1999 PLP 1943 (PTD)

R.C. Pandey and Mrs. Prem Lata Bansal for Respondent In the return of income filed by the assessee in respect of the assessment year 1989-90 it, inter alia, claimed depreciation amounting to ps.37,69,273 in respect of 15 computers acquired by it on March 15, 1989, stated to be mainly used in the course of carrying on its business. These computers were said to have been purchased by the assessee from Pertech Computers Ltd. (for short "PCL") for an aggregate sum of Rs.50,26,

200. Subsequently, under an agreement, dated March 18, 1989, these computers were said to have been leased out by the assessee to Altos India Ltd. (for short "Altos") for a period of three years against a security deposit of Rs.25,13,

100. The claim of the assessee of depreciation was disallowed by the Assessing Officer. The disallowance was upheld in appeal by the Commissioner of Income-tax (Appeals) as also by the Income-tax Appellate Tribunal. The application of the petitioner filed before the Income-tax Appellate Tribunal under section 256(1) of the Income-tax Act was dismissed holding that the findings recorded by the Tribunal are findings of fact involving no question of law. The assessee has filed the present application under section 256(2) of the Act praying that the Tribunal be directed to state the case and refer for the opinion of this Court, the following questions, stated to be questions of law: "(1) While upholding the disallowance of depreciation amounting to Rs.37,69,273 whether the Income-tax Appellate Tribunal was right in law in holding that the transaction was not genuinely entered into merely because the assessee-company had purchased computers from Pertech Computers Ltd. to whom the same had been leased out, particularly when in other cases, under similar circumstances the purchases were admittedly held to-be genuine? (2) Whether, on the facts and in the circumstances as found by the Tribunal, there was any valid material to come to the conclusion that the agreement of lease of the computers, dated March 18, 1989, between the assessee and Altos was not valid, proper and genuine? (3) Whether, on the facts and circumstances found by the Tribunal and on the correct interpretation of the provisions contained in section 32 of the Income-tax Act, the Income-tax Appellate Tribunal was right in law in holding `that the assessee has rightly been denied the claim of depreciation on computers? (4) Whether the consideration upon which the claim of depreciation aggregating to Rs.37,69,273 has been denied to the assessee can be regarded as valid consideration in law? (5) Whether in view of the fact that Pertech Computers Ltd., the supplier of computers had duly confirmed the delivery to Altos Ltd., Altos Ltd. have accepted to have received the delivery on behalf of the assessee-company, could it be held in law that no delivery was legally made to the assessee-company, depriving himself the benefit of the claim of depreciation of Rs.37,69,273?" At the outset, we may observe that the order of the Tribunal does not show that it took into consideration other transactions said to be admittedly genuine which form part of the aforesaid question No.

1. From the facts found it seems clear that in so far as Altos and Pertech Computers Ltd. are concerned, they belong to same management having Dadan Bhai as one common director. Briefly, the facts found by the Tribunal are these: Altos is the manufacturer of the computers. It sold the computers to Pertech Computers Ltd. its selling agent. Pertech Computers Ltd., in its turn; sold the computers to the assessee. The assessee entered into an agreement of lease with Altos. The computers were given on lease by the assessee to Altos. The Altos, in turn, sub-leases the computers to Pertech Computers Ltd: and Pertech Computers. Ltd. against sub-leased the same computers to various parties at Calcutta. Having noticed these facts, the Tribunal has come to the conclusion that the entire transaction is so interwoven that it gives a colour of a mere paper transaction without any actual transaction of sale; there is no material on record to establish that the title to the computers ever actually passed to the assessee. The total sale consideration of the computers was Rs.50,26,200, out of which Rs.25,13,100 had been received by the assessee from Altos and under the lease agreement of a period of three years the assessee was to realise money at Rs.92,845 per month, i.e.. Rs.11,14,140 per annum. From the facts as found it appears that the assessee had paid to Pertech Computers Ltd. Rs.25,13,100 being the amount arranged from PICUP and Rs.25,13,100 it had received as security deposit under the lease agreement with Altos. Thus, it appears that against the investment of Rs.25,13,100 under the lease agreement it was to receive lease amount of Rs. 11, 14,140 per annum for a period of three years. As already noticed in regard to the transaction between Altos, Pertech Computers Ltd. and the assessee, the Tribunal has concluded that the entire transaction was inter woven, which gives a mere colour of paper transaction without any transaction of actual sale. The main contention urged before us is that the findings/conclusions arrived at by the Tribunal are based on suspicion and surmises and that suspicion, however, strong, cannot partake of the character of evidence, or material and any finding of fact recorded on such a basis is vitiated in law. As a matter of proposition of law, we have no quarrel with the proposition that suspicion, however, strong, cannot partake of the character of evidence. However, in view of the findings of fact noticed by the Tribunal and conclusions arrived at, it cannot be held that the conclusions of the Tribunal are based on mere suspicion or surmises. In this view, the decision of the Supreme Court in Krishna Flour Mills v. CI'T (1962) 44 ITR 501 will have no applicability to the present case. Learned counsel for the petitioner/assessee had submitted that the delivery of the computers was taken by the assessee. Reliance was placed on invoice-cum-challan of Pertech Computers Ltd. That document only shows that delivery was taken by Altos from Pertech Computers Ltd. It is contended that it was taken on behalf of the assessee. The finding arrived at, however is that actual delivery was not taken by the assessee. As noticed hereinbefore the management of Altos and Pertech Computers Ltd. is common. We are in agreement with the conclusion of the Tribunal that the findings recorded by it are findings of fact involving no question of law. In this view, the application is dismissed. No costs. M. B. A./2013/FC Application dismissed.