Dismissed

The Commissioner of Income Tax v. M/S Tvs Finance and Services

Madras HC14 Jul 2014TCA/44/2014

Case brief

AI extract

What is this about?

The Madras High Court dismissed the Revenue's appeal against the Tribunal's order allowing depreciation on a sale and leaseback transaction. The Court held that since sales tax was paid and lease income was disclosed as business income, the assessee was the owner and eligible for depreciation.

What did the court decide?

None.

What the court decided

The Commissioner of Income Tax Vs M/S Tvs Finance and Services — Income Tax | Madras HC (2014)

¶1

IN THE HIGH COURT OF JUDICATURE AT MADRAS

¶2

DATED: 14.7.2014

¶3

CORAM

¶4

THE HON'BLE MR.JUSTICE R.SUDHAKAR AND THE HON'BLE MR.JUSTICE G.M.AKBAR ALI

¶5

T.C.(A).No.44 of 2014

¶6

The Commissioner of Income Tax Chennai.

¶7

.. Appellant

¶8

Vs.

¶9

TVS Finance and Services Ltd. (formerly known as Harita Finance Ltd., which was formerly known as TVS Lakshmi Credit Ltd.), Jayalakshmi Estate No.29, (Old No.8), Haddows Road Chennai – 600 006.

¶10

.. Respondent

¶11

Appeal under Section 260A of the Income Tax Act, 1961 against the order of the Income Tax Appellate Tribunal Chennai 'A' Bench, dated 30.9.2013 made in ITA No.1965/Mds/2012 for the assessment year 19961997.

¶12

For Appellant : Mr.Arun Joseph Kurian Standing Counsel

¶13

J U D G M E N T

¶14

(Delivered by R.SUDHAKAR, J. )

¶15

The appeal has been filed by the Revenue challenging the order of the Income Tax Appellate Tribunal Chennai 'A' Bench, dated 30.9.2013 made in ITA No.1965/Mds/2012 for the assessment year 1996-1997, by raising the following substantial questions of law:

¶16

¶17

“1. Whether on the facts and circumstances of the case the Tribunal was right in upholding the order of CIT(A) in allowing depreciation on sale and lease back transaction with Hightemp Furnace Ltd., especially when not for sale sign was affixed on the assets?

¶18

Is not the finding of the Tribunal bad, especially when the transaction of the assessee was purely a financial transaction structured under the name of sale and lease back agreement?”

¶19

The assessee in this case is a finance company and in the course of business, they entered into an Sale and Lease back agreement with the manufacturer of a machinery, namely, Hightemp Furnace Ltd., to acquire ownership of machinery for consideration and thereafter lease the said machinery to Hightemp Furnace Ltd. The machinery was manufactured by Hightemp Furnace Ltd. and sold to the assessee and on the transaction, sales tax was levied and collected from the assessee and paid out to the Government. On the leased out machinery, the assessee received rental income and it was disclosed in the returns as business income of the assessee. The Assessing Officer has also accepted the lease amount as business income of the assessee. The assessee in this case claimed depreciation on the machinery so leased out to Hightemp Furnace Limited, but the same was disallowed by the Assessing Officer primarily relying upon the Central Excise document, where it was shown that the machinery is “ not for sale ”.

¶20

¶21

Aggrieved by that portion of the assessment order declining to grant the benefit of depreciation, the assessee moved the Commissioner of Income Tax (Appeals). The Commissioner of Income Tax (Appeals) considering the nature of the sale and lease back agreement, namely, purchase of the machinery by the assessee on payment of sales tax; leasing of the machinery to the manufacturer after acquiring the ownership of the machinery by the assessee; and the payment of lease rental income by Hightemp Furnace Limited to the assessee, which is shown as business income of the assessee, was of the view that the words “ not for sale ” used in the central excise document was more to indicate that the machinery was not for sale to any third party, that is to say that it is not transferable to any other person than the manufacturer, who had sold it to the assessee and retained the machinery inside the premises under the terms of the lease agreement. It was also held that once it is admitted by the Assessing Officer that sales tax leviable on such transaction has been levied and paid out to the Government and the lease rental in respect of machinery was assessed as business income of the assessee, it is evident that the assessee was treated as the owner of the machinery in question and the manufacturer is only a lessee and, therefore, allowed the claim of depreciation made by the assessee.

¶22

The above said view of the Commissioner of Income Tax (Appeals) was affirmed by the Tribunal on the undisputed facts, referred to above, and

¶23

¶24

it was held that the assessee is the owner of the machinery in question and the said machinery was used for its leasing business in the assessment year under consideration and, therefore, they are eligible for depreciation. To arrive at such a conclusion, both the Commissioner of Income Tax (Appeals) and the Tribunal were guided by a decision of this Court in Commissioner of Income-tax v. High Energy Batteries (India) Ltd., (2012) 348 ITR 574 (Mad.) .

¶25

We have heard the learned Standing Counsel appearing for the appellant and perused the order of the Tribunal.

¶26

The facts narrated above are not disputed by the learned Standing Counsel for the appellant. In the case on hand, we find that the sale was on payment of sales tax and the assessee has received the lease amount and disclosed the same as business income. Therefore, there cannot be any dispute that the assessee is the owner of the goods. It is another matter that the Central Excise document does not disclose sale. The excise duty is payable on manufacture. That is not the issue in the present case. That apart, there is no material produced by the Revenue to show that the transaction of sale and lease back was not genuine or was bogus, warranting interference with the concurrent findings arrived at both by the Commissioner of Income Tax (Appeals) as well as by the Tribunal.

¶27

¶28

For the foregoing reasons, on the above stated facts, no substantial

¶29

question of law arises for our consideration and we find no reason to differ with the concurrent findings rendered by the Commissioner of Income Tax (Appeals) and the Tribunal.

¶30

In the result, this appeal is dismissed.

¶31

(R.S.J.) (G.M.A.J.) 14.7.2014

¶32

Index : Yes Internet : Yes

¶33

sasi

¶34

To:

¶35

The Assistant Registrar, Income Tax Appellate Tribunal Chennai Bench "A", Chennai.

¶36

The Secretary, Central Board of Direct Taxes, New Delhi.

¶37

The Commissioner of Income Tax (Appeals-XII) Chennai – 600 034.

¶38

The Commissioner of Income Tax-I Chennai.

¶39

The Deputy Commissioner of Income Tax Company Circle II(2) Chennai – 600 034.

¶40

¶41

R.SUDHAKAR,J. and G.M.AKBAR ALI,J.

¶42

(sasi)

¶43

T.C.(A).No.44 of 2014

¶44

14.7.2014

The Commissioner of Income Tax v. M/S Tvs Finance and Services

Case brief

What is this about?

What did the court decide?

What the court decided

The Commissioner of Income Tax v. M/S Tvs Finance and Services

Case brief

What is this about?

What did the court decide?

What the court decided

A compact analysis

Issues for consideration

Cases cited

Statutes considered

Parties & counsel

Coram

Case details

Similar cases

M/S Quest Life Services P Ltd. Vs the Customs Excise and

The Commissioner of Central Vs M/S.Sri Ranga Balaji Cotton

M/s perfect vending India Pvt. Vs the Customs Excise and Service

Director of Income Tax Vs M/S Young Men Christian Assn

Commissioner of Income Tax Vs M/S Aditya Ferro Alloys P Ltd.

Commissioner of Income Tax Vs Shri Akbar Ali Dhala