LITOLIER INTERIORS P. LTD, MUMBAI V. ACIT 5(2), MUMBAI

ITA 313/MUM/2010

• Counselvise Citation: 31319914 RSA 2010
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-04-2011
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2005-2006
• Appeal Filed On: 13-01-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SHRAVAN KUMAR
• Keywords: Depreciation
• Section: 5(2)

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES A, MUMBAI BEFORE SHRI R.V. EASWAR, HONBLE PRESIDENT AND SHRI R.K. PANDA, A.M. ITA NO.313/MUM/2010 ASSESSMENT YEAR : 2005-06 M/S. LITOLIER INTERIORS P. LTD. CHATURVEDI SOHAN & CO. 320, TULSIANI CHAMBERS, 212, NARIMAN POINT, MUMBAI PAN NO. : AAACL6987E VS. ACIT 5(2) AAYAKAR BHAVAN, MAHARSHI KARVE ROAD, MUMBAI. (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI PIYUSH CHATURVEDI RESPONDENT BY : SHRI SHRAVAN KUMAR O R D E R PER R.K. PANDA, A.M. THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST THE ORDER DATED 18.11.2009 OF THE CIT(A)-9, MUMBAI RELATING TO ASS ESSMENT YEAR 2005-06. 2. THE GROUND OF APPEAL NO.1 RAISED BY THE ASSESSEE READS AS UNDER: 1. THE LD.CIT(A) HAS ERRED IN DISALLOWING THE ENT IRE CLAIM OF DEPRECIATION OF `. 1,76,306/- ON CAR AND THEREBY MAKING ENHANCEMENT OF INCOME BY `. 1,05,784/- INSTEAD OF ALLOWING RELIEF ON ACCOUNT OF DISALLOWANCE OF DEPRECIATION ON CAR A T `. 70,522/- WITHOUT APPRECIATING THE FACTS OF THE CASE. 3. FACTS OF THE CASE, IN BRIEF, ARE THAT THE AO IN THE ASSESSMENT ORDER DISALLOWED THE DEPRECIATION OF `. 70,522/-, BEING 40% OF THE DEPRECIATION ON MOTOR CAR CLAIMED BY THE ASSESSEE AT `. 1,76,306/-, ON ACCOUNT OF PROBABLE PERSONAL USE OF CAR BY DIRECTOR OF THE ASSESSEE COM PANY. 2 4. THE LEARNED CIT(APPEALS) NOTED THAT THE CAR ON W HICH DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE, IS NOT REGISTERED IN THE NAME OF THE ASSESSEE COMPANY. ACCORDING TO HIM, THE DEPRECIATION IS TO B E ALLOWED ONLY IF THE ASSESSEE IS THE OWNER OF THE ASSET AND IT USES FOR THE PURPOSE OF BUSINESS. SINCE, THE ASSESSEE IN THE INSTANT CASE IS NOT THE OWNER OF THE CAR, HE ASKED THE ASSESSEE TO EXPLAIN WHY THE DEPRECIATION CLAIME D ON CAR SHOULD NOT BE DISALLOWED AND WHY ITS INCOME SHOULD NOT BE ENHANCE D ON THIS ACCOUNT. 4.1 THE ASSESSEE REPLIED THAT PAYMENT FOR THE PURCH ASE OF CAR WAS MADE BY THE COMPANY. ONLY THE CAR IS REGISTERED IN THE NAME OF MRS. NIRUPMA MITTAL, DIRECTOR OF THE ASSESSEE COMPANY. THE ASSESSEE COMP ANY IS ALSO PAYING INSTALMENTS OF LOAN TAKEN FOR THE PURCHASE OF THE C AR. IT WAS SUBMITTED THAT THE COMPANY HAD AUTHORISED THE DIRECTOR TO PURCHASE THE CAR IN HER NAME. RELYING ON A COUPLE OF DECISIONS, IT WAS SUBMITTED THAT THE ASSESSEE IS ENTITLED TO CLAIM DEPRECIATION ON THE CAR, WHICH IS USED FOR THE PURPOSE OF THE BUSINESS OF THE ASSESSEE COMPANY, ALTHOUGH REGISTERED IN THE NAME OF THE DIRECTOR. 5. HOWEVER, THE LEARNED CIT(APPEALS) WAS NOT SATISF IED WITH THE EXPLANATION GIVEN BY THE ASSESSEE. DISTINGUISHING THE VARIOUS D ECISIONS CITED BEFORE HIM, HE NOTED THAT THE DEPRECIATION ON AN ASSET IS TO BE ALLOWED, IF IT IS OWNED BY THE PERSON AND IS USED BY THE PERSON FOR THE PURPOS E OF ITS BUSINESS. HOWEVER, IF FOR ANY REASON, THERE IS ANY DIFFICULTY IN GETTI NG LEGAL OWNERSHIP TRANSFERRED OR IT CANNOT BE TRANSFERRED IN THE NAME OF A PERSON , THEN DEPRECIATION CANNOT BE DISALLOWED ONLY ON THE GROUND THAT THE LEGAL OWN ERSHIP OF THE ASSET DOES NOT LIE WITH THE PERSON. IN SUCH A CASE, DEPRECIATI ON HAS TO BE ALLOWED, EVEN IF THE PERSON IS NOT THE OWNER OF THE ASSET. HOWEVER, IN THE INSTANT CASE, THERE WAS NO SUCH DIFFICULTY IN GETTING THE VEHICLE REGIS TERED IN THE NAME OF THE ASSESSEE. THE ASSESSEE HAS ALSO NOT EXPLAINED AS TO WHY HE GOT THE VEHICLE REGISTERED IN THE NAME OF THE DIRECTOR. THE ASSESSE E HAS ALSO NOT FILED ANY EVIDENCE TO SHOW THAT THE SAID VEHICLE WAS REGISTER ED FOR THE PURPOSE OF COMMERCIAL USE. WHEN THE VEHICLE REGISTERED FOR THE PURPOSE OF PERSONAL USE, THE ASSESSEE CANNOT CLAIM DEPRECIATION STATING THAT THE SAME IS USED FOR THE PURPOSE OF BUSINESS. HE ACCORDINGLY, DISALLOWED THE ENTIRE CLAIM OF 3 DEPRECIATION OF `. 1,76,306/- ON CAR AND THEREBY MAKING ENHANCEMENT OF INCOME BY `. 1,05,784/-. 6. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(APP EALS), THE ASSESSEE IS IN APPEAL BEFORE US. 7. THE LEARNED COUNSEL FOR THE ASSESSEE AT THE OUTS ET DREW THE ATTENTION OF THE BENCH TO THE ORDER OF THE TRIBUNAL IN ASSESSEE S OWN CASE FOR A.Y. 2003-04 & 2004-05. THE LEARNED COUNSEL FOR THE ASSESSEE REF ERRING TO THE PAGE 41 OF THE PAPER BOOK DREW THE ATTENTION OF THE BENCH TO T HE PAYMENTS MADE BY THE ASSESSEE COMPANY TO AUTO HANGER (I) LTD. ON 25.08.2 001 AMOUNTING TO `. 3,82,435/-. HE FURTHER SUBMITTED THAT THE BALANCE A MOUNT OF `. 10,90,104/- WAS FINANCED BY ICICI BANK WITH 11 EMI OF `. 1,02,896/-. REFERRING TO THE BOARD RESOLUTION DATED 04.07.2001, HE SUBMITTED THA T THE COMPANY HAS RESOLVED THAT THE VEHICLE SHOULD BE PURCHASED IN TH E NAME OF MRS. NIRUPMA MITTAL, DIRECTOR OF THE ASSESSEE COMPANY FOR THE OF FICIAL PURPOSE OF THE COMPANY. HE SUBMITTED THAT IN THE PAST ALSO DEPRECI ATION WAS ALLOWED AND ONLY FOR THIS ASSESSMENT YEAR, THE LEARNED CIT(APPE ALS) INSTEAD OF ALLOWING THE DEPRECIATION HAS ENHANCED THE SAME BY DISALLOWING T HE ENTIRE AMOUNT OF DEPRECIATION. REFERRING TO THE PARA 22 OF THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE IN THE ASSESSMENT YEAR 2004-05, HE SUBMITT ED THAT THE TRIBUNAL FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SAYAJI IRON & ENGG. CO. VS. CIT (2002) REPORTED IN 253 ITR 749, HAD DELETED THE DEPRECIATION WHICH WAS DISALLOWED BY THE AO, AND CO NFIRMED BY THE LEARNED CIT(APPEALS). THEREFORE, THIS BEING A COVERED MATTE R IN FAVOUR OF THE ASSESSEE, THE ENTIRE DEPRECIATION SHOULD BE ALLOWED. 8. THE LEARNED DR ON THE OTHER HAND, SUPPORTED THE ORDER OF THE LEARNED CIT(APPEALS). 9. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS MADE BY BOTH THE SIDES, PERUSED THE ORDERS OF THE AO AND THE LEARNED CIT(AP PEALS) AND THE PAPER BOOK FILED BEFORE US. WE HAVE ALSO CONSIDERED THE DECISI ONS CITED BEFORE US. THERE IS NO DISPUTE TO THE FACT THAT THE MOTOR CAR HAS BEEN PURCHASED IN THE NAME OF ONE OF THE DIRECTOR, ALTHOUGH THE PAYMENTS HAVE BEE N MADE BY THE ASSESSEE 4 COMPANY. WE FIND THE AO DISALLOWED 40% OF THE DEPRE CIATION ON MOTOR CAR ON ACCOUNT OF PROBABLE PERSONAL USE OF THE MOTOR CAR B Y THE DIRECTOR OF THE ASSESSEE COMPANY. WE FIND THE LEARNED CIT(APPEALS) DISALLOWED THE ENTIRE DEPRECIATION AND THEREBY, ENHANCING THE DISALLOWANC E OF DEPRECIATION ON THE GROUND THAT THE MOTOR CAR HAS NOT BEEN REGISTERED I N THE NAME OF THE ASSESSEE COMPANY, AND IT HAS BEEN REGISTERED IN THE NAME OF ONE OF THE DIRECTORS. FROM THE DETAILS FURNISHED BY THE ASSESSEE, WE FIND THE CAR HAS BEEN PURCHASED DURING THE FINANCIAL YEAR 2001-02, RELEVANT TO ASSE SSMENT YEAR 2002-03 AND THE DEPRECIATION HAS BEEN CLAIMED BY THE ASSESSEE O N MOTOR CAR SINCE THEN. FROM THE ORDER OF THE TRIBUNAL WE FIND THE DISALLOW ANCE OF PART DEPRECIATION OF ` .95,159/- AND MOTOR CAR EXPENSES OF ` .2,01,789/- MADE BY THE AO AND UPHELD BY THE LEARNED CIT(APPEALS) HAS BEEN DELETED BY THE TRIBUNAL FOLLOWING THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN T HE CASE OF SAYAJI IRON & ENGG. CO. (SUPRA), ON THE GROUND THAT THERE COULD B E NO PERSONAL USE OF THE MOTOR CAR BY THE COMPANY SINCE IT IS ONLY A JURISTI C IDENTITY. 10. RESPECTFULLY, FOLLOWING THE DECISION OF THE TRI BUNAL IN ASSESSEES OWN CASE AND CONSIDERING THE FACT THAT THE ASSESSEE COM PANY WAS ALLOWED DEPRECIATION FROM A.Y. 2002-03 ONWARDS ON ACCOUNT O F MOTOR CAR USED BY THE ASSESSEE COMPANY, ALTHOUGH STANDS IN THE NAME OF ON E OF THE DIRECTOR OF THE ASSESSEE COMPANY, WE HOLD THAT THE ASSESSEE IS ENTI TLED TO DEPRECIATION ON MOTOR CAR AND NO PART OF THE SAME CAN BE DISALLOWED FOR PROBABLE PERSONAL USE. WE, THEREFORE, SET ASIDE THE ORDER OF THE LEAR NED CIT(APPEALS) AND DIRECT THE AO TO DELETE THE DISALLOWANCES ON DEPRECIATION. THE GROUND APPEAL NO.1 RAISED BY THE ASSESSEE IS ACCORDINGLY, ALLOWED. 11. THE GROUND APPEAL NO.2 RAISED BY THE ASSESSEE R EADS AS UNDER :- 2. THE LD.CIT(A) HAS ERRED IN UPHOLDING THE MISC. EXPENSES PAID TO SHRI. Y.E. NALWALA AT ` .50,000/- AND TO SHRI SHAHSI WALNE AT ` .25,000/- AGGREGATING TO ` .75,000/- AS MADE BY THE A.O. WITHOUT APPRECIATING THE FACTS OF THE CASE. 12. FACTS OF THE CASE, IN BRIEF, ARE THAT THE ASSES SEE HAS MADE PAYMENT OF ` .50,000/- TO SHRI. Y.E. NALWALA AND ` .25,000/- TO SHRI SHAHSI WALNE AND TREATED THE SAME AS MISC. EXPENSES. ON BEING QUESTI ONED BY THE AO, IT WAS 5 SUBMITTED THAT THE PAYMENTS TO THE ABOVE TWO PARTIE S WERE MADE FOR CERTAIN WORK WHICH THEY COULD NOT COMPLETE. THEREFORE, THE AMOUNTS WERE DEBITED AS EXPENSES UNDER THE HEAD OF MISC. EXPENSES. SINCE, T HE ASSESSEE HAD NOT PROVIDED THE DETAILS OF THE PAYMENTS MADE, NOR PROV IDED THE NATURE OF WORK ASSIGNED TO THESE TWO PERSONS, THE AO DISALLOWED TH E EXPENSES. 13. BEFORE THE LEARNED CIT(APPEALS), THE ASSESSEE S UBMITTED THAT THESE TWO PARTIES WERE SUPPOSED TO DO PAINTING WORK, BUT AFTE R TAKING THE PAYMENTS THESE PARTIES DISAPPEARED. THEREFORE, THE ADVANCES GIVEN DURING THE COURSE OF BUSINESS WAS WRITTEN OFF U/S. 28(1) OF THE I.T. ACT , AS BUSINESS LOSS. THEREFORE, THE CLAIM OF DEDUCTION SHOULD BE ALLOWED. HOWEVER, THE LEARNED CIT(APPEALS), REJECTED THE CONTENTION OF THE ASSESSEE ON THE GROU ND THAT THE ASSESSEE FILED NO EVIDENCE TO SUBSTANTIATE THAT THE PAYMENTS WERE MADE TO THE ABOVE TWO PARTIES DURING THE COURSE OF BUSINESS. NO BILLS OR VOUCHERS EVIDENCING THE PAYMENT TO THESE PERSONS WERE PRODUCED. THEREFORE, THE CLAIM CANNOT BE ALLOWED. 14. AGGRIEVED WITH SUCH ORDER OF THE LEARNED CIT(AP PEALS), THE ASSESSEE IS IN APPEAL BEFORE US. 15. AFTER HEARING BOTH THE PARTIES WE FIND THAT THE AMOUNT OF ` .25,000/- HAS BEEN PAID TO SHRI SHAHSI WALNE ON 02.08.2003 AND TH E AMOUNT OF ` .50,000/- PAID TO SHRI. Y.E. NALWALA ON 09.06.2000. ADMITTED LY, THE ABOVE PAYMENTS DO NOT RELATE TO THIS YEAR. THE ASSESSEE HAS NOT PRODU CED ANY EVIDENCE EITHER BEFORE THE LEARNED CIT(APPEALS) OR BEFORE THE AO OR EVEN BEFORE US, TO SUBSTANTIATE THAT THE PAYMENTS TO THESE PERSONS WER E MADE FOR THE PURPOSE OF BUSINESS AND MADE DURING THE COURSE OF BUSINESS. SI NCE THE PAYMENTS DID NOT RELATE TO THIS YEAR, THE SAME CANNOT BE ALLOWED AS BUSINESS LOSS. IN THE ABSENCE OF ANY SATISFACTORY EVIDENCE TO SUBSTANTIAT E THE EXPENSES, THE SAME IN OUR OPINION CANNOT BE ALLOWED AS MISC. EXPENSES ALS O. IN THIS VIEW OF THE MATTER, GROUND NO.2 RAISED BY THE ASSESSEE IS DISMI SSED. 16. THE GROUND APPEALS NO.3 & 4 RAISED BY THE ASSES SEE ARE AS UNDER :- 6 3. THE LD.CIT(A) HAS ERRED IN UPHOLDING THE DISALL OWANCE OF ` .4,84,614/- AS MADE BY THE A.O. RELATING TO BOAT OP ERATING EXPENSES WITHOUT APPRECIATING THE FACTS OF THE CASE . 4. THE LD.CIT(A) HAS ERRED IN UPHOLIDING THE DISALL OWANCE OF ` .5,16,280/- AS DEPRECIATION OF BOAT AS MADE BY THE A.O. WITHOUT APPRECIATING THE FACTS OF THE CASE. 17. THE LEARNED COUNSEL FOR THE ASSESSEE FAIRLY CON CEDED THAT THE ABOVE TWO GROUNDS ARE AGAINST THE ASSESSEE BY THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE A.Y. 2003-04 AND 2004-05, A COPY O F WHICH WAS FILED BY HIM AT THE TIME OF HEARING. IN VIEW OF THE ABOVE SUBMIS SION BY THE LEARNED COUNSEL FOR THE ASSESSEE AND IN THE ABSENCE OF ANY OBJECTIO N FROM THE LD. DR, THE ABOVE TWO GROUNDS RAISED BY THE ASSESSEE ARE DISMIS SED. 18. THE GROUND APPEAL NO. 5 & 6 BEING GENERAL IN NA TURE ARE DISMISSED. 19. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS PARTLY ALLOWED. ORDER PRONOUNCED ON THIS 27 TH DAY OF APRIL, 2011. SD/- (R.V. EASVAR) HON'BLE PRESIDENT SD/- (R.K. PANDA) ACCOUNTANT MEMBER MUMBAI, DATED : 27/04/2011 COPY FORWARDED TO : 1. THE APPELLANT, 2. THE RESPONDENT, 3. THE C.I.T. 4. CIT (A) 5. THE DR, A - BENCH, ITAT, MUMBAI //TRUE COPY// BY ORDER ASSISTANT REGISTRAR ITAT, MUMBAI BENCHES, MUMBAI ROSHANI