Commissioner of Income Tax vs Gujarat Gas Co. Ltd.

D.A. Mehta, J.—The appellant-Revenue has proposed the following question:

"Whether the Appellate Tribunal is right in law and on facts in holding that the transaction of sale and lease back was genuine and the assessee was entitled to depreciation?

The assessment year in question is 1995-96. The Tribunal in its order dated November 30, 2006, has recorded the facts in the following manner:

The brief facts of the case are that the assessee has entered into lease agreement with the Rajasthan State Electricity Board entrusted in generation and distribution of electricity. The assessee has got the electrical equipment and leased out the same on rent to the Rajasthan State Electricity Board. The assessee has shown the lease rent received from the Rajasthan State Electricity Board as its income and also the machinery purchased during the year in the audited balance-sheet. The original assessment was completed u/s 143(3) on March 30, 1998.

The case of the appellant-Revenue as projected by the learned Counsel for the appellant is that on analysis of various Clauses of the lease deed between the parties, viz., the respondent-assessee and the Rajasthan State Electricity Board, the transaction of lease is not genuine and hence the assessee is not entitled to depreciation. It is further submitted that the Commissioner (Appeals) and the Assessing Officer having found that the transaction was not genuine the Tribunal had committed an error in treating the transaction as genuine, without properly appreciating various Clauses of the lease deed. It was further submitted that in similar circumstances other tax appeals filed by the Revenue have been admitted and hence this appeal requires admission.

The learned advocate for the respondent assessee, appearing on caveat, was directed to place on record the treatment meted out to the lease rent received by the respondent-assessee, the lessor. In compliance with the said direction compilation has been placed on record. The compilation substantiates the finding of fact recorded by the Tribunal that the assessee has shown the lease rent received from the Rajasthan State Electricity Board as its business income.

In relation to the transaction, after referring to an earlier order of the Tribunal, the Tribunal in the present case has recorded the following findings:

10.9 Respectfully following the aforesaid case, we find that in the case before us the invoices are in the name of the assessee as is clear copy of these invoices appearing at pages 59 to 63 of the paper book. Similar transaction was held to be genuine transaction by the hon''ble Rajasthan High Court in the case of Commissioner of Income Tax Vs. Rajasthan State Electricity Board, therefore, the transaction in question is held to be genuine one and, therefore, we set aside the order of the Commissioner of Income Tax (Appeals) and direct the Assessing Officer to allow depreciation to the assessee.

With reference to the decision of the Rajasthan High Court as appearing in the order of the Tribunal, the same relates to the decision reported in Commissioner of Income Tax Vs. Rajasthan State Electricity Board, The question before the Rajasthan High Court was in relation to disallowance of payment of lease rentals on the transaction of sale-cum-lease back agreement and the Rajasthan High Court has found that the Tribunal had rightly appreciated the facts and correctly found the transaction to be genuine and such a finding could not be treated to be perverse.

Admittedly, the transaction in question which the High Court of Rajasthan was called upon to deal with is the same transaction which has been found to be genuine by the Tribunal in the present case. The lease rental paid by the Rajasthan State Electricity Board has been found by the Rajasthan High Court to be allowable deduction as the transaction is genuine. Correspondingly, in the hands of the assessee-company, the said lease rental has been taxed as business income and the same has not been disturbed by the Assessing Officer despite having initiated action u/s 147 of the Act for treating the transaction as a non-genuine transaction.

In the aforesaid facts and circumstances of the case whether the transaction of leasing out electrical equipments to the Rajasthan Electricity Board is genuine or not is based on appreciation of evidence on record as found by the Tribunal by referring to the various documents like invoice, etc. In the absence of any evidence to show anything to the contrary no legal infirmity exists in the impugned order of the Tribunal so as to give rise to any question of law, much less a substantial question of law, as proposed or otherwise. The appeal is accordingly dismissed.