AI Insights
The case revolves around the denial of a depreciation claim by Permeshwar Fashions Impex Pvt. Ltd. for a motor car purchased during the assessment year 2013-14. The car was registered in the name of the company's director, leading the Assessing Officer and the CIT(A) to reject the depreciation claim. The Tribunal examined whether the appellant, being the beneficial owner and using the car for business purposes, was entitled to the depreciation claim despite the car's registration in the director's name. The Tribunal referenced several precedents and judgments, concluding that the appellant was indeed entitled to the depreciation claimed.
Appeal details
Counselvise Citation
[2023] 140 COUNSELVISE.COM (IT) 113456 (ITAT-MUMBAI)
Assessee PAN
Bench
Appeal Number
Duration Of Justice
2 month(s) 28 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
30-01-2023
Appeal Filed By
Assessee
Order Result
Allowed
Bench Allotted
C
Next Hearing Date
09-01-2023
Assessment Year
2013-2014
Appeal Filed On
02-11-2022
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL "C" BENCH, MUMBAI SHRI B.R. BASKARAN, ACCOUNTANT MEMBER SHRI RAHUL CHAUDHARY, JUDICIAL MEMBER ITA No. 2803/MUM/2022 (Assessment Year: 2013-14) Permeshwar Fashions Impex Pvt. Ltd., Plot No. 52, MIDC, Road No. 7, Marol Behind JVJ Orkey Mill, Mumbai - 400053 [PAN: AADCP2827J] The Assistant Commissioner of Income Tax, Circle – 5(2)(2), Mumbai, Aayakar Bhavan, M.K. Road, Mumbai - 400020 .................. Vs ................ Appellant Respondent Appearances For the Appellant/Assessee For the Respondent/Department : : None Smt. Shreekala Pardesi Date of conclusion of hearing Date of pronouncement of order : : 10.01.2023 31.01.2023 O R D E R Per Rahul Chaudhary, Judicial Member: 1. By way of the present appeal the Appellant has challenged the order, dated 06.09.2022, passed by the Ld. Commissioner of Income Tax (Appeals), National Faceless Appeal Centre (NFAC), Delhi [hereinafter referred to as „the CIT(A)‟] for the Assessment Year 2013-14 whereby the Ld. CIT(A) had dismissed the appeal against the Assessment Order, dated 21.01.2016, passed under Section 143(3) of the Income Tax Act, 1961 (hereinafter referred to as „the Act‟). 2. The Appellant has raised following grounds of appeal: “1. The Learned Commissioner of Income-tax Appeal. ITA. No. 2803//Mum/2022 Assessment Year: 2013-14 2 National Faceless Appeal Centre, Delhi has erred in confirming the disallowance of claim of depreciation of Rs 7,37,523/- on Motor Car purchased during the year on ground that the car is purchased in name of the director of the company. 2) The Learned Comm. disallowed the claim of depreciation on the new car purchased during the year on the ground that registration is in name of the director. For the following reasons the Learned Asst Comm. has erred in disallowing the claim of depreciation: i) The car is shown as addition to fixed assets in the audited books of the appellant. ii)) The car is mortgaged by the bankers of the company for various loans taken by the appellant. (iii) The wealth tax returns are filed showing the car as an asset. (iv) The motor car is used for the purposes of the business of the company. (v) The word "owner", as observed by the Supreme Court in B R Jodha Mal Kuthiala v. CIT has different meanings in different contexts and in certain circumstances even a lessee maybe considered as the owner of the property leased to him. (vi) The expression "owned by the assessee" also came up for interpretation before the Allahbad High Court in CIT(Addl) v. U.P.State Agro Industrial Corporation Ltd(127 ITR 97), where the court held that though the ownership was not transferred to the assessee, for all practical purposes the assessee was the owner (vii) The Mumbai Tribunal decision in case of Dhimant Mehta Computing Solutions Pvt Ltd v. ACIT the learned bench have held that it is the beneficial ownership and not titular ownership that is relevant for claim of depreciation under the Income Tax Act, 1961. For this learned Mumbai bench relied on the supreme court decision of Poddar Cement Ltd (226 ITR 625) and Bombay High Court decision of Dilip Singh Sardarsingh Bagga (201 ITR 995).” 3. The sole issue raised in the present appeal pertains to claim of ITA. No. 2803//Mum/2022 Assessment Year: 2013-14 3 depreciation of INR 7,37,523/- in respect of motor car purchased during the relevant previous year. The aforesaid claim of depreciation made by the Appellant was rejected by the Assessing Officer vide Assessment Order dated 21.01.2016, passed under Section 143(3) of the Act. In appeal, the CIT(A) declined to grant any relief and dismissed the appeal. Therefore, the Appellant has preferred the present appeal before us. 4. When the matter was taken up for hearing, none was present for the Appellant. However, on perusing the records, we proceeded to examine issue and adjudicate the appeal on merits after hearing the Ld. Departmental Representative. 5. We have considered the submissions advanced by the Ld. Departmental Representative took us through the order passed by the Assessing Officer and the CIT(A). We have also taken into account the contentions raised by the Appellant before the Assessing Officer and the CIT(A). We find that the Appellant had claimed depreciation of INR 7,37,523/- in respect of motor car which was registered in the name of the director of the Appellant-Company. Before the CIT(A), it was contended that the motor car was shown as addition to the fixed assets in the audited accounts of the Appellant. Further, this motor car was mortgaged with the bank in respect of various loans taken by the Appellant. Even in the wealth tax return of the Appellant, the motor car was shown as asset. Since the motor car was being used for the purpose of business of the Appellant, the Appellant was entitled to claim depreciation in respect of the same. We note that the CIT(A) has recorded these facts in paragraph 2 of the order, but has not controverted the same. The Assessing Officer and the CIT(A) have rejected the claim of ITA. No. 2803//Mum/2022 Assessment Year: 2013-14 4 depreciation on the ground that the Appellant was not registered owner of the motor car and there was no reason why the motorcar could have been registered in the name of the Appellant. We do not agree with the reasoning given by the Assessing Officer and the CIT(A). It is undisputed fact that the payment for the motor car has been made by the Appellant and the same has been mortgaged with bank in relation to loans taken by the Appellant-company. It is also shown as asset of the Appellant in the books of accounts and the wealth tax return. In view of the aforesaid facts, we hold that Appellant is entitled to depreciation on the motor car which was owned by it but not registered in its name. Our view draws strength from the judgment of the Hon‟ble Delhi High Court in the case of CIT Vs. Basti Sugar Mills Co. Ltd: [2002] 257 ITR 88 (Delhi) wherein reference has also been made to the judgment of the Hon‟ble Supreme Court in the case of CIT v. Dilip Singh Sardarsingh Bagga [1993] 201 ITR 995 cited by the Appellant. We note that both the Assessing Officer and the CIT(A) have relied upon the decision of the Mumbai Bench of the Tribunal in the case of Edwise Consultant Private Limited vs. ACIT : [2013] 35 taxmann.com 149 (Mumbai - Trib.) for the Assessment Year 2007-08. However, we note that in appeal for the Assessment Year 2008-09 and 2009-10, the Mumbai Bench of the Tribunal has, by following the judgment of Hon‟ble Delhi High Court in the case of Basti Sugar Mills Co. Ltd. (supra), allowed the claim of depreciation. The relevant extract of the aforesaid decision of the Tribunal in the case of Edwise Consultant Private Limited vs. Deputy Commissioner of Income-tax 4(3), Mumbai: [2017] 83 taxmann.com 27 (Mumbai - Trib.) read as under: “25. We have heard the parties on this issue and perused the record. We notice that the Hon'ble Gujarat High Court ITA. No. 2803//Mum/2022 Assessment Year: 2013-14 5 has considered identical issue in the case of Aravali finlease Ltd. (supra) and has taken the decision that the depreciation is allowable in the hands of the company, even if it is registered in the name of its director provided that the vehicle is used for the purpose of business of company and income derived there from was shown as income of the company. In the instant case there is no dispute with regard to the fact that the vehicles are used for the purpose of business of the assessee company. In the case of Basti Sugar Mills Co. Ltd. (supra), the Hon'ble Delhi High Court approved the decision of the Tribunal in holding that, since vehicle is a movable asset, the registration as required in the case of transfer of immovable property is not a condition precedent for legal ownership. In the instant case, the funds for purchase of vehicles have been provided by the assessee company and they have been shown as assets of the assessee company. Hence, in our view, the assessee company should be considered as owner for all practical purposes and hence it is entitled for depreciation. In view of the direct decision of Hon'ble Gujarat High Court is available on this issue, we prefer to follow the same to that rendered by the Tribunal in the assessee's own case for AY 2007-08. Accordingly, we set aside the order of Ld CIT(A) on this issue and direct the AO to allow depreciation on vehicles.” 6. In view of the above, the order of CIT(A) is overturned, the Appellant‟s claim of depreciation is allowed, and the disallowance of depreciation of INR 7,37,523/- made by the Assessing Officer is deleted. Ground No. 1 and 2 raised by the Appellant are allowed. 7. In the result, the present appeal is allowed. Order pronounced on 31.01.2023. Sd/- (B.R. Baskaran) Accountant Member (Rahul Chaudhary) Judicial Member म ुंबई Mumbai; दिन ुंक Dated : 31.01.2023 Alindra, PS ITA. No. 2803//Mum/2022 Assessment Year: 2013-14 6 आदेश की प्रतितिति अग्रेतिि/Copy of the Order forwarded to : 1. अपील र्थी / The Appellant 2. प्रत्यर्थी / The Respondent. 3. आयकर आय क्त(अपील) / The CIT(A)- 4. आयकर आय क्त / CIT 5. दिभ गीय प्रदिदनदि, आयकर अपीलीय अदिकरण, म ुंबई / DR, ITAT, Mumbai 6. ग र्ड फ ईल / Guard file. आिेश न स र/ BY ORDER, सत्य दपि प्रदि //True Copy// उप/सह यक पुंजीक र /(Dy./Asstt. Registrar) आयकर अपीलीय अदिकरण, म ुंबई / ITAT, Mumbai
Mehul