- (1.) THE following questions are proposed for admission of the appeal: Whether in the facts and circumstances of the case, the Tribunal was justified in law and has not acted perversely in deleting the additions made by the AO on account of disallowance of claim of lease rentals on the transactions of sale -cum -lease back agreement? Whether in the facts and circumstances of the case, the Tribunal has not acted perversely in allowing the appeal of the assessee and deleting the additions made on disallowance of lease rentals with regard to plant and machinery belonging to assessee and which were never transferred by the sale and were taken back on lease by the assessee and whether such colourable device of tax evasion is permissible under law?
(2.) WHETHER the transaction of sale -cum -lease back is genuine or not and whether the lease rent should be allowed or not, the Tribunal has considered the factual aspects and legal provisions in this regard in paras 10 to 17 of its order. For ready reference, it reads as under: 10. We have heard the rival submissions and perused the materials available on record. During all these years, the appellant board had sold various electrical equipments to various companies and after sale, the appellant board had taken back the same equipments on lease basis (Refer to paper book 34 -59 -lease agreement and 60 to 61 -sale agreement). The AO after discussing the details and for the reasons given in his order, held that sale -cum -lease back agreements were sham or colourable device as held in the case of McDowell and Co. Ltd. v. CTO : [1985]154ITR148(SC) . We find that the learned Authorised Representative has rebutted all the contentions raised by the AO for holding these transactions as sham or colourable device. We also find that the assessee's board has entered into various agreements and funds have been received which were needed by the board. The board has raised total funds of Rs. 26,06,42,70,305. It is evident from the perusal of paper book 14 that the decision of the board as per 443rd the meeting held on 6th Jan., 1995, the board discussed in detail the proposal brought out in the agenda note for securing funds through leasing at an interest rate of Rs. 7.70 per cent per annum through leasing companies. It was noted that this interest rate is roughly half the rate at which the RSEB is generally borrowing funds from the financial institutions. As per order of the AO at p. 3, the RSEB had been raising money from various financial institutions carrying interest rate ranging between 15 to 17.25 per cent. The learned Departmental Representative had relied upon the decision of Tribunal Special Bench, Bombay in the case of Mid East Portfolio Management Ltd. v. Dy. CUT (supra) whereas the learned Authorised Representative had relied upon the decision of Hon'ble Gauhati High Court in the caseCIT v. George Williamson (Assam) Ltd. . He also relied upon another case reported in Industrial DevelopmentCorporation of Orissa Ltd. v.CIT : [2004]268ITR130(Orissa) . In the case of CIT v. George Williamson (Assam) Ltd. (supra), the Hon'ble Gauhati High Court held that at pp. 629 and 630 that the delivery of goods to the buyer is proved by documents on record. The transactions of transfer of plant and machinery are entered into between the companies and the third parties, the seller and buyer had no inter se interest in each other, that is, the transactions of sale took place between the parties at arms' length. The sale price of the plant and machinery was determined on the basis of valuation by a independent valuer and there is nothing on record to indicate that such valuation was doubtful and an exaggerated value has been put for sale transactions. Although the delivery of possession is an essential ingredient of sale of movable property, actual delivery of possession does not mean that the buyer should take away the assets after delivery and the acknowledgement by the buyer of taking delivery would suffice the requirement of taking delivery of goods for the paid price. 12. The learned Authorised Representative had relied upon the decision of Tribunal, Special Bench Delhi in the case of Tej International (P) Ltd. v.Dy. CIT (2000) 69 TTJ (Delhi) 650 wherein it was held that once an authority higher than Tribunal has expressed an opinion on the issue before the Tribunal, (it) is not permissible for it to rely upon the contrary decisions of the Tribunal included by a Special Bench. Fact that the judgment was rendered by High Court other than the jurisdictional High Court does not alter the position. 13. The learned Departmental Representative had relied upon the decision of Hon'ble Karnataka High Court in the case,of Avasrala Automation Ltd. v. Jt. CIT (supra). The facts are distinguishable. In this case, the fact showed that while the board was interested in securing financial assistance by way of loan and for the said purpose the machinery/equipment was offered as a security by creating the documents in question to assure repayment of the loan advanced, the assessees found it convenient to enter into such a transaction as a device adopted to avoid payment of tax. The Tribunal, the appellate authority and the AO had recorded a finding that the transaction in question was not real and genuine; it was not in the nature of a tax planning which is within the framework of law. The finding recorded by the authorities did not suffer from any error, much less an error involving a substantial question of law. The Tribunal having regard to the facts and circumstances of the case was fully justified in relying upon the principle enunciated by the Supreme Court in McDowell and Co. Ltd v. CTO (supra). 14. After appreciation of the facts of the case before us, we find that the facts of the case relied upon by the learned Departmental Representative are quite different. The registration is not necessary for leasing back of movable assets, i.e. electrical equipments. In this case, the machinery/electrical equipment was identified as per paper book 71 to 80. The written down value of the machinery/equipment is ascertainable. It was held by the Hon'ble Gauhati High Court in the caseCIT v. George Williamson (Assam) Ltd. (supra) that actual delivery does not mean physical possession of the assets. In this case, the symbolic delivery has taken place as per agreements. It is a valid delivery/sale as per definition of delivery of goods in Section 33 of Sale of Goods Act, 1930. 15. After going into facts of the case, we find that the assessee's board and the lessor with various companies had entered into genuine agreement. The assets had been sold for which consideration had been received. By this colourable device, the assessee's board had been able to raise funds at lessor rate which is prevalent in the market. By entering into these transactions, the tax liability of the assessee board has not been reduced. We find that this cannot be termed as sham transaction as held in the case CIT v. Saksaria Sons (P) Ltd. : [1982]138ITR419(Bom) for the following reasons: (i) No actual transaction was executed on the basis of the agreement. (ii) The agreement is without any consideration. (iii) The amount be paid on the basis of the agreement which were actually paid but only the book entries were made. 16. The learned Authorised Representative had rightly placed reliance on Expln 4A to Section 43(1) of the Act. It is clear from the Explanatory Notes [Circular No. 762, dt. 18th Feb. (1998) 145 CTR 5: (1998) 230 ITR 12], that this Explanation was introduced in order to curb the claim of higher depreciation by the lessor. In order to curb such transaction, an amendment had been made to deal with a case where the assets had been sold and re -acquired by an assessee by way of hire, lease or otherwise. In such a case, the 'actual cost' for the purpose of deduction of depreciation allowance shall be taken to the written down value at the time of transfer of the assets in the hands of the seller who subsequently acquires the asset by way of hire, lease or otherwise. 17. Keeping in view the reasons given by us, we hold that sale -cum -lease back agreements entered by the appellant board were not sham/non -genuine transactions. The orders of the lower authorities are reversed The AO is directed to allow deduction for the lease rent paid by the board for all the years. The admitted facts are that assessee is a Government company and when the Tribunal found the transaction as genuine, this finding of fact in our view is not perverse and when the finding of the Tribunal is not perverse, no question of law does arise for admission of the appeal. The appeal stands dismissed at admission stage.;