M/S Maharashtra Apex Corporation ... vs The Deputy Commissioner Of Income ...
2022 Latest Caselaw 4688 Kant

  IN THE HIGH COURT OF KARNATAKA AT BENGALURU

        DATED THIS THE 14TH DAY OF MARCH, 2022

                        PRESENT

          THE HON'BLE MRS.JUSTICE S.SUJATHA

                           AND

THE HON'BLE MR. JUSTICE SHIVASHANKAR AMARANNAVAR

                   I.T.A.No.3/2022 c/w
            I.T.A.No.2/2022, I.T.A.No.4/2022,
            I.T.A.No.5/2022, I.T.A.No.6/2022
                     & I.T.A.No.7/2022

BETWEEN :

M/s MAHARASHTRA APEX CORPORATION LTD.,
PAN: AACCM 2741 B,
SYNDICATE HOUSE, MANIPAL-576104,
REP BY ITS SENIOR OFFICER,
SRI J.SUDHASHANKAR RAO,
S/O SRI K.JANARDHANA RAO
AGED ABOUT 52 YEARS                            ...APPELLANT
                                                   (COMMON)

        (BY SRI K.K.CHYTHANYA, SENIOR COUNSEL A/W
                    SRI TATA KRISHNA, ADV.)

AND :

THE DEPUTY COMMISSIONER
OF INCOME TAX, CIRCLE-1, UDUPI                ...RESPONDENT
                                                 (COMMON)

                (BY SRI E.I.SANMATHI, ADV.)

     THIS INCOME TAX APPEAL NO.3/2022 IS FILED UNDER
SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A)
FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED
ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE
                         -2-



IMPUGNED ORDER OF THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU 'A' BENCH BEARING IN ITA
NO.239/BANG/2018,   DATED     20.09.2019  FOR   THE
ASSESSMENT YEAR 1995-1996 AS ENCLOSED IN ANNEXURE-A
AND ETC.

     THIS INCOME TAX APPEAL NO.2/2022 IS FILED UNDER
SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A)
FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED
ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE
IMPUGNED ORDER OF THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU 'A' BENCH BEARING IN ITA
NO.242/BANG/2018,   DATED     20.09.2019   FOR   THE
ASSESSMENT YEAR 1998-1999 AS ENCLOSED IN ANNEXURE-A
AND ETC.

     THIS INCOME TAX APPEAL NO.4/2022 IS FILED UNDER
SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A)
FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED
ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE
IMPUGNED ORDER OF THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU 'A' BENCH BEARING IN ITA
NO.241/BANG/2018,   DATED     20.09.2019   FOR   THE
ASSESSMENT YEAR 1997-1998 AS ENCLOSED IN ANNEXURE-A
AND ETC.

     THIS INCOME TAX APPEAL NO.5/2022 IS FILED UNDER
SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A)
FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED
ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE
IMPUGNED ORDER OF THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU 'A' BENCH BEARING IN ITA
NO.246/BANG/2018,   DATED     20.09.2019   FOR   THE
ASSESSMENT YEAR 2000-2001 AS ENCLOSED IN ANNEXURE-A
AND ETC.

     THIS INCOME TAX APPEAL NO.6/2022 IS FILED UNDER
SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A)
FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED
ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE
IMPUGNED ORDER OF THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU 'A' BENCH BEARING IN ITA
NO.240/BANG/2018,   DATED    20.09.2019    FOR   THE
                           -3-



ASSESSMENT YEAR 1996-1997 AS ENCLOSED IN ANNEXURE-A
AND ETC.

     THIS INCOME TAX APPEAL NO.7/2022 IS FILED UNDER
SECTION 260-A OF INCOME TAX ACT 1961, PRAYING TO A)
FORMULATE THE SUBSTANTIAL QUESTION OF LAW STATED
ABOVE. B) ALLOW THE APPEAL AND SET-ASIDE THE
IMPUGNED ORDER OF THE INCOME TAX APPELLATE
TRIBUNAL, BENGALURU 'A' BENCH BEARING IN ITA
NO.244/BANG/2018,   DATED     20.09.2019   FOR   THE
ASSESSMENT YEAR 1999-2000 AS ENCLOSED IN ANNEXURE-A
AND ETC.

      THESE APPEALS COMING ON FOR ORDERS, THIS DAY,
S. SUJATHA, J., DELIVERED THE FOLLOWING:

                   JUDGMENT

Since common and akin issues are involved in

these appeals, they are heard together and disposed of

by this common judgment.

2. These appeals are filed by the assessee

under Section 260A of the Income Tax Act, 1961 ['Act'

for short] assailing the order passed by the Income Tax

Appellate Tribunal Bangalore Bench 'A', Bangalore

['Tribunal' for short] in ITA Nos.239, 242, 241, 246, 240

and 244/Bang/2018 dated 20.09.2019 and M.P.Nos.52

to 55/Bang/2020 relating to the assessment years

1995-96 to 2000-01 raising the following substantial

questions of law:

Common Substantial Questions of

Law in ITA Nos.2 to 7/2022:

"1. Whether on the facts and circumstances of the case, the Tribunal is right in perversely denying the Appellant's claim for deduction of depreciation on assets leased merely on the basis that lease agreements were not made available before it, ignoring the lease agreements filed vide Memo dated 31.07.2019 for AY 1998-99 and the assessment order detailing the clauses of the lease agreements?

2. Whether, the findings of the Tribunal that the lease transactions entered into by the Appellant are sham and perverse?

3. Whether on the facts and circumstances of the case, the Tribunal is right in law in denying depreciation on assets leased by the appellant?

4. Whether on the facts and circumstances of the case, the Tribunal erred

in law in failing to follow the decision of the co-ordinate bench of the same jurisdiction rendered in similar set of facts?

Common Substantial Questions of

Law in ITA Nos.2 and 3/2022:

5. Whether on the facts and circumstances of the case, the Tribunal has erred in failing to adjudicate the issue relating to depreciation on assets leased by the appellant to educational institutions for the impugned AY despite a specific ground being raised in this regard?

Common Substantial Questions of

Law in ITA Nos.3, 4 and 6/2022:

6. Whether on the facts and circumstances of the case, the Tribunal has erred in dismissing as belated, the mistake apparent from record added vide Memo dated 10.08.2020 to the miscellaneous petition filed in time on 03.02.2020?

Common Substantial Questions of

Law in ITA Nos.2, 3, 4 and 6/2022:

7. Whether on the facts and circumstances of the case, the Tribunal is justified in perversely dismissing the miscellaneous petitions filed before it despite pointing out glaring errors apparent from records in the original order?"

Common Substantial Questions of

Law in ITA Nos.2, 5 and 7/2022:

6. Whether on the facts and circumstances of the case, the Tribunal is right in law in denying depreciation on assets leased by the Appellant to M/s. Khatema Fibers merely for the reason that the appellant did not pay the excise duty component on the assets leased when the same did not form part of actual cost under Explanation 9 to Section 43[1]?

7. Whether on the facts and circumstances of the case, the Tribunal is right in law in denying depreciation on assets leased by the Appellant to M/s. Mohan Meakin on the basis that the appellant met only part of cost when the appellant had met

Rs.19,98,000/- out of Rs.22,25,057/- constituting 89.8% of cost?

Common Substantial Questions of

Law in ITA Nos.5 and 7/2022:

7. Whether on the facts and circumstances of the case, the Tribunal is right in upholding the action of the respondent in denying the appellants' claim for interest on refund under Section 244A?"

3. These appeals are admitted to consider the

substantial question of law No.1 at present as the same

is the basis for arriving at a decision by the Tribunal

which gives rise to the other substantial questions of

law raised by the appellant as framed in the appeals.

4. The appellant-assessee is a public limited

company carrying on the business of a Non-Banking

Financial Institution and classified by RBI as a Hire

Purchase Finance and Equipment Leasing Company.

The appellant has filed its return of income for the

assessment years 1995-96 to 2000-01. After issuance of

notices under Section 143[2] and 142[1] and

considering the response filed by the appellant, the

orders were passed under Section 143[3] of the Act.

Aggrieved by the said orders, the appellant filed appeals

before the Commissioner of Income Tax (Appeals)

[CIT(A)] and the appeals were partly allowed. Aggrieved

by the said orders, the appellant has preferred appeals

before the Tribunal which are disposed of by the

Tribunal holding that the transactions in question is a

financial transaction and not lease transaction. Hence,

these appeals by the assessee.

5. Learned senior counsel Sri.K.K.Chythanya

appearing for the appellant-assessee would submit that

the entire approach of the Tribunal is on a wrong notion

that no lease agreements are placed on record by the

assessee. The primary question involved herein i.e.,

whether the transactions are lease or financial

arrangements would certainly depends on the clauses of

the lease agreements which were made available before

the Tribunal in the first round of litigation. This indeed

has been considered by the Assessing Officer and it was

recorded that "these lease agreements have been

examined, they are all identical and contained identical

terms and conditions they are discussed below......".

The clauses in the lease deeds having been extracted by

the Assessing Officer, the Tribunal ought to have

considered the same. Even otherwise, in the

Miscellaneous Petition Nos.52 to 55/2020 filed by the

assessee, the main ground urged was that the finding of

the Tribunal that lease agreements were not brought on

record by the appellant-assessee was not justifiable. In

support of the said contention, Memos were filed along

with the copy of the index and the affidavits of the

learned Chartered Accountant. Despite the index

depicting the lease agreements submitted by the

appellant-assessee, the same are given a go-bye in

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arriving at a conclusion by the Tribunal. Thus, the

learned senior counsel submits that the matters require

re-consideration by the Tribunal keeping open the other

substantial questions of law to be considered by the

Tribunal.

6. Learned counsel appearing for the Revenue

justifying the impugned orders submitted that despite

providing reasonable opportunity to the appellant-

assessee, no lease agreements were made available

before the Tribunal. The burden of proof lies on the

assessee. For the query made by the Tribunal insofar as

the lease agreements, the reply given by the learned

authorized representative appearing for the assessee

that the lease agreements are not readily available was

indeed recorded by the Tribunal. In such

circumstances, no fault can be found with the order of

the Tribunal in proceeding with the matter accepting

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the finding of the Assessing Officer/First Appellate

Authority.

7. We have given our anxious consideration for

the arguments advanced by the learned counsel

appearing for the parties and perused the material on

record.

8. Though the assessee has raised several

substantial questions of law, we have considered only

the substantial question of law No.1 which is the

genesis for these appeals. The entire gamut of the order

impugned revolves around the controversy whether the

transactions involved in the case are lease or financial

arrangement. In order to answer this controversy, it was

necessary for the appellant-assessee to place on record

the copies of the lease agreements. It may be true that

the Tribunal was examining the matter in the second

round but that itself would not preclude the assessee to

place on record the copies of the lease agreements for

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the examination of the Tribunal notwithstanding certain

clauses of the lease agreements extracted by the

Assessing Officer in the assessment order. The assessee

instead of furnishing the lease agreement copies has

taken a circuitous method of defending its action of

having submitted the copies of the lease agreements in

the first round of litigation, so in the Miscellaneous

Petition. In the absence of furnishing the relevant lease

agreements, the Tribunal had no other option but to

give weightage to the finding of the Assessing Officer as

recorded in the order impugned.

9. However, in view of the undertaking given by

the learned Senior Counsel appearing for the appellant-

assessee that the copies of the lease agreements would

be furnished before the Tribunal within a period of four

weeks from today, which is sine qua non for deciding the

issue whether the transactions are lease or financial

arrangement, we are of the considered opinion that the

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interest of justice and equity would be met in setting

aside the impugned orders and restoring the matters to

the file of the Tribunal to provide an opportunity to the

appellant-assessee to furnish the lease agreements

before the Tribunal.

10. If such lease agreements are furnished

before the Tribunal within a period of four weeks from

today, the Tribunal shall consider the same in

accordance with law and shall take a proper decision in

an expedite manner after providing an opportunity of

hearing to the appellant-assessee. It is needless to

observe that all the rights and contentions of the parties

are left open to be urged before the Tribunal including

the issues raised in the form of substantial questions of

law before this Court. After considering all these issues,

the Tribunal shall pass appropriate orders in

accordance with law in an expedite manner.

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With the aforesaid observations and directions, the

appeals are disposed of answering the substantial

question of law No.1 in favour of the assessee and

against the Revenue, keeping open the other substantial

questions of law as aforesaid.

The appellant-assessee shall appear before the

Tribunal on 11.04.2022 and shall take further orders

thereof.

Sd/-

JUDGE

Sd/-

JUDGE

NC.