GILL & CO. P.LTD, MUMBAI V. ACIT CIR 2(1), MUMBAI

ITA 3723/MUM/2010

• Counselvise Citation: [2011] 140 COUNSELVISE.COM (IT) 55524 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 5 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-10-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: G
• Next Hearing Date: 03-10-2011
• Assessment Year: misc
• Appeal Filed On: 10-05-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: PARTHA SARATHI NAIK
• Keywords: Depreciation; Opportunity of being heard
• Section: 14A

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCH G, MUMBAI BEFORE SHRI N.V. VASUDEVAN, J.M. AND J. SUDHAKAR RE DDY, A.M. ITA NO. 3723/MUM/2010 ASSESSMENT YEAR : 2006-07 M/S GILL & CO. PVT. LTD., APPELLANT NTC HOUSE, NARROTTHAM MORARJI MARG, BALLARD ESTATE, MUMBAI 400 038. VS. ASSTT. COMMISSIONER OF INCOME-TAX, RES PONDENT CIRCLE 2(1), AAYKAR BHAVAN, MUMBAI. APPELLANT BY : NONE RESPONDENT BY : MR. PARTHASARATHI NAIK DATE OF HEARING : 03/10/2011 DATE OF PRONOUNCEMENT : 14/10 /2011 ORDER PER J. SUDHAKAR REDDY, A.M.: THIS APPEAL FILED BY THE ASSESSEE ARE DIRECTED AGA INST THE ORDER OF CIT(A)-4, MUMBAI, DATED 01/04/2010 FOR THE ASSES SMENT YEAR 2006-07. 2. NONE APPEARED ON BEHALF OF THE ASSESSEE AT THE T IME OF HEARING BEFORE US DESPITE ISSUE OF NOTICE BY RPAD AND THE A CKNOWLEDGMENT OF WHICH IS ON RECORD. EVEN THERE IS NO APPLICATION FO R THE ADJOURNMENT. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT APPEAL MAY BE DISPOSED OF EXPARTE QUA THE ASSESSEE ON MERITS AFTE R HEARING THE LEARNED DR. 3. GROUND NOS. 1 TO 6 ARE ON THE ISSUE OF DISALLOWA NCE U/S 14A READ WITH RULE 8D. THE CIT(A) HAS FOLLOWED THE DECI SION OF SPECIAL BENCH OF ITAT, IN THE CASE OF DAGA CAPITAL & MANAGE MENT PVT. LTD., ITA NO. 3723/MUM/10 M/S GILL & CO. PVT. LTD. 2 119 TTJ 289. THIS ISSUE IS COVERED BY THE JUDGMENT OF THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & B OYCE MFG. CO. LTD., [2010] 328 ITR 81 (BOM.) WHEREIN THE HONBLE COURT HELD AS UNDER:- THAT THE PROVISIONS OF RULE 8D OF THE RULES WHICH H AVE BEEN NOTIFIED WITH EFFECT FROM MARCH 24, 2008, WOULD APP LY WITH EFFECT FROM ASSESSMENT YEAR 2008-09. EVEN PRIOR TO ASSESSM ENT YEAR 2008-09, WHEN RULE 8D WAS NOT APPLICABLE, THE AO HA D TO ENFORCE THE PROVISIONS OF SUB-SECTION (1) OF SECTION 14A. F OR THAT PURPOSE, THE AO IS DUTY BOUND TO DETERMINE THE EXPENDITURE W HICH HAS BEEN INCURRED IN RELATION TO INCOME WHICH DOES NOT FORM PART OF THE TOTAL INCOME UNDER THE ACT. THE AO MUST ADOPT A REASONABLE BASIS OR METHOD CONSISTENT WITH ALL THE RELEVANT FA CTS AND CIRCUMSTANCES AFTER FURNISHING A REASONABLE OPPORTU NITY TO THE ASSESSEE TO PLACE ALL GERMANE MATERIAL ON THE RECOR D. THE PROCEEDINGS FOR ASSESSMENT YEAR 2002-03 WOULD STAND REMANDED TO THE AO. THE AO SHOULD DETERMINE AS TO WHETHER TH E ASSESSEE HAD INCURRED ANY EXPENDITURE (DIRECT OR INDIRECT) I N RELATION TO DIVIDEND INCOME/INCOME FROM MUTUAL FUNDS WHICH DOES NOT FORM PART OF THE TOTAL INCOME AS CONTEMPLATED UNDER SECT ION 14A. THE AO CAN ADOPT A REASONABLE BASIS FOR EFFECTING THE A PPORTIONMENT. WHILE MAKING THAT DETERMINATION, THE AO SHOULD PROV IDE A REASONABLE OPPORTUNITY TO THE ASSESSEE OF PRODUCING ITS ACCOUNTS AND RELEVANT OR GERMANE MATERIAL HAVING A BEARING O N THE FACTS AND CIRCUMSTANCES OF THE CASE. 5. IN VIEW OF THE RATIO LAID DOWN BY THE HONBLE JU RISDICTIONAL HIGH COURT IN THE CASE OF GODREJ & BOYCE MFG. CO. LTD. ( SUPRA), WE SET ASIDE THE MATTER BACK TO THE FILE OF THE AO WITH A DIRECT ION TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF THE SAID JUDGMENT OF T HE HONBLE JURISDICTIONAL HIGH COURT AFTER PROVIDING REASONABL E OPPORTUNITY OF BEING HEARD TO THE ASSESSEE. 6. GROUND NO. 7 IS ON THE ISSUE OF DISALLOWANCE OF DEPRECIATION ON TWO VEHICLES. 7. DISALLOWANCE HAS BEEN MADE ON THE GROUND THAT TH E VEHICLES HAVE BEEN PURCHASED BY THE COMPANY IN THE NAME OF T HE DIRECTORS. THE CIT(A) OBSERVED AT PAGE 5 PARA 14 & 15 IN HIS O RDER AS FOLLOWS:- 14. A REMAND REPORT WAS CALLED FOR FROM THE AO AS T HE AO HAS NOTED THAT NO DETAILS WERE FILED BEFORE HIM. THE AR SUBMITTED THAT DETAILS OF THESE VEHICLES ARE AVAILABLE IN THE BALANCE SHEET OF ITA NO. 3723/MUM/10 M/S GILL & CO. PVT. LTD. 3 THE COMPANY. THE COMPANY HAS TAKEN LOAN FOR PURCHAS E OF THESE VEHICLES. THE LOAN LIABILITY IS SHOWN IN THE BALANC E SHEET. THE REGISTRATION PAPERS ARE IN THE NAMES OF THE DIRECTO RS BUT FOR ALL THE PRACTICAL PURPOSES, THE OWNERSHIP OF THE VEHICL ES IS WITH THE ASSESSEE COMPANY. 15. IN THE REMAND REPORT THE AO HAS REPORTED THAT P URCHASE INVOICE OF CARS CLEARLY INDICATES THE DIRECTORS NA ME. COPY OF THE LOAN STATEMENT FOR THE PURCHASE OF CAR ALSO INDICAT ES THE NAME OF THE DIRECTORS. HENCE, THE CONTENTION OF THE ASSESSE E THAT LIABILITY IS RECORDED IN THE BALANCE SHEET OF THE ASSESSEE CO MPANY DOES NOT ENTITLE THE ASSESSEE COMPANY TO CLAIM DEPRECIAT ION ON SUCH CARS. 8. ON THE ABOVE FACTS, WE ARE OF THE CONSIDERED OPI NION THAT DEPRECIATION HAS TO BE GRANTED IN THIS CASE, AS IT IS OBSERVED THAT THE AO NOR CIT(A) HAVE DISALLOWED THE INTEREST PAID ON THE LOANS TAKEN FOR THE PURCHASE OF THE ABOVE VEHICLES IN THE NAME OF D IRECTORS OF THE COMPANY. IT IS WELL SETTLED THAT DEPRECIATION HAS TO BE ALLOWED, IN CASES, WHERE THE ASSET BELONG TO THE COMPANY BUT FO R SOME REASON, REGISTRATION IS DONE IN THE NAME OF THE DIRECTORS. THUS, WE ALLOW GROUND NO. 7 RAISED BY THE ASSESSEE. 9. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED , AS INDICATED ABOVE. PRONOUNCED IN THE OPEN COURT ON THIS 14 TH DAY OF OCTOBER, 2011. SD/- SD/- (N.V. VASUDEVAN) (J. SUDHAKAR REDDY) JUDICIAL MEMBER ACCOUNT ANT MEMBER MUMBAI, DATED: 14 TH OCTOBER, 2011 KV ITA NO. 3723/MUM/10 M/S GILL & CO. PVT. LTD. 4 COPY TO:- 1) THE APPELLANT. 2) THE RESPONDENT. 3) THE CIT (A) CONCERNED. 4) THE CIT CONCERNED. 5) THE DEPARTMENTAL REPRESENTATIVE, G BENCH, I.T .A.T., MUMBAI. BY ORDER //TRUE COPY// ASST. REGISTRAR, I.T.A.T., MUMBAI.