Sri Renga Apparels India (P) Ltd., Coimbatore V. DCIT, Coimbatore

ITA 1519/CHNY/2012

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 64368 (ITAT-CHENNAI)
• Duration Of Justice: 2 month(s) 6 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 09-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: D
• Next Hearing Date: 09-10-2012
• Assessment Year: 2009-2010
• Appeal Filed On: 02-08-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K E B RENGARAJAN JUNIOR
• Assessee Lawyers: K RAGHU
• Keywords: Depreciation; Source of fund

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, CHENNAI BEFORE SHRI ABRAHAM P. GEORGE, ACCOUNTANT MEMBER AND SHRI S.S. GODARA, JUDICIAL MEMBER I.T.A. NO. 1519/MDS/2012 (ASSESSMENT YEAR : 2009-10) M/S SRI RENGA APPARELS INDIA (P) LTD., NO.68, BHARATHI PARK, 7 TH CROSS, SAIBABA COLONY, COIMBATORE 641 011. PAN : AAHCS1926R (APPELLANT) V. THE DEPUTY COMMISSIONER OF INCOME TAX, COMPANY CIRCLE I(3), COIMBATORE. (RESPONDENT) APPELLANT BY : SHRI K. RAGHU, CA RESPONDENT BY : SHRI K.E.B. RENGARAJAN, JUNIOR STANDING COUNSEL DATE OF HEARING : 09.10.2012 DATE OF PRONOUNCEMENT : 09.10.2012 O R D E R PER ABRAHAM P. GEORGE, ACCOUNTANT MEMBER : IN THIS APPEAL FILED BY THE ASSESSEE, ITS GRIEVAN CE IS THAT THE ASSESSING OFFICER DISALLOWED CLAIM OF DEPRECIATION AND RUNNING EXPENSES RELATING TO A MOTOR CAR AND SUCH DISALLOWA NCES WERE CONFIRMED BY CIT(APPEALS). I.T.A. NO. 1519/MDS/12 2 2. FACTS APROPOS ARE THAT ASSESSEE, ENGAGED IN THE BUSINESS OF MANUFACTURE OF APPARELS, HAD FILED ITS RETURN FOR T HE IMPUGNED ASSESSMENT YEAR DECLARING AN INCOME OF ` 32,12,293/-. DURING THE COURSE OF ASSESSMENT PROCEEDINGS, IT WAS NOTED BY T HE A.O. THAT ASSESSEE HAD CLAIMED DEPRECIATION, INTEREST PAYMENT AND FUEL CHARGES FOR A CAR PURCHASED IN THE NAME OF ONE OF I TS DIRECTORS, NAMELY, SHRI R. PRADEEPKUMAR. AS PER THE A.O., THI S ASSET WAS NOT OWNED BY THE ASSESSEE. ASSESSEE ALSO COULD NOT PRO VE THAT THE VEHICLE WAS USED IN ITS BUSINESS. IN THIS VIEW OF THE MATTER, THE A.O. MADE FOLLOWING DISALLOWANCES PERTAINING TO THE CAR: 1. DEPRECIATION ` 6,15,519 2. INTEREST PAYMENT ` 1,94,097 3. FUEL CHARGES ` 42,743 TOTAL ` `` ` 8,52,359 3. IN ITS APPEAL BEFORE CIT(APPEALS), ARGUMENT OF T HE ASSESSEE WAS THAT THOUGH THE VEHICLE WAS PURCHASED IN THE NA ME OF THE DIRECTOR FOR CONVENIENCE, FUNDS WERE INVESTED BY TH E ASSESSEE ONLY. AS PER THE ASSESSEE, IT WAS DE FACTO OWNER OF THE VEHICLE AND THE SAID DIRECTOR WAS NOT CLAIMING ANY DEPRECIATION ON HIS INDIVIDUAL CAPACITY. RELYING ON THE DECISION OF HONBLE APEX COURT IN THE CASE OF MYSORE MINERALS LTD. V. CIT (239 ITR 775), ASSES SEE ARGUED THAT I.T.A. NO. 1519/MDS/12 3 ANY PERSON IN POSSESSION OF THE PROPERTY IN HIS OWN RIGHT AND EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS, BEING EXCLUDED THEREFROM, COULD BE CONSIDERED AS TH E OWNER AND ELIGIBLE FOR DEPRECIATION. AS PER THE ASSESSEE, THE TRANSACTION OF PURCHASE OF THE VEHICLE WAS REFLECTED IN THE BOOKS OF THE ASSESSEE AND IT WAS AN IMPORTED CAR. 4. HOWEVER, CIT(APPEALS) WAS NOT IMPRESSED. ACCORD ING TO HIM, THE SUBMISSION OF THE ASSESSEE THAT ENTIRE FUNDS CA ME FROM THE ASSESSEE FOR ACQUIRING THE CAR, WAS NOT CORRECT. T HE SOURCE OF FUNDS WERE LOANS TAKEN FROM ICICI BANK LTD. AND AMOUNT GI VEN BY THE ASSESSEE TO THE DIRECTOR SHRI R. PRADEEPKUMAR. THE CAR WAS REGISTERED IN THE NAME OF SHRI R. PRADEEPKUMAR AND THE VEHICLE WAS ONLY A PERSONAL ONE USED BY THE SAID DIRECTOR. THE REFORE, ACCORDING TO CIT(APPEALS), ASSESSEE WOULD NOT BE ELIGIBLE FOR CLAIMING DEPRECIATION ON THE COST OF SUCH VEHICLE OR CLAIM E XPENSES FOR RUNNING OF SUCH VEHICLE. IN THIS VIEW OF THE MATTE R, HE CONFIRMED THE DISALLOWANCES MADE BY THE A.O. 5. NOW BEFORE US, LEARNED A.R., STRONGLY ASSAILING THE ORDERS OF AUTHORITIES BELOW, SUBMITTED THAT THE CAR WAS SHOWN AS PROPERTY OF ASSESSEE-COMPANY. JUST BECAUSE OF THE FACT THAT IT WAS HELD IN THE I.T.A. NO. 1519/MDS/12 4 NAME OF ITS DIRECTOR, IT WAS UNFAIR TO DISALLOW THE CLAIM OF EXPENDITURE RELATING TO CAR, ESPECIALLY, SINCE IT WAS USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ACCORDING TO LEARNED A.R ., CIT(APPEALS) HAD GIVEN A FINDING THAT THE FUNDS FOR ACQUIRING TH E MOTOR VEHICLE HAD NOT COME FROM THE ASSESSEE, WITHOUT PROPER APPRECIA TION OF BOOKS OF THE ASSESSEE. IN THE BOOKS OF ACCOUNTS, THE VEHICL E WAS SHOWN AS AN ASSET OF THE ASSESSEE-COMPANY. THE SAID VEHICLE WA S USED FOR THE PURPOSE OF BUSINESS OF THE ASSESSEE. ASSESSEE HAD A LARGE NUMBER OF BUYERS FROM ABROAD VISITING THEIR COMPANY, IT WA S NECESSARY TO HAVE VEHICLE SUITING THEIR PURPOSE. RELIANCE WAS O NCE AGAIN PLACED ON THE DECISION OF MYSORE MINERALS LTD. (SUPRA). 6. PER CONTRA, LEARNED D.R. STRONGLY SUPPORTED THE ORDERS OF AUTHORITIES BELOW. 7. WE HAVE PERUSED THE ORDERS AND HEARD THE RIVAL SUBMISSIONS. THERE IS NOTHING ON RECORD TO SHOW WHETHER THE CAR IN QUESTION WAS SHOWN AS PART OF THE ASSET OF THE ASSESSEE-COMPANY. ARGUMENT OF THE ASSESSEE THAT IT WAS USED IN THE BUSINESS OF TH E ASSESSEE, HAS NOT BEEN FOUND TO BE INCORRECT BY THE REVENUE. THE REASON FOR MAKING DISALLOWANCE IS THAT THE CAR WAS HELD IN THE NAME OF ONE OF THE ASSESSEES DIRECTOR. IN OUR OPINION, THIS REASO N ALONE WOULD NOT I.T.A. NO. 1519/MDS/12 5 DISQUALIFY THE ASSESSEE FROM CLAIMING DEPRECIATION AND EXPENSES RELATABLE TO CAR, AS LONG AS THE CAR WAS USED FOR T HE BUSINESS PURPOSES OF THE ASSESSEE. BUT, NEVERTHELESS, WE DO ACCEPT THE CONTENTION OF THE LEARNED D.R. THAT THE CAR SHOULD HAVE BEEN SHOWN AS A PART OF THE ASSETS OF THE ASSESSEE-COMPANY. U NLESS AND UNTIL ASSESSEE HAS SHOWN THE CAR AS A PART OF ITS ASSETS, IT CANNOT SAY THAT IT SHOULD BE GIVEN DEPRECIATION AND ALLOWED EXPENSE S RELATING TO THE CAR. WE ARE UNABLE TO FIND FROM THE RECORDS WHETHE R THE CAR WAS SHOWN AS PART OF ASSET OF THE ASSESSEE-COMPANY. TH E ORDERS OF LOWER AUTHORITIES ARE NOT CLEAR IN THIS REGARD. WE ARE, THEREFORE, OF THE OPINION THAT THE MATTER REQUIRES A RE-VISIT BY THE A.O. TO VERIFY THE BOOKS OF THE ASSESSEE AND ASCERTAIN WHETHER THE CAR WAS SHOWN AS ASSET OF THE ASSESSEE. IF IT WAS NOT SHOWN AS ASSE T OF THE COMPANY, BUT, ON THE OTHER HAND, IF THE ASSESSEE HAD ONLY GI VEN LOANS TO ITS DIRECTOR FOR PURCHASE OF THE CAR, IRRESPECTIVE OF T HE FACT WHETHER THE CAR WAS USED BY THE ASSESSEE OR NOT, IT WOULD NOT B E ELIGIBLE FOR CLAIMING DEPRECIATION OR EXPENSES RELATING TO THE C AR. WE, THEREFORE, SET ASIDE THE ORDERS OF THE AUTHORITIES BELOW AND R EMIT THE ISSUE BACK TO THE FILE OF THE A.O. FOR CONSIDERATION AFRESH, I N ACCORDANCE WITH LAW. I.T.A. NO. 1519/MDS/12 6 8. IN THE RESULT, APPEAL FILED BY THE ASSESSEE IS A LLOWED FOR STATISTICAL PURPOSES. THE ORDER WAS PRONOUNCED IN THE COURT ON TUESDAY, T HE 9 TH OF OCTOBER, 2012, AT CHENNAI. SD/- SD/- (S.S. GODARA) (ABRAHAM P. GEORGE) JUDICIAL MEMBER ACCOUNTANT MEMBER CHENNAI, DATED THE 9 TH OCTOBER, 2012. KRI. COPY TO: (1) APPELLANT (2) RESPONDENT (3) CIT(A)-I, COIMBATORE (4) CIT-I, COIMBATORE (5) D.R. (6) GUARD FILE