Vinod Textiles, Ahmedabad V. The ACIT, Circle-7(2), Ahmedabad

ITA 229/AHD/2023

AI Insights

Vinod Textiles appealed against the order of the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre, which had confirmed the disallowance of depreciation on a motor vehicle. The vehicle was registered in the name of Rameshchandra N. Shah, the Karta of an HUF and a partner in Vinod Textiles. The Assessing Officer had disallowed the depreciation claim on the grounds that the vehicle was not purchased with the firm's funds. The Tribunal, after reviewing the financial records and usage of the vehicle, concluded that the vehicle was indeed purchased for the firm's business and allowed the appeal.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 300022 (ITAT-AHMEDABAD)
• Duration Of Justice: 2 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-07-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: SMC
• Next Hearing Date: 02-07-2023
• Assessment Year: 2017-2018
• Appeal Filed On: 09-04-2023
• Laws Referred To: Income-tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Depreciation
• Section: 40(b); 143(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “SMC” BENCH, AHMEDABAD \ BEFORE Ms. SUCHITRA R. KAMBLE, JUDICIAL MEMBER ITA No. 229/Ahd/2023 Assessment Years : 2017-18 Vinod Textiles, Indian Ginning Press, Naroda Road, Naroda, Ahmedabad-380025 PAN : AABFV 2697 P Vs The ACIT, Circle-7(2), Ahmedabad अपीलाथ牸 अपीलाथ牸अपीलाथ牸 अपीलाथ牸/ (Appellant) 灹瀄 灹瀄 灹瀄 灹瀄 यथ牸 यथ牸यथ牸 यथ牸/ (Respondent) Assessee by : Shri M.K. Patel, AR Revenue by : Shri Ramesh Kumar, Sr. DR सुनवाई क琉 तारीख/Date of Hearing : 04/07/2023 घोषणा क琉 तारीख /Date of Pronouncement : 07/07/2023 आदेश आदेशआदेश आदेश/O R D E R This appeal is filed by the assessee against the order dated 02.03.2023 passed by the Commissioner of Income-tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [“CIT(A)” in short] for Assessment Year 2017-18. 2. The Grounds of appeal are as under :- “1. That on facts, and in law, the learned NFAC has grievously erred in confirming the disallowance of depreciation of Rs.59,475/- made by the AO. 2. That on facts, and in law, the learned NFAC has grievously erred in not considering the evidences and submissions and in disallowing the claim of deprecation by making incorrect observations on page 6, para 10.1 of the order under appeal.” 3. The return of income in respect of Assessment year 2017-18 was filed by the assessee on 06.10.2017 declaring total income of Rs.16,95,140/-. Later, the assessee on 11.09.2018 revised its return of income declaring total income of Rs.19,83,890/-. The return filed ITA No. 229/Ahd/2023 Vinod Textiles Vs. ACIT AY : 2017-18 2 was duly processed and the case was selected for complete scrutiny. Notice under Section 143(2) of the Income-tax Act, 1961 [“the Act” in short] was issued on 14.08.2018 and duly served upon the assessee. The assessee filed its reply through e-proceedings. The Assessing Officer observed that the assessee is a firm deriving income from business and profession. The assessee-firm has 7 partners and one partner is in the capacity of HUF i.e. Rameshchandra N. Shah HUF. Regarding the remuneration paid to HUF partner, the Assessing Officer observed that the HUF cannot be a working partner in the firm; therefore, he made disallowance of Rs.5,27,241/-. The Assessing Officer also made a disallowance of Rs.59,475/- towards claim of depreciation, thereby stating that the depreciation claim on motor vehicle is not allowable as the bills and proof of purchase of the asset is in the name of Rameshchandra N. Shah and also registered in the name of Rameshchandra N. Shah. 4. Being aggrieved by the assessment order, assessee filed appeal before the CIT(A). The CIT(A) partly allowed the appeal of the assessee. 5. The learned AR submitted that the CIT(A) has allowed/deleted the disallowance in respect of remuneration paid to HUF partner thereby observing that the salary paid to Karta of HUF, who is a working partner in the firm, would be admissible as deduction under Section 40(b) of the Act. The learned AR further submitted that the depreciation on motor vehicle, which was exclusively purchased by the said partner who is Karta of HUF in assessee’s firm, was disallowed on the basis that the assessee failed to furnish the evidence to show that the vehicle was purchased with the funds of the assessee firm. The learned AR pointed out the Profit and Loss account and the balance-sheet as well as the treatment given by the assessee to the ITA No. 229/Ahd/2023 Vinod Textiles Vs. ACIT AY : 2017-18 3 old car as well as new purchased car along with the bills and invoices to that extent as well as ledger account of the said motor vehicle. 6. The learned DR relied upon the assessment order and the order of the CIT(A). 7. Heard both the parties and perused all the relevant material available on record. It is pertinent to note that there is no dispute in respect of the Karta of HUF who is a working partner in the assessee- firm and the motor vehicle was purchased for the business purpose of the assessee-firm itself. The treatment given by the assessee-firm to the new purchased motor vehicle as well as the old motor vehicle which was sold clearly sets out that fund of the partnership firm was used for purchase of the said motor vehicle and the vehicle is exclusively used for the business purpose only. Merely the vehicle is registered in the name of partner cannot deny the assessee- partnership firm the depreciation on the said vehicle. Therefore, the disallowance made by the Assessing Officer on depreciation of vehicle is not justifiable; hence, the appeal of the assessee is allowed. 8. In the result, the appeal of the assessee is allowed. Order pronounced in the open Court on 07/07/2023 at Ahmedabad. Sd/- (SUCHITRA R. KAMBLE) JUDICIAL MEMBER Ahmedabad, Dated 07/07/2023 *Bt ITA No. 229/Ahd/2023 Vinod Textiles Vs. ACIT AY : 2017-18 4 आदेश क琉 灹ितिलिप अ灡ेिषत/Copy of the Order forwarded to : 1. अपीलाथ牸 / The Appellant 2. 灹瀄यथ牸 / The Respondent. 3. संबंिधत आयकर आयु猴 / Concerned CIT 4. आयकर आयु猴)अपील (/ The CIT(A)- 5. िवभागीय 灹ितिनिध ,आयकर अपीलीय अिधकरण/DR,ITAT, Ahmedabad, 6. गाड榁 फाईल /Guard file. आदेशानुसार/ BY ORDER, TRUE COPY सहायक पंजीकार (Asstt. Registrar) आयकर अपीलीय अिधकरण ITAT, Ahmedabad 1. Date of dictation- ...05.07.2023...... 2. Date on which the typed draft is placed before the Dictating Member ...06.07.2023......... Other member.... .......... 3. Date on which the approved draft comes to the Sr.P.S./P.S. - ...06.07.203......... 4. Date on which the fair order is placed before the Dictating Member for Pronouncement ...07.07.2023 5. Date on which the file goes to the Bench Clerk........ 6. Date on which the file goes to the Head Clerk.................................. 7. The date on which the file goes to the Assistant Registrar for signature on the order......... 8. Date of Despatch of the Order..................