MANGAL SINGH PALSANIA, Jaipur V. ACIT, Jaipur

ITA 53/JPR/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 5320 (ITAT-JAIPUR)
• Duration Of Justice: 2 year(s) 2 month(s) 7 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-03-2016
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 24-01-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: AJAY MALIK CIT DHK
• Assessee Lawyers: M GARGIEYA
• Keywords: Depreciation
• Section: 32; 147; 263

Judgement Text

VK;DJ VIHYH; VF/KDJ.K] T;IQJ U;K;IHB] T;IQJ IN THE INCOME TAX APPELLATE TRIBUNAL, JAIPUR BENCHE S, JAIPUR JH FOE FLAG ;KNO] YS[KK LNL; ,OKA JH YFYR DQEKJ] U;KF;D LNL; DS LE{K BEFORE: SHRI VIKRAM SINGH YADAV, AM & SHRI LA LIET KUMAR, JM VK;DJ VIHY LA-@ ITA NO.53/JP/14 FU/KZKJ.K O'K Z@ ASSESSMENT YEAR : 2008-09 SHRI MANGAL SINGH PALSANIA, A- 4,UDHYOG NAGAR OPP. ROAD NO.8 VKI AREA, JAIPUR CUKE VS. THE ACIT, CIRCLE-4, JAIPUR LFKK;H YS[KK LA-@THVKBZVKJ LA-@ PAN NO. AAQPP 7401A VIHYKFKHZ@ APPELLANT IZR;FKHZ@ RESPONDENT FU/KZKFJRH DH VKSJ LS@ ASSESSEE BY : SHRI M. GARGIEYA (C.A.) JKTLO DH VKSJ LS@ REVENUE BY :S HRI AJAY MALIK (ADDL.CIT) LQUOKBZ DH RKJH[K@ DATE OF HEARING : 15.03.2016 ?KKS'K .KK DH RKJH[K @ DATE OF PRONOUNCEMENT : 31/03/2016. VKNS'K@ ORDER PER SHRI VIKRAM SINGH YADAV, A.M. THIS IS AN APPEAL FILED BY THE ASSESSEE AGAINST TH E ORDER OF CIT(A)-II, JAIPUR .DATED 30.10.2013 WHEREIN THE ASSESSEE HAS TAKEN THE FOLLOWING EFFECTIVE GROUNDS OF APPEAL: (1) THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE MADE ON ACCOUNT OF DEPRECIA TION CLAIMED U/S 32 OF THE ACT OF RS.21,02,033/- MADE BY THE ASSESSE E. THE DISALLOWANCE SO MADE BY THE AO AND CONFIRMED BY THE LD. CIT(A) IS CONTRARY TO THE PROVISIONS OF LAW AND FACTS OF THE CASE . HENCE THE SAME KINDLY BE DELETED IN FULL. (2) THE LD. CIT(A) ERRED IN LAW AS WELL AS ON THE FACTS OF THE CASE IN CONFIRMING DISALLOWANCE OF RS. 1,00,000/- ON A/C OF TRIP EXPENSES OUT OF RS. 15,20,280/- MADE BY THE AO. THE DISALLOWANC E SO MADE BY THE ITA NO. 53/JP/14 SHRI MANGAL SINGH PALSANIA , JAIPUR VS. ACIT, CIRCL E-4, JAIPUR 2 AO AND CONFIRMED BY THE LD. CIT(A) IS CONTRARY TO T HE PROVISIONS OF LAW AND FACTS OF THE CASE. HENCE, THE SAME KINDLY BE DE LETED IN FULL. 2. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE DERIVES INCOME FROM TRANSPORT AND FLEET TRANSPORT. DURING THE ASSESSME NT PROCEEDING, THE AO NOTED THAT THE ASSESSEE CLAIMED DEPRECIATION OF RS. 21,02,033/- ON 16 TANKERS WHICH WERE NOT FOUND REGISTERED IN THE NAME OF THE ASSESSEE THOUGH WERE SHOWN AS ASSETS OF THE ASSESSEE. OUT OF 16 TANKERS, 11 TANKERS WERE IN THE NAME OF SHRI NARENDRA PALSANIA AND REMAINING WAS IN THE NAME OF SHRI PRABHU DAYAL. ON BEING ASKED, THE ASSESSEE VIDE REPLY DATE D 10.12.2010 STATED THAT THE ASSESSEE HAS PURCHASED THESE VEHICLES FROM THE ABOVE NAMED PERSONS VIDE AGREEMENTS, BOTH DATED 01.04.2006. THE VEHICLES WER E FINANCED BY HDFC AND ICICI BANKS AND HENCE THE REGISTRATION CERTIFICATES WERE BEARING HYPOTHECATION. THE ASSESSEE PURCHASED THE SAME CONTINUING WITH THE LOANS AS WERE DUE AGAINST THESE TANKERS AS ON 31.03.2006. THE AO HOW EVER DISALLOWED DEPRECIATION OF RS.21,02,033/- CLAIMED IN RESPECT O F THE TANKERS. 2.1 BEING AGGRIEVED, THE APPELLANT CARRIED THE MATT ER IN APPEAL BEFORE THE LD. CIT(A) WHO HAS GIVEN FINDINGS AS UNDER: I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SU BMISSION MADE. IT IS STATED THAT THE A/R COULD NOT CONTROVERT THE FINDINGS OF T HE AO THE ASSESSEE CLAIM FOR DEPRECIATION ON TRUCKS IS NOT ALLOWABLE BECAUSE HE WAS NOT OWNER OF THOSE TRUCKS. THE AO CATEGORICALLY MENTIONED IN THE ASSE SSMENT ORDER THAT THE EXPRESSION OWNER IS A MUCH COMPREHENSIVE TERM WH ICH DENOTES THE FULL OWNERSHIP AS PER LAW, I.E. WITHOUT A VALID REGISTER ED DOCUMENT, THE RIGHT TITLE AND INTEREST WOULD NOT PASS TO THE ASSESSEE. THE DI SALLOWANCE MADE BY THE AO IS CONSIDERED TO BE FAIR AND REASONABLE AND DOES NO T CALL FOR ANY INTERFERENCE. HENCE, THE ADDITION MADE BY THE AON ON ACCOUNT OF D EPRECIATION OF RS. 21,02,033/- IS HELD TO BE JUSTIFIED AND THE SAME IS SUSTAINED. THE APPELLANT FAILS ON THIS GROUND. 2.2 THE LD. AR HAS SUBMITTED THAT THERE IS NO DISP UTE RAISED BY THE AO THAT THE ASSESSEE HAS SHOWN SUCH TANKER, TRAILERS AND TR UCKS IN THE AUDITED BALANCE ITA NO. 53/JP/14 SHRI MANGAL SINGH PALSANIA , JAIPUR VS. ACIT, CIRCL E-4, JAIPUR 3 SHEET (SCHEDULE D) AS AN OWNER. THE SAID TANKERS AR E ADMITTEDLY USED FOR THE BUSINESS OF THE ASSESSEE AND DAY TO DAY RUNNING EXP ENSES ARE ALSO CLAIMED BY THE ASSESSEE IN ITS PROFIT & LOSS A/C AND THE SAME HAVE BEEN ALLOWED BY THE AO WITHOUT ANY DISPUTE. NOTABLY EVEN THE INCOME FROM T HE TRUCK PLYING HAS BEEN DULY DECLARED BY THE APPELLANT AND ASSESSED AS SUCH THOUGH THE TANKERS ARE REGISTERED IN THE NAME OF SHRI NARENDRA PALSANIA AN D SHRI PRABHU DAYAL. THE FACTS ARE NOT DENIED THAT THE ASSESSEE WAS NOT THE REGISTERED OWNER OF THE TRUCK. HOWEVER, THE FACTS ARE ALSO ADMITTED THAT THE ASSESSE PURCHASED THESE TRUCKS FROM TWO PERSONS NAMELY SHRI PRABHU DA YAL CHOUDHARY AND SHRI NARENDRA SINGH PALSANIA THROUGH AGREEMENTS BOTH DAT ED 01.04.2006 ALONG WITH LOANS (HYPOTHECATION) . THE TRUCKS WERE GOT FINANCED BY THESE TWO PERSONS THROUGH BANKS HOWEVER, ALL THE INSTALMENTS AND EMIS ARE BEING PAID BY THE APPELLANT TO THE BANK DIRECTLY. COPY OF THE LEDGER ACCOUNT IN THE BOOKS OF THE APPELLANT SHOWING THE PAYMENT WITH CHEQUE NUMBER AS ALSO THE CORRESPONDING BANK STATEMENTS ARE ENCLOSED. AS THESES TANKERS WE RE PURCHASED BY THE FIRST PARTIES I.E. SHRI PRABHU DAYAL CHOUDHARY AND SHRI N ARENDRA SINGH PALSANIA ON FINANCE, THERE HAS BEEN SOME RESTRICTION TO OPERATE THE SAID TANKERS AS OWNER UNDER THE MOTOR VEHICLES ACT BECAUSE OF THE CHARGES OF HYPOTHECATION PUT ON RC BY THE RTO. THEREFORE, THE SUBJECTED TANKERS COU LD NOT BE REGISTERED IMMEDIATELY IN THE NAME OF THE ASSESSEE UNTIL THE E NTIRE LOAN WAS PAID OFF BUT USE OF THE SAME FOR BUSINESS IS NOT DENIED. HENCE, THE BENEFIT OF DEPRECIATION ON THE GROUND THAT THE ASSESSEE WAS NOT A REGISTERE D OWNER, CANNOT BE DENIED. THESE TRUCKS WERE PURCHASED IN A.Y.2007-08 WHEREIN ALSO DEPRECIATION WAS CLAIMED AND ALLOWED THROUGH ASSESSMENT WAS COMP LETED U/S 143(1) HOWEVER, SUCH ASSESSMENT HAS NOT BEEN DISTURBED U/S 147 OR U/S 263 AND ITA NO. 53/JP/14 SHRI MANGAL SINGH PALSANIA , JAIPUR VS. ACIT, CIRCL E-4, JAIPUR 4 THEREFORE HAS BECOME FINAL. THUS, THE AO HIMSELF TR EATED THE APPELLANT TO BE BENEFICIAL OWNER OF THESE TRUCKS. THE CONCEPT OF REGISTERED OWNER IS NOT AT ALL RELEV ANT U/S 32. IN SUPPORT OF ITS CONTENTION THE LD. AR DRAWN OUR ATTENTION TO FOLLOW ING: 1. THE APEX COURT WHILE INTERPRETING SECTION 32 OF THE ACT IN MYSORE MINERALS LTD. V. CIT (1999) 239 ITR 775 (SC) HAS HE LD, THAT THE TERM OWNED OCCURRING IN S. 32(1) MUST BE ASSIGNED A WIDER MEAN ING. ANYONE IN POSSESSION OF PROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINI ON OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HA VING RIGHT TO USE AND OCCUPY THE PROPERTY IN HIS OWN RIGHT WOULD BE THE O WNER OF BUILDING FOR THE PURPOSE OF S. 32(1) THOUGH A FORMAL DEED OF TITLE M AY NOT HAVE BEEN EXECUTED AND REGISTERED. ASSESSEE HAVING PAID PART OF THE PR ICE, HAS BEEN PLACED IN POSSESSION OF THE HOUSES AS AN OWNER AND IS USING T HE BUILDINGS FOR THE PURPOSE OF ITS BUSINESS, DENIAL OF DEPRECIATION NOT JUSTIFIED 2. IN THE CASE OF CIT V. PODDAR CEMENT (P) LTD. (1 997) 226 ITR 625 (SC), IT HAS BEEN HELD THAT ANYONE IN POSSESSION OF THE PROP ERTY IN HIS OWN TITLE EXERCISING SUCH DOMINICAL OVER THE PROPERTY AS WOUL D ENABLE THE OTHERS BEING EXCLUDED THERE FROM AND HAVING THE RIGHT TO USE AND OCCUPY THE PROPERTY AND/OR TO ENJOY ITS USURP IN HIS OWN RIGHT WOULD BE THE 'OWNER' OF THE BUILDING THOUGH THE FORMAL DEED OR TITLE MAY NOT HAVE BEEN E XECUTED OR REGISTERED AS CONTEMPLATED BY TRANSFER OF PROPERTY ACT AND REGIST RATION OF PROPERTY ACT, ETC. IN THAT CASE IT WAS HELD THAT -OWNER', FOR PURPOSE S OF S. 22, IS A PERSON WHO IS ENTITLED TO RECEIVE INCOME FROM THE PROPERTY IN HIS OWN RIGHT AND THE REQUIREMENT OF REGISTRATION OF SALE-DEED IN THE CON TEXT OF S. 22 IS NOT WARRANTED. ITA NO. 53/JP/14 SHRI MANGAL SINGH PALSANIA , JAIPUR VS. ACIT, CIRCL E-4, JAIPUR 5 3. ANIL BULK CARRIERS (P) LTD. VS CIT (2005) 276 IT R 0625 (ALL.) HELD THAT: FACT THAT REGISTRATION OF THE VEHICLES UNDER THE M OTOR VEHICLES ACT, 1988, WAS GRANTED ON 1ST APRIL, 1997, WAS OF NO RELEVANCE AS REGARDS ALLOWABILITY OF DEPRECIATIONTHAT APART, THE WORD USED UNDER S. 3 2 HAS TO BE GIVEN WIDER MEANING AND IT WILL INCLUDE ASSETS READY FOR USE HENCE THE IMPUGNED DISALLOWANCE KINDLY BE DELETED I N FULL AND THE ASSESSEE BE HELD ENTITLED TO THE CLAIM OF DEPRECIATION AS MADE. 2.3 THE LD DR IS HEARD WHO HAS SUBMITTED THE TEST O F OWNERSHIP IS GOVERNED BY THE REGISTRATION UNDER THE MOTOR VEHICLE ACT AND IN THE INSTANT CASE, SINCE THE TANKERS WERE NOT REGISTERED IN THE NAME OF THE APPELLANT, THE AO WAS RIGHT IN DENYING THE DEPRECIATION CLAIM IN RESPECT OF SAI D TANKERS. 2.4 WE HAVE HEARD THE RIVAL SUBMISSION AND PURSUED THE MATERIAL ON RECORD. THE DEPRECIATION CLAIM UNDER THE PROVISIONS OF THE ACT IS SUBJECT TO TWIN TEST OF OWNERSHIP AND TEST OF USAGE FOR THE PURPOSES OF BUS INESS. IN THE INSTANT CASE, THE LIMITED DISPUTE RELATES TO WHETHER THE ASSESSEE SATISFIES THE OWNERSHIP TEST AND WHETHER FOR THE PURPOSES OF DETERMINING THE OWN ERSHIP, THE REGISTRATION OF TANKERS IN THE NAME OF THE APPELLANT UNDER THE M OTOR VEHICLE ACT IS AN ESSENTIAL REQUIREMENT. THE ASSESSEE HAS PURCHASED THESE VEHICLES FROM TWO ABOVE NAMED PERSONS VIDE AGREEMENTS, BOTH DATED 01. 04.2006 WHICH HAS NOT BEEN DISPUTED BY THE REVENUE. IT IS ALSO AN UNDISP UTED FACT THAT THE VEHICLES WERE FINANCED BY HDFC AND ICICI BANKS AND HENCE THE REGISTRATION CERTIFICATES WERE BEARING HYPOTHECATION. FURTHER, THE LOANS TAKE N HAVE BEEN SHOWN AS LIABILITY IN THE BALANCE SHEET AND THE EMI & INTERE ST THEREON WAS PAID BY THE ASSESSEE ONLY. FURTHER, THE INCOME EARNED FROM THE VEHICLES HAS BEEN BOOKED TO THE REVENUE ACCOUNT BY THE ASSESSEE AND DULY OFF ERED TO TAX. ALL THESE FACTS REMAIN UNCONTROVERTED BY THE REVENUE AUTHORITIES. THE ONLY REASON WHY THE ITA NO. 53/JP/14 SHRI MANGAL SINGH PALSANIA , JAIPUR VS. ACIT, CIRCL E-4, JAIPUR 6 REVENUE FEELS THAT THE APPELLANT IS NOT ELIGIBLE FO R CLAIM OF DEPRECIATION IS THAT REGISTRATION OF VEHICLES HAS NOT BEEN TRANSFERRED I N THE NAME OF THE APPELLANT UNDER THE MOTOR VEHICLE ACT. IN RESPONSE, THE LD A R HAS SUBMITTED THAT IT HAS BOUGHT THE VEHICLES AND HAVE TAKEN OVER THE LOAN LI ABILITIES OF THE SELLERS AND THE VEHICLES ARE CURRENTLY UNDER HYPOTHECATION WITH THE BANK AND AS SOON AS LOAN LIABILITY IS FULLY DISCHARGED, THE REGISTRATIO N OF VEHICLES WOULD BE TRANSFERRED IN HIS NAME UNDER THE MOTOR VEHICLE ACT . REGARDING REGISTRATION UNDER THE MOTOR VEHICLE ACT, THE HONBLE SUPREME CO URT IN CASE OF I.C.D.S VS CIT (2013) 29 TAXMANN.COM 129 HAS HELD THAT THE MO TOR VEHICLE ACT IS NOT A STATEMENT OF LAW ON OWNERSHIP IN GENERAL AND PERHAP S, THE REPOSITORY OF A GENERAL STATEMENT OF LAW ON OWNERSHIP MAY BE THE SA LE OF GOOD ACT. FURTHER, THE HONBLE SUPREME COURT DECISION IN CASE OF MYSOR E MINERALS LTD. V. CIT (SUPRA) HAS HELD THAT ANYONE IN POSSESSION OF P ROPERTY IN HIS OWN TITLE EXERCISING SUCH DOMINION OVER THE PROPERTY AS WOULD ENABLE OTHERS BEING EXCLUDED THEREFROM AND HAVING RIGHT TO USE AND OCCU PY THE PROPERTY IN HIS OWN RIGHT WOULD BE THE OWNER OF BUILDING FOR THE PURPOS E OF S. 32(1) THOUGH A FORMAL DEED OF TITLE MAY NOT HAVE BEEN EXECUTED AND REGISTERED. THE SAID PROPOSITION OF LAW IS FULLY SATISFIED IN THE INSTAN T CASE WHERE THE ASSESSEE HAS CLAIMED DEPRECIATION ON THE VEHICLES HAVING POSSESS ION AND DOMINION OVER THE INCOME AND CONTROL OVER THEIR OPERATIONS. IN LIGHT OF ABOVE, WE ARE OF THE VIEW THAT THE APPELLANT IS ELIGIBLE TO CLAIM DEPRECIATIO N ON THE VEHICLES AND ACCORDINGLY, WE ALLOW THE GROUND NO. 1. 3. REGARDING GROUND NO.2, THE BRIEF FACTS OF THE C ASE ARE THAT DURING THE ASSESSMENT PROCEEDING THE AO NOTED THAT THE THAT TH E ASSESSEE HAS DEBITED A SUM OF RS.15,20,280/- ON ACCOUNT OF TRIP EXPENSES. ON VERIFICATION IT WAS NOTICED BY THE AO THAT THE EXPENSES ARE INCURRED BY THE DRIVERS ON THE WAY FOR TOLL TAX, RTO / POLICE EXPENSES, WAGES INSPECTION C HARGES, FOOD DEPOT EXP. ETC ITA NO. 53/JP/14 SHRI MANGAL SINGH PALSANIA , JAIPUR VS. ACIT, CIRCL E-4, JAIPUR 7 AND THE EXPENSES ACCOUNTED FOR ON THE BASIS OF SLIP S PREPARED BY THE DRIVERS AND NO EXTERNAL SUPPORTING WAS AVAILABLE. THEREFORE HE MADE AN ADHOC DISALLOWANCE OF RS.1,00,000/- WHICH HAS BEEN CONFIR MED BY LD. CIT(A). 3.1 THE LD. AR SUBMITTED THAT A BARE PERUSAL OF THE IMPUGNED ORDER SHALL REVEAL THAT THE VARIOUS DISALLOWANCES HAVE BEEN MAD E SIMPLY ON SURMISES AND CONJECTURES. NO SPECIFIC INSTANCE HAS BEEN GIVEN. THE CONTENTION OF THE APPELLANT WAS THAT DETAILS WERE NEVER MENTIONED IN THE ACCOUNTS OR SLIPS ETC. THE PAYMENTS WERE ONLY @ RS.1500/- AS A FIXED ALLOW ANCE PER TRIP TO THE DRIVERS AND HELPERS TO MEET THE LODGING, BOARDING A ND OTHER INCIDENTAL EXPENSES AND THEREFORE, THE APPELLANT NEVER ACCOUNT ED FOR THESE EXPENSES IN THE WAY, THE AO ALLEGED. THE ALLOWANCES SO PAID WER E DULY SUPPORTED BY THE VOUCHERS WITH THE SIGNATURE OF THE PAYEE DRIVERS AN D HELPERS ETC. THUS, THE EXPENSES WERE DULY SUPPORTED. THE LD. CIT(A) SUMMAR ILY CONFIRMED THE DISALLOWANCE. 3.2 WE HAVE GONE THROUGH THE ORDER OF AO AND LD CIT (A) AS WELL AS CONSIDERED THE SUBMISSIONS MADE BY LD AR AND LD DR. THE EXPENSE HAVE BEEN DISALLOWED ON PURELY ADHOC BASIS AND NO SPECIFIC EX PENDITURE/TRANSACTION HAS BEEN HIGHLIGHTED BY THE AO WHICH SUGGEST THAT THESE EXPENSES HAVE NOT BEEN INCURRED FOR THE PURPOSES OF THE BUSINESS. IN LIGH T OF THAT, WE DELETE THE ADHOC DISALLOWANCE OF RS 1 LACS. HENCE, GROUND NO. 2 IS ALLOWED. IN THE RESULT THE APPEAL FILED BY THE ASSESSEE IS A LLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 31/0 3/2016. SD/- SD/- (LALIET KUMAR) (VIKRAM SINGH YADAV) U;KF;D LNL;@ JUDICIAL MEMBER YS[KK LNL;@ ACCOUNTANT MEMBER ITA NO. 53/JP/14 SHRI MANGAL SINGH PALSANIA , JAIPUR VS. ACIT, CIRCL E-4, JAIPUR 8 JAIPUR DATED:- 31/ 03 /2016 PILLAI VKNS'K DH IZFRFYFI VXZSF'KR@ COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT- SHRI MANGAL SINGH PALSANIA , JAI PUR 2. THE RESPONDENT- THE ACIT, CIRCLE-4, JAIPUR 3. THE CIT(A) II, JAIPUR 4. THE CIT-II, JAIPUR 5. THE DR, ITAT, JAIPUR 6. GUARD FILE (ITA NO.53 /JP/14) VKNS'KKUQLKJ@ BY ORDER, LGK;D IATHDKJ@ ASSISTANT. REGISTRAR