M/s ALD Automotive Pvt. Ltd, Thane V. PCIT, Mumbai-3, Mumbai

ITA 1859/MUM/2022

AI Insights

M/s. ALD Automotive Pvt. Ltd. appealed against the revision order passed by the PCIT-3, Mumbai, which pertained to the assessment year 2015-16. The revision order challenged the initial assessment made under section 143(3) of the Income Tax Act, 1961, claiming it was erroneous and prejudicial to the interests of the revenue. The issues under scrutiny included the claim of depreciation on leased assets, examination of commission expenses, payment of information technology fees, and the handling of a foreign currency loan. The Tribunal found that while some issues had been adequately addressed by the assessing officer, others required further examination, leading to a partial allowance of the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 123909 (ITAT-MUMBAI)
• Duration Of Justice: 5 month(s) 12 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 16-10-2022
• Assessment Year: 2015-2016
• Appeal Filed On: 21-07-2022
• Other Referred Cases: ICDS Ltd vs. CIT (2013) (350 ITR 527) (SC)
• Laws Referred To: Income Tax Act
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 263; 2

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI ‘A’ BENCH, MUMBAI. Before Shri B.R. Baskaran (AM) & Smt. Kavitha Rajagopal (JM) I.T.A. No. 1859/Mum/2022 (A.Y. 2015-16) M/s. ALD Automotive Pvt. Ltd. 9 th Floor, Ashar IT. Park B-Wing, Road No. 16/Z Neheru Nagar, Wagle Industrial Estate, Thane West Pincode No. - 400 604. PAN : AAFCA0924K V s . PCIT-3 Room No. 612 6 th Floor Aayakar Bhavan M.K. Road Mumbai-400 020. (Appellant) (Respondent) Assessee by Shri Brijmohan Agarwal Department by Ms. Mamta Bansal D ate of He a rin g 17.10.2022 D ate of P r on ou nc em ent 04.01.2023 O R D E R Per B.R.Baskaran (AM) :- The assessee has filed this appeal challenging the revision order dated 31-03-2021 passed by learned PCIT-3, Mumbai and it relates to the assessment year 2015-16. The assessee is challenging the validity of the revision order passed by learned PCIT. 2. The assessment in the hands of the assessee was completed by the assessing officer under section 143 (3) of the Act for assessment year 2015- 16 on 20-12-2017. The Learned PCIT examined the assessment record and noticed that the assessing officer has not made enquiries properly on the following issues (a) depreciation on leased assets (b) commission expenses (c) payment of information technology fees (d) loan taken from society general Paria. M/s. ALD Automotive Pvt. Ltd. 2 Accordingly, the Learned PCIT took the view that the assessment order is erroneous and prejudicial to the interests of the revenue. Accordingly, he initiated revision proceedings under section 263 of the Act on the above said issues. 3. Before the Learned PCIT, the assessee contended that the assessing officer has made necessary enquiries with regard to the above said issues and has taken possible view of the matter. Accordingly it was contended that the impugned revision proceedings should be dropped. The Learned PCIT noticed that the assessing officer has simply raised queries on the above said issues and thereafter did not take any action thereon. Accordingly, invoking Explanation 2 of section 263, the learned PCIT held that the assessment order is erroneous and prejudicial to the interest of the revenue. Accordingly he set aside the assessment order and directed AO to make detailed verification of the issues discussed above. The assessee is aggrieved. 4. We heard the parties and perused the record. The assessee is engaged in the business of leasing out motor vehicles to various corporate customers under operating lease. 5. The 1 st issue raised by Learned PCIT relates to the claim of depreciation on vehicles leased out by it. We noticed that the assessee was leasing out vehicles under operating lease basis and accordingly claimed depreciation thereon contending that it continued to be owner of the vehicles. The learned PCIT has expressed view that the assessing officer has not examined the claim of depreciation. The learned AR submitted that the assessing officer has called for details of depreciation during the course of assessment proceedings. In this regard, the learned AR invited our attention to the reply dated 26 th of September, 2017 filed by the assessee before the assessing officer, wherein the assessee has given detailed explanation with regard to the claim of depreciation. The learned AR further submitted that the issue of depreciation has since been settled by the ITAT in the assessee’s own case in M/s. ALD Automotive Pvt. Ltd. 3 its favour in ITA No. 2179 and 601/Mum/2013 relating to assessment years 2008-2009 and 2007-2008, wherein the Hon’ble ITAT has held that the assessee is eligible for depreciation on the assets leased out to its customers, since the lease is a operating lease where risk and reward of ownership are not transferred. In this regard, the ITAT has followed the decision rendered by Honourable Supreme Court in the case of ICDS Ltd vs. CIT (2013) (350 ITR 527) (SC). Accordingly, the learned AR submitted that the direction issued by Learned PCIT on this issue is liable to be set-aside. 6. We heard learned DR on this issue and perused the records. Since the Tribunal has already decided this issue in earlier years holding that the assessee is eligible to claim depreciation on the assets leased out by it under operating lease basis and since the AO has also raised queries on this issue and considered the replies given by the assessee, we are of the view that the AO has taken possible view of the matter on proper application of mind. Accordingly we are of the view that the learned PCIT was not justified in passing revision order on this issue. Accordingly we set aside the order passed by learned PCIT on this issue. 7. The next issue raised by Ld PCIT relates to commission expenses claimed by the assessee. The PCIT noticed that the commission expenses claimed by the assessee have increased from 87.12 lakhs to ₹ 158.36 lakhs during the year under consideration. The learned PCIT noticed that the AO has not examined this issue properly. It was submitted before the Principal Commissioner that the assessing officer has called for details of commission expenses during the course of assessment proceedings. From the break-up details furnished by the assessee before AO, we notice that, during the year under consideration, the assessee has paid major amount of commission to M/s Maruti Suzuki India Ltd. (Rs.53.97 lakhs) and to M/s. pinnacle India (₹ 85.62 lakhs). It was submitted that the assessee got major business from above said 2 concerns, which has resulted in the increase in commission M/s. ALD Automotive Pvt. Ltd. 4 expenses. It was submitted that the assessee has duly deducted tax at source from the above said payments. 8. The case of learned PCIT is that the assessing officer has simply called for details and did not examine them properly. 9. We heard the parties on this issue and perused the records. The details of commission have been furnished by the assessee through the letter dated 26 th of September 2017 filed before the AO during the course of assessment proceedings. However, as observed by Learned PCIT, the AO has not carried out any verification with regard to the cause of increase in the commission expenses, i.e., any prudent officer would have examined the payment of commission expenses with reference to the claim of increase in business of the assessee which had necessitated the payment of commission. In the absence of such enquiry, we agree with the view taken by Learned PCIT that the assessing officer has not properly examined this issue. Accordingly we confirm the order passed by learned PCIT on this issue. 10. The next issue relates to payment of Information technology fee of ₹ 97.44 lakhs during the course of assessment proceeding. We notice that the AO has raised query on this issue and the assessee has furnished copies of agreement entered between the assessee and its AE for providing information technology services to the assessee. We noticed that, apart from obtaining the agreement, the AO has not taken any steps to examine this issue further during the course of assessment proceeding. Mere obtaining copy of agreement, in our view, does not amount examination of the issue and it cannot be taken as a case of taking possible view. Accordingly we agree with the view taken by learned PCIT that the assessing officer has not properly examined to this issue. Accordingly we confirm the order passed by learned PCIT on this issue. M/s. ALD Automotive Pvt. Ltd. 5 11. The last issue raised by Ld PCIT relates to the foreign currency loan taken by the assessee from its AE named Society General Paris. In this case also, the assessing officer has obtained the copy of agreement entered for taking loan from its AE. Thereafter he did not examine the issue further. In the reply given, the assessee has submitted that there was gain in view of the appreciation of rupee. It is quiet normal to examine the tax implications on the gain arising on account of foreign exchange fluctuation. Mere obtaining copy of agreement, in our view, does not amount examination of the issue and it cannot be taken as a case of taking possible view. Accordingly we agree with the view taken by learned PCIT that the assessing officer has not properly examined this issue. Accordingly we confirm the order passed by learned PCIT on this issue. 12. In the result, the appeal filed by the assessee is partly allowed. Pronounced in the open court on 4.1.2023 Sd/- Sd/- (KAVITHA RAJAGOPAL) (B.R. BASAKARAN) Judicial Member Accountant Member Mumbai; Dated : 04/01/2023 Copy of the Order forwarded to : 1. The Appellant 2. The Respondent 3. The CIT(A) 4. CIT 5. DR, ITAT, Mumbai 6. Guard File. BY ORDER, //True Copy// (Assistant Registrar) PS ITAT, Mumbai