Ita/1294/2006 Of The Commissioner Of Income Tax v. M/S Krone Communications Limited

IN THE HIGH COURT OF KARNATAKA, BANGALORE DATEBD THIS THER DAY OF JULY, 2012 PRESENT THER HON BLE MR. JUSTICE K.SREEBEDHAR ANT THR HON'BLE MR. JUSTICK B.MANOHAR 1.T.A. No. 1294 OF 2006 BBRITIWE (By Sri G. Kamaladhar, Advocate) Appellants AND: M/s.Krone Communications Ltd.,P.B.No.5812,No.30O(c), II PhasePeenyaBangalore, (By Sri Ramabhadran, Advocate) Respondent This I.T.A. is filed u/s.260-A of I.T. Act, 1961 arisingOUT|oT orderdated12-05-2006passed1nNITANo.929/Bang/2003, for the Assessment Year 1994-95,praying that this Hon’ble Court may be pleased to: (i)formulate the substantial questions of law stated therein and(11) allow the appeal and set aside the order passed by theITAT, Bangalore in ITA No.529/Bang/2003 dated 12-0o-2006 confirming the order of Appellate Commissioner &confirm the order passed by the Asst. Commissioner ofIncome Tax, Circle-11(3), Bangalore, in the interest of justiceand equity. This appeal is coming on for hearing this day,SREEDHAR RAO, J.,delivered the following: JU DBGMENT The Respondent is the assessee and had purchasedbio gas and furnace. The sale invoice discloses the value ofthe said equipment at Rs.50,00,000/- each. The assesseehad purchased the said equipment by taking finance fromKotak Mahindra and hire purchase agreement was enteredinto. ooThe assessee sought for depreciation as per thevalue stated in the sale invoice. The Assessing Authority heldthat the value in the sale invoice is inflated and the value ofthe equipment is Rs.2,50,00,000/- and not Rs.50,00,000/-.Accordingly, the claim of the assessee for depreciation is rejected. The Commissioner of Income Tax in appealconfirmed the order of the Assessing Authority. The Tribunalin appeal has set aside the order of Commissioner of IncomeTax and remanded the matter to the Assessing Authority toexamine the issue afresh in accordance with the observationmade which are as follows: [A review of the entire matter about the lack ofenquiry made and not considering the tax in properline, we come to the only plausible conclusion that theassessment deserves to be set aside and to be doneafresh. We accordingly, set aside the assessment anddirect the Assessing Officer to examine the issueafresh namely - 4+6Whether the sale value of the bio gasplants and flameless furnace as per thesole invoice is assessed in the hands ofsuppher at the same value as has beendone in the sale invoice. If it is soassessed, then the department can do theassessment in the hands of the assesseeand to accept the same as a cost and allowthe depreciation to the assessee at thecost as per the agreement,plants and flameless furnace as per thesole invoice is assessed in the hands ofsuppher at the same value as has beendone in the sale invoice. If it is soassessed, then the department can do theassessment in the hands of the assesseeand to accept the same as a cost and allowthe depreciation to the assessee at thecost as per the agreement, 4=6Thedepartmentwouldconsider-!"decision of the Supreme Court with regardthat provides that all that the assesseerequires to prove the ownership and usageof the asset for claiming depreciation. Inso far as the ownership is concerned,despite the assessee had purchased thedecision of the Supreme Court with regardthat provides that all that the assesseerequires to prove the ownership and usageof the asset for claiming depreciation. Inso far as the ownership is concerned,despite the assessee had purchased the assets under Hire Purchase Agreement. Inview of the Board Circular (supra), theassessee would be entitled to depreciation.The usage aspect is to be seen in the lightof the decision of the Supreme Court 1.e.,if the business of the assessee is leasingand is using and has leased it, the usagestands proved. 4=6Thedepartmentwouldconsider-!"decision of the Supreme Court with regardthat provides that all that the assesseerequires to prove the ownership and usageof the asset for claiming depreciation. Inso far as the ownership is concerned,despite the assessee had purchased thedecision of the Supreme Court with regardthat provides that all that the assesseerequires to prove the ownership and usageof the asset for claiming depreciation. Inso far as the ownership is concerned,despite the assessee had purchased the assets under Hire Purchase Agreement. Inview of the Board Circular (supra), theassessee would be entitled to depreciation.The usage aspect is to be seen in the lightof the decision of the Supreme Court 1.e.,if the business of the assessee is leasingand is using and has leased it, the usagestands proved. Keeping these two aspects in view, we direct theAssessing Officer to re-do the assessment afresh bygiving the assessee sufficient opportunity of hearing,For statistical purpose the appeal is treated asallowed.9 3,It is the contention of the State in appeal thatthe observations made would make the Assessing Officer toaccept the value stated in the sale invoice as binding andthat there is no scope for Assessing Authority to find out theactual market value of the equipment. The AssessingAuthority should be given scope to find out the actualmarket price of the equipment, otherwise whatever stated inthe invoice, which is concocted document would becomebinding and results in injustice to revenue. respondents submitted that the observation made by the Tribunal does not foreclose the discretion of the AssessingAuthority to assess the market price of the equipment.However, it is essential that verification from the supplier isto be made and if the material furnished by the supplierwould disclose that the sale price stated in the invoice is justand proper, accordingly the depreciation is to be allowed.The contention that the observation made have divesteddiscretion of the Assessing Authority, is incorrect. 5.Heard. Learned counsel for both sides. It 1sclarified that the remand is an open remand. The AssessingAuthority is free to assess sale value of the product withreference to the materials pertaining to the supplier andother relevant material if any. Accordingly, the appeal isdisposed of. sd/-JUDGE NM* sd/-JUDGE