- (1.) SINCE all the three appeals involve common question of law, the same are being decided by the common judgment.
(2.) THESE appeals are directed against the judgment and order of the Income-tax Appellate Tribunal, Jaipur Bench, Jaipur (for short 'the Tribunal'), dt. 27th Nov., 2000. The appeals were admitted in terms of the following questions : "1. Whether the Tribunal was justified in upholding the view of the learned CIT(A) and AO that additions could be made on estimation or presumption and by rejecting the documentary evidence produced by the assessee in contradiction of the judgment of Honourable apex Court in CIT v. Daulatram Rawatmal (1973) 87 ITR 349 (SC). 2. Whether the Tribunal was justified it bifurcating the lease rent into capital and revenue expenditure merely on a presumptuous basis ? 3. Whether the Tribunal was right in taking the view that the intention of the parties was to transfer in abrogation of the specific terms of lease agreement which all through the document provides for the ownership to be of the lessor, M/s Key Leasing and Finance Co. 4. Whether the Tribunal was justified in sustaining the additions and reversing the order of CIT(A) in respect of expenditure on lease rent against the factual material available on the record of the appeal. 5. Whether the Tribunal was right in taking the view that the amount paid by way of lease rent was capital expenditure incurred on truck, depreciation of which has been claimed by the lessor. 6. Whether the Tribunal was justified in upholding the additions of realisable value of old tyres which as per method of accounting prescribed under Section 145 and consistently followed by assessee are written off in the year of purchase itself. 7. Whether the Tribunal was justified in overlooking the fact that nature of expenditure has to be determined on the basis of tenure of lease and purpose of use as held by Honourable Punjab & Haryana High Court in the case of Silver Screen Enterprises v. CIT (1972) 85 ITR 578 (P&H)." The appellant is a registered partnership firm carrying on the business of transportation of cement from M/s J.K. Cement Works, Nimbahera, and also deals in cement handling works. The appellant-firm has entered' into a lease agreement with M/s Key Leasing and Finance Ltd., for taking on lease 15 trucks on 25th April, 1990. The relevant assessment years are 1991-92, 1992-93 and 1993-94. In 1991-92 in the income-tax return the assessee declared loss of Rs. 1,33,687, for the asst. yr. 1992-93 the assessee has shown income of Rs. 1,05,177 and in the third assessment year i.e., 1993-94, the assessee has shown income of Rs. 7,199. The ITO noticed that the assessee had claimed lease rent as revenue expenditure. Considering the contents of the agreement with M/s Key Leasing and Finance Ltd., the ITO was of the view that the trucks were not taken on lease but it was a sale. Therefore, the lease amount which has been paid cannot be allowed as revenue expenditure and he assessed the total income of the assessee at Rs. 15,82,582 in the asst. yr. 1991-92: Similar view has been taken for the subsequent assessment years. In appeal before the CIT(A), the CIT(A) was of the view that as per the agreement, the assessee cannot be treated as owner of the leased 15 trucks for the years of assessment and as per terms and condition of the agreement, the lease money which has been paid by the assessee should be allowed as revenue expenditure. In appeal before the Tribunal, the Tribunal has referred the letter dt. 21st Nov., 1992, wherein the advocate of the assessee has expressed that after expiry of the lease period of three years, the vehicles were to be transferred in favour of the assessee. Therefore, the Tribunal has agreed with the view taken by the AO and held that the lease money which has been paid by the assessee cannot be allowed as revenue expenditure. Heard, learned counsel for the parties. Mr. A. Kasliwal, learned counsel for the appellant submits that when as per the agreement, the assessee was not the owner of the trucks in the years under consideration and he has paid the lease money and even depreciation of these 15 trucks is allowed to the lessor and not to the lessee. Therefore, there is no justification to deny claim of the assessee to allow the lease amount paid, as revenue expenditure. On the other hand, Ms. Parinitoo Jain, learned counsel appearing for the Department, submits that when under the agreement there is clause that after completion of lease period, if 1 per cent of the total consideration of the trucks is paid, the lessee will be owner of those trucks.
(3.) WHETHER the assessee is owner of the trucks or the trucks were taken on lease for three years, that has to be considered in the facts and circumstances of the case i.e., taking into account the terms and conditions of the agreement and also the contents of the letter which reveal the intention of the assessee. The AO after considering the submissions and also considering the directions of the Dy. CIT under Section 144A of the IT Act, 1961, has allowed the interest on the borrowed amount @ 18 per cent as revenue expenditure and rest of 30 per cent was not allowed treating the expenditure in the form of lease money as capital expenditure for purchase of trucks. The CIT(A) after considering the terms and conditions of the agreement allowed the lease rent as revenue expenditure. He pointed out in para 15 of his order that after expiry of lease period, the assessee can exercise its option for purchase of truck but prior to that neither it is owner nor has any right of owner of the trucks and it cannot be treated as owner and the lease rent paid for the trucks cannot be treated as capital expenditure. The lease agreement was executed on 25th April, 1990, and is annexed to the appeals as Annexure 2. We have perused the lease agreement. Clause 3 of the agreement provides the period of lease and the rent was to be paid as per the schedule. Clause 8 of the agreement speaks about ownership of the trucks under the agreement. There is a clear provision that the said machinery shall at all times remain sole and exclusive property of the lessor and lessee shall have no right, title or interest thereon. It further provides the irrevocable undertaking of the lessee that at no time during currency of lease agreement, which shall be non-cancellable, will lessee attempt to capitalise leased assets in lessee's balance-sheet. As per Clause 8 it has been agreed that ownership of said assets during tenure of lease and inclusive of any renewal options that lessor may concur indisputably rests with the lessor. ;