×Latest Case Laws on Income Tax by various Income Tax Appellate Tribunals in India
These are the latest case laws decided by various Income Tax Appellate Tribunals (ITAT) of India on Income Tax which have been published recently. The case laws are open for discussion and we invite expert comments from our members on its applicability and effect on relevant issues.
07-06-2019, CISCO Systems Capital, Section 10, 92C(3)(c),Tribunal Bangalore
Both these appeals are filed by the assessee and are directed against the separate orders of the AO passed u/s. 143(3) r.w.s. 144C(13) of the Income-Tax Act, 1961 [“the Act”] for the AYs 2011-12 & 2013-14 respectively.
2. The assessee is a registered Non Banking Financial Company (NBFC) with RBI and is a subsidiary of CSI Mauritius, Inc., which in turn is a subsidiary of CISCO Systems Inc. The assessee is engaged in the business of providing end to end financial solutions to the customers of CISCO, in India.
3. The common issue that arises for adjudication for both the assessment year 2011-12 and 2012-13 is the allowability of the claim for depreciation on assets given on financial lease. For the AY 2011-12, the only other issue that arises for adjudication is TP adjustment on the issue of “Provision of management services”. For the AY 2013-14, the only other issue that arises is determination of arm’s length price (ALP) and validity of the consequent TP adjustment made for the international transaction of “Purchase of equipment for financial lease from Associate Enterprise (AE)”.
4. We have heard Mr. Rajan Vora, the ld. counsel for the assessee and Shri C.H. Sundar Rao, the ld. CIT(DR) on behalf of the revenue at length.
5. On a careful consideration of the facts and circumstances of the case and on a perusal of papers on record and orders of the authorities below as well as case laws cited, we hold as follows. Disallowance of c aim of depreciation on equipment leased by the assessee under financial lease arrangement
6. The AO in this case has not followed the binding judgment of Hon’ble Supreme Court in the case of ICDS Ltd. V CIT [Civil Appeal No.3282 of 2008). He has from page 6 onwards in his order recorded views contrary to the ratio laid down by the Hon’ble Supreme Court. This cannot be approved. He relied on the judgment of Hon’ble Supreme Court in the case of M/s. Asea Brown Boveri Ltd. v. Industrial Finance Corporation of India & Ors. in CA 3574 of 1998 dated October 27, ,2004. This judgment is not on the issue of claim of depreciation of assets given on financial lease under the Income-Tax Act, 1961 [“the Act”]. This judgment was rendered in an appeal under section 10 of the Special Courts (Trials of Offences relating to Transactions in Securities) Act, 1992. In fact, the judgment of Hon’ble Supreme Court in the case of ICDS Ltd. (supra) has been delivered much after the judgment in the case of Asea Brown Boveri Ltd (supra). Hence, these findings of the ld. AO, which were approved by the DRP are hereby reversed as these are not in accordance with law.
7. Be it as it may, as at page 18 of the final assessment order for the AY 2011-12, the AO records that the assessee was asked to produce copies of agreements and that the assessee had only produced a few of them. We agree with the argument of the ld. DR that at least some more agreements have to be produced for examination before the AO, so that the submissions of the assessee that, the terms of the agreement in these financial leases are similar to the terms of the agreement considered by the Hon’ble Supreme Court in the case of ICDS Ltd. (supra) is correct or not.
8. In view of the above discussion, we set aside the issue to the file of the AO for fresh adjudication in accordance with law. The assessee is directed to produce copies of those agreements which the AO may call for. The AO shall examine these agreements and if the terms & conditions mentioned in these agreements are similar to the terms and conditions mentioned in the agreements considered by the Hon’ble Supreme Court in the case of ICDS Ltd. (supra) and if there are no material variations in the contracts, then depreciation has to be granted to the assessee as claimed. With these observations, we set aside this issue to the file of AO for fresh adjudication in accordance with the law.
9. In the result, this ground is allowed for statistical purposes.
10. We now take up the grounds against the TP adjustment made for the AY 2011-12 which are on account of payments made for “administrative support services”. Admittedly, this issue is covered in favour of the assessee by an order of the Tribunal in the assessee’s own case for the AY 2008-09, AY 2009-10 and AY 2010-11 vide IT(TP)A No.1558/Bang/2012 order dated 19.09.2014, where this very same issue was examined. The Tribunal has set aside the matter to the file of the TPO with certain directions. Consistent with the view taken therein, we restore the matter to the file of the TPO for fresh adjudication in accordance with the law. The TPO shall dispose of the matter n accordance with the directions given by the Tribunal on the very same issue in the earlier assessment years in AY 2008-09, AY 2009-10 and AY 2010-11.
11. In the result, appeal for AY 2011-12 is allowed for statistical purposes.
12. The first issue that arises for adjudication for AY 2013-14 is grant of depreciation on assets given on financial lease. Consistent with the view taken by us on this issue in the earlier AY 2011-12, we set aside the matter to the file of AO with a direction to apply the decision of the Hon’ble Supreme Court in the case of ICDS Ltd. (supra) and grant depreciation, wherever the terms & conditions of the financial lease agreements entered into by the assessee is similar to the terms & conditions of the financial lease agreements considered by the Hon’ble Supreme Court. The assessee is directed to produce the copies of agreements as desired by