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Madras High CourtTCA/343/2018dismissed

M/S. Simpson & Gen.Finance Co. v. The Assistant Commissioner Of

2018-07-03Honourable The Chief Justice,Honourable Ms. Justice P.T. Asha5 pages

IN THE HIGH COURT OF JUDICATURE AT MADRAS

DATED: 03.07.2018

CORAM:

THE HON'BLE MR. JUSTICE S.MANIKUMAR THE HON'BLE MR. JUSTICE SUBRAMONIUM PRASAD Tax Case Appeal No.343 of 2018 M/s. Simpson & General Finance Co. Ltd., No.861/862, Anna Salai, Chennai- 600 002.

... Appellant/Appellant Vs.

The Assistant Commissioner of Income Tax, Corporate Circle- 6(2), Chennai - 600 034.

... Respondent/ Respondent PRAYER: The Tax Case Appeal has been filed under Section 260 A of the Income Tax Act, against the order of the Income Tax Appellate Tribunal, "C" Bench, Chennai, dated 23rd February 2017 in ITA No.2470/Mds/2016 preferred against the order dated 23.05.2016 in I.T.A. No. 560/CIT(A)-15/2013-2014 assessment year 2011-2012, by the Commissioner of Income Tax(Appeals)15, Chennai 34 preferred against the order dated 17.01.2014 in GIR.No. Si22/AABCS1868 A for the assessment year 2011-2012 by the Assistant Commissioner of Income Tax, Company Circle -VI(3) Chennai 34.

For Appellant : Mr. R.Venkatanarayanan for M/s. Subbaraya aiyar padmanabhan

O R D E R

(Order of the Court was made by SUBRAMONIUM PRASAD, J.) This appeal is directed against the order dated 23.02.2017, passed by the Income Tax Appellate Tribunal, "C" Bench, Chennai, in ITA No.2470/Mds/2016.

2.The facts and brief as stated in the affidavit are as under:- (a) The appellant is in the business of bill discounting, hire purchase leasing, mutual funds and insurance agency. For the assessment year 2011-2012, the appellant filed its return income of Rs.1,18,80,275/-. The case of the assessee was taken for scrutiny by issuing notice under Section 143(2) of the Income Tax Act, as the assessing officer completed the

assessment disallowing the principal portion of rental income for Rs.11,72,296/-. The basis for the order is that the assessing officer has treated the principal portion of lease rent as income from the leasing business and added it back to the total income of the appellant. The assessee filed an appeal. The Appellate Authority dismissed the tax appeal. The matter was taken up further before the Income Tax Appellate Tribunal. The Tribunal also dismissed the appeal. The present appeal has been filed against the judgment of the Tribunal raising the following substantial questions of law:- "1.Whether on the facts and circumstances of the case the Tribunal was right in law in holding that in the case of "Finance Lease" transaction the entire lease rental should be offered as income contrary to the Accounting Standard -19 dealing with accounting of leases issued by the Institute of Chartered Accountants of India?

2.Whether on the facts and circumstances of the case the Tribunal was justified in not directing the assessing officer to consider that in the case of Financial Lease only the interest income accrued to assessee should be taxed and not the entire lease rental as assessed by him and consequently withdraw the claim of depreciation on leased assets?"

3.The Income Tax Appellate Authority and the Tribunal dismissed the case of the assessee placing reliance on the Judgment of this Court in the case of the appellant in Simpson and General Finance Co. Ltd., Vs. Deputy Commissioner of Income Tax in Tax Case Appeal Nos.124 to 130 of 2014 and M.P.No.1 of 2014 (6 M.Ps.) in ITA Nos. 36,37,38,39,40,41 and 105/Mds/2012 pertaining to the assessment year 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09.

4.The Division Bench of this Court on the very same questions of law raised by the assessee, for the previous assessment years dismissed the case of the assessee. Relevant portion of the judgment reads as under:- "1.The assessee seeks a decision of this Court on the following questions of law:- "1.Whether on the facts circumstances of the case the Tribunal was right in law in holding that in the case of "Finance Lease" transaction the entire lease rental should be offered as income contrary to the Accounting Standard -19 dealing with accounting of leases issued by the Institute of Chartered Accountants of India?

2.Whether on the facts circumstances of the case the Tribunal was justified in not directing the assessing officer to consider that in the case of Financial Lease only the interest income accrued to assessee should be taxed and not the entire lease rental as assessed by him and consequently withdraw the claim of depreciation on leased assets?"

2.The assessment order herein arises out of the common order of the Income Tax Appellate Tribunal relating to the assessment years 2002-03; 2003-04; 2004-05; 2005-06; 2006-07; 2007-08; 2008-09.

9.On a reading of the terms of the agreement, we find that the agreement is a lease agreement sample and that there is nothing in the agreement to speak about mere financing for the purchase of an equipment as it had been contended by the assessee.

10.Learned counsel for the assessee however, submitted that the equipment leased out is one which the lessee had purchased. Consequently, the agreement has to be seen only as a finance agreement. We do not find any justification to accept this as a ground for holding the agreement as a finance lease agreement. If in effect the agreement is finance agreement, the question of returning the leased item back to the assessee will not arise at all. Further, the question of again affixing the name of the assessee on the property also does not arise. The fact that the equipment is delivered by the supplier to the location of the assessee thus by itself, will not make the agreement, the Finance Agreement and the terms thus seen are matters of arrangement between the parties, finance agreement. As has been conatended by the Revenue, even in the calculation of the lease rental, the monthly repayment of the rent and the number of months of the lease rent payment is also clearly stated in the agreement.

11.In the circumstances, we do not think any justifiable ground to accept the case of the assessee that based on Accounting Standard 19 only that the agreement in question was entered into by the assessee and it has to be treated as the finance agreement.

13.As far as the present case is concerned, the question herein has to be seen from the terms of the agreement entered into between the assessee, which was placed before the Assessing Officer as well as before other Appellate Authorities, a copy of which is also placed before us and we have also gone through it. In the light of the details contained in the agreement has been narrated by us in the preceding paragraphs and considering the import of the agreement, we have no hesitation in rejecting the assessee's contention that the transaction is only a finance lease."

The present appeal is squarely covered by the judgment of this Court (mentioned supra).

5.It is contented by the learned counsel for the assessee that as against the above mentioned judgment, Special Leave Petitions have been filed in the Hon'ble Supreme Court of India, which have been numbered as Special Leave Petitions (Civil) No.20796 of 2014 and 29801 of 2014 and the Hon'ble Supreme Court has issued notice by admitting the appeal. The learned counsel for the petitioner, therefore, contend that the issue has not attained finality and therefore the appeals be deferred.

6. We are not prepared to accept this contention. The judgment of this Court in Tax Case Appeal Nos.124 to 130 of 2014 and M.P.No.1 of 2014 (6 M.Ps.) in ITA Nos. 36,37,38,39,40,41 and 105/Mds/2012 pertaining to the assessment year 2002-03, 2003-04, 2004-05, 2005-06, 2006-07, 2007-08, 2008-09 has not been stayed by the Hon'ble Supreme Court. The impugned order is squarely covered by the judgment of this Court in Simpson and General Finance Co. Ltd., Vs. Deputy Commissioner of Income Tax (mentioned supra).

7.In view of the above, the appeal is dismissed. There shall be no order as to costs.

-s/d- Assistant Registrar(CCC) True Copy Sub-Assistant Registrar gsp

To 1.

The Assistant Commissioner of Income Tax, Corporate Circle- 6(2), Chennai - 600 034.

2. The Income Tax Appellate Tribunal "C" Bench Chennai.

3. The Commissioner of Income Tax(Appeals )15 121, Mahathma Gandhi Road Nungambakkam, Chennai 34.

4. The Assistant Commissioner of Income Tax Company Circle VI(3) Room No. 706, 7th Floor New Block, 121, Mahathma Gandhi Road Chennai 34.

+1 CC to M/s. Subbaraya Aiyar, Advocate sr 42993. +1 CC to Mr.T.R. Senthil Kumar, Advocate sr 42995. Tax Case Appeal No.343 of 2018 NRI(CO) SP(30/07/2018)