in Digest ?
BADAR DURREZ AHMED, J (ORAL)
1. The present appeal under Section 260 A of the Income Tax
Act, 1961 (hereinafter referred to as the „said Act‟) has been preferred
by the revenue against the order dated 31.08.2006 passed by the
Income Tax Appellate Tribunal in ITA 5810/Del/1998 pertaining to the
assessment year 1994-1995.
2. The learned counsel for the revenue challenged the said
order of the Tribunal on four issues. The first issue was with relation
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to the deletion of the addition of Rs 33 lacs, which had been made by
the Assessing Officer on account of unexplained share capital under
Section 68 of the said Act. The second issue pertains to the deletion
made by the Tribunal of the addition of Rs 35,06,292/- by the
Assessing Officer on account of alleged unexplained security deposits
under Section 68 of the said Act. The third issue relates to the
disallowance of depreciation by the Assessing Officer amounting to
Rs 15 lacs in respect of cast iron moulds. The disallowance has been
set aside and the Tribunal has allowed the said depreciation. The
fourth issue also pertains to disallowance of depreciation of
Rs 6,11,145/-, which had been claimed by the assessee in respect of
rolls which were machinery items less than Rs 5,000/- each on which,
at the relevant point, 100% depreciation was allowable.
3. We have heard the learned counsel for the parties and have
also examined the orders passed by the Assessing Officer, the
Commissioner of Income Tax (Appeals) and the impugned order
passed by the Tribunal. Insofar the first issue is concerned, we find
that the Commissioner of Income Tax (Appeals) had considered the
issue in detail and had found that one of the parties, namely, Sh. S. P.
Garg and Mrs Raj Garg, who had introduced a sum of Rs 2 lacs by way
of share capital, had appeared before the Assessing Officer and had
furnished their returns of income. They had also filed copies of their
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bank statements evidencing issuance of cheques to the assessee
company towards share capital. Even the proof and details of dividend
paid and tax deducted at source had been filed by the assessee. With
regard to the other party, namely, Magadh Leasing and Finance Ltd,
and the associate parties, Mr D. N. Sahai, Ms Sushila Sahai and Daya
Engineering Works Ltd, who had collectively introduced share capital
to the extent of Rs 16 lacs, it had been noticed that the assessee had
furnished their permanent account numbers, places of their assessment
and confirmations from them, before the Assessing Officer. The said
information was also filed before the Commissioner of Income Tax
(Appeals). The amounts received from these shareholders were
through cheques, which had been duly credited in the bank account of
the assessee and these shareholders were also income tax assessees,
who had also received dividends in respect of the shares. It was also
noted that the assessee company had also filed tax deducted at source
certificates along with bank statements to show the evidence of
remittance of dividend. As regards the remaining shareholder, that is,
Dr. S. P. Srivastava, it was noted that he was an NRI and the share
capital of Rs 15 lacs received from him was through his NRE account
maintained in ANZ Grindlaya Bank. The remittances were through
three separate cheques, of which details were available. The assessee
had also filed bank certificates submitted to the Reserve Bank of India
ITA No. 458/2007 Page No.3 of 8
presumably for the purpose of remittance of dividend to the said
Dr Srivastava.
4. In the light of such evidence, the Commissioner of Income
Tax (Appeals) as also the Tribunal had come to a conclusion of fact
that the assessee had discharged the burden which lay upon it for
establishing the identity of the shareholders as well as the genuineness
of the transactions. As such, the Tribunal confirmed the findings of the
Commissioner of Income Tax (Appeals) and deleted the addition of
Rs 33 lacs which had been made by the Assessing Officer. It is
obvious that the findings returned by the Commissioner of Income Tax
(Appeals) as well as the Tribunal are pure findings of fact and no
question of law arises on this issue.
5. As regards the second issue of alleged unexplained security
deposits of Rs 35,06,292/-, we find that the Tribunal, after examining
the material on record as also the order passed by the Commissioner of
Income Tax (Appeals), which was in favour of the assessee, came to
the conclusion that the advances received from the customers by way of
security deposits were duly accounted for in the lease rentals and were
adjusted against the final sale price. Consequently, the security
deposits could not be regarded as unexplained cash credits. It may be
noted that the security deposits were received from customers who
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wished to purchase or take on hire, finance or lease any vehicle or plant
or machinery from the assessee. The security deposits were either
eventually refunded or adjusted against sale of the assets to the
customers upon termination of the lease. The agreements which were
entered into between the assessee and its customers, contained the
period of lease, security deposit received, rate of interest, descriptions
of the assets etc. The Commissioner of Income Tax (Appeals) noted
that the assessee company had more than 1500 such customers from
whom security deposits had been received and to whom assets had
been leased as on 31.03.1994. Taking of security deposits from the
customers was regarded as mandatory for the business as it provides a
safety net and thus minimizes the risk of any possible default in
payment of lease rentals by the customers. On termination of the lease
the said security deposits are adjusted against the sale of the leased
asset to the customers. The Commissioner of Income Tax (Appeals)
also noted that for the subsequent assessment year 1995-1996 the
Assessing Officer had thoroughly examined the issue of receipt of
security deposits and was convinced about the genuineness and,
therefore, did not make any addition on this account. For all these
reasons, we find that the Tribunal‟s conclusion confirming the findings
of the Commissioner of Income Tax (Appeals) cannot be faulted. In
any event, these are pure findings of fact and no question of law, much
less a substantial question of law, arises on this aspect of the matter.
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6. As regards the third issue with regard to disallowance of
depreciation of Rs 15 lacs on cast iron moulds, we find that the
Assessing Officer had proceeded on an entirely incorrect premise. The
Assessing Officer had disallowed the depreciation claimed by the
assessee on the ground that the lease agreement which had been signed
on 29.03.1994 was to take effect from 29.04.1994 and, therefore,
depreciation could not be allowed for the year in question which ended
on 31.03.1994. The Commissioner Income Tax (Appeals), after going
through the lease agreement dated 29.03.1994, categorically observed
that the commencement date of the said lease agreement was
29.03.1994. However, the lease money was payable in monthly
instalments with effect from 29.04.1994. Both the Commissioner
Income Tax (Appeals) as well as the Tribunal have concluded that the
fact that the lease payments were to commence on 29.04.19994 did not
make any difference to the fact that the lease, in fact, had commenced
on 29.03.1994. Moreover, bills in respect of the cast iron moulds were
dated 29.03.1994. The delivery challans were also prior to 31.03.1994.
The Tribunal concluded that on the basis of these documents as also on
the basis of the certificate given by the lessee (Shiva Glass Works Ltd),
it was established that the cast iron moulds were put to use in the
month of March, 1994 and, therefore, the depreciation was allowable in
the year in question. This is also a finding of fact and the Tribunal has
correctly concluded that the Assessing Officer had not appreciated that
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the date of commencement of the payment was 29.03.1994 and not
29.04.1994. We may note in passing that in paragraph 19 of the
impugned order there appears to be typographical error in the
mentioning of the date in the following phrase:-
“……..the date of commencement was 29.04.1994.”
Reading the context in which the said phrase appears, the date would
be 29.03.1994 as has been held by the Commissioner of Income Tax
(Appeals), which is noted in paragraph 16 of the impugned order itself.
7. The fourth issue with regard to disallowance of depreciation
of Rs 6,11,145/- has also been rightly set aside by the Commissioner of
Income Tax (Appeals) as also the Tribunal. These are also findings of
fact. The Tribunal has confirmed the following observations of the
Commissioner of Income Tax (Appeals):-
“7.1 It is also noticed that the appellant-
company has filed complete details regarding
depreciation claim, including purchase vouchers,
which categorically show that the said assets were
purchased in financial year 1993-1994 and the
rate per item is less than Rs 5,000/-. Also the
copy of the Lease Agreement entered into
between the appellant company and M/s Accurate
Tubes Pvt. Ltd has also been filed, apart from
tripartite agreement between the Allahabad Bank,
the lessor and the lessee dated 18.03.1994.
Keeping in view the facts and circumstances of
the case I have no hesitation in holding that the
Assessing Officer has acted in an arbitrary
manner in denying the deprecation claim on rolls.
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The said claim of 100% is clearly admissible
under the first proviso to Section 32 (1).”
We see no reason to interfere with these findings.
8. No substantial question of law arises for our consideration.
The appeal is dismissed.
BADAR DURREZ AHMED, J
RAJIV SHAKDHER, J
October 15, 2008
SR
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