PIONEER DYEING P.LTD, MUMBAI V. ASST CIT 4(3), MUMBAI

ITA 6322/MUM/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 3973 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 6 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 05-05-2016
• Appeal Filed By: Assessee
• Bench Allotted: C
• Assessment Year: 2010-2011
• Appeal Filed On: 13-10-2014
• Court: TRIBUNAL
• Assessee Lawyers: SHANKARLAL JAIN
• Keywords: Depreciation
• Section: 32

Judgement Text

1 ITA NO.,6322/MUM/2014 IN THE INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES C, MUMBAI BEFORE SHRI JOGINDER SAINGH (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. NO.6322/MUM/2014 (ASSESSMENT YEAR : 2010-11) M/S PIONEER DYEING PVT LTD C/O AHANKARLAL JAIN & ASSOCIATES CHARTERED ACCOUNTANTS 12, ENGINEER BUILDING 265, PRINCESS STREET MUMBAI 400 002 VS ACIT, 4(3), MUMBAI PAN : AAACP7002 (APPELLANT) (RESPONDENT) APPELLANT BY SHRI SHANKARLAL JAIN RESPONDENT BY MS. SUDHA RAMCHANDRAN, CIT-DR DATE OF HEARING : 05-05-2016 DATE OF ORDER : 18-05-2016 O R D E R PER ASHWANI TANEJA, AM THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS) (HEREINAFTER C ALLED CIT(A)) DATED 02- 04-2013 FOR THE ASSESSMENT YEAR 2010-11 RAISING THE FOLLOWING GROUNDS OF APPEAL: 1. LD. CIT(A) ERRED IN CONFIRMING DISALLOWANCE OF CAR DEPRECIATION MERELY ON THE GROUNDS THAT REGISTRATION OF THE CAR WAS IN THE NAME OF 2 ITA NO.,6322/MUM/2014 ONE OF THE DIRECTORS WITHOUT APPRECIATING FACTS OF THE CASE AND LAW APPLICABLE THERETO. 2. LD. CIT(A) SHOULD HAVE CONSIDERED THAT CAR, ALTH OUGH REGISTERED IN THE NAME OF ONE OF THE DIRECTORS IS BEING PURCHASED OUT OF THE FUNDS OF THE APPELLANT, IS INCLUDED IN THE BLOCK OF ASSET S AND IS BEING USED FOR THE PURPOSE OF THE BUSINESS OF APPELLANT AND HE NCE APPELLANT IS ENTITLED FOR NECESSARY DEDUCTION OF DEPRECIATION. 3. APPELLANT PRAY THAT DISALLOWANCE OF DEPRECIATION AS MADE BE DELETED. 2. DURING THE COURSE OF HEARING IT HAS BEEN SUBMITT ED BY THE LD. COUNSEL THAT ACTUALLY ASSESSEE COMPANY IS THE OWNER OF THE CAR. IT HAS MADE PAYMENT OF THE DOWN AMOUNT AND IS ALSO REGULARLY PAYING EMI S OF THE LOANS TAKEN FOR PURCHASE OF CAR. THE CAR HAS BEEN REFLECTED IN THE BALANCE-SHEET OF THE COMPANY. IN ALL THE PAST YEARS DEPRECIATION HAS BE EN ALLOWED IN ORDERS PASSED U/S 143(3). ONLY IN THIS YEAR CONTRADICTORY ACTION HAS BEEN TAKEN BY THE DEPARTMENT. 3. PER CONTRA, THE LD.DR SUBMITTED THAT SINCE CAR I S NOT IN THE NAME OF THE ASSESSEE COMPANY, THE ASSESSEE SHOULD NOT BE ELIGIB LE TO CLAIM DEPRECIATION. 4. WE HAVE GONE THROUGH THE FACTS OF THE CASE. THE SOLITARY ISSUE TO BE DECIDED BY US IS WHETHER THE ASSESSEE COMPANY WOULD BE ELIGIBLE TO CLAIM DEPRECIATION ON THE CAR WHICH IS NOT REGISTERED IN THE NAME OF THE ASSESSEE COMPANY BUT REGISTERED IN THE NAME OF ONE OF THE DI RECTORS OF THE COMPANY. THE ADMITTED FACTS NARRATED BEFORE US ARE THAT THE CAR WAS PURCHASED BY THE COMPANY BY MAKING DOWN PAYMENT FROM THE BANK AMOUNT OF THE ASSESSEE COMPANY. FOR THE REMAINING AMOUNT, THE ASSESSEE CO MPANY HAD TAKEN LOAN AND EMIS TOWARDS REPAYMENT OF THE LOAN HAS ALSO BEE N PAID BY THE COMPANY. 3 ITA NO.,6322/MUM/2014 THE CAR CONTINUES TO BE REFLECTED IN THE BALANCE-SH EET OF THE ASSESSEE COMPANY. UNDER THESE CIRCUMSTANCES, WE HAVE TO DEC IDE WHETHER DEPRECIATION CAN BE CLAIMED BY THE ASSESSEE COMPANY OR NOT? 5. WE HAVE GONE THROUGH THE FACTS OF THIS CASE AS W ELL AS COPY OF JUDGEMENT RELIED UPON BY THE LD.COUNSEL IN THE CASE OF EDWISE CONSULTANTS PVT LTD IN ITA NO.4121/MUM/2014 & ITA NO.594/MUM/2013 FOR A.Y 2008-09 TO 2010-11 ORDER DATED 14-10-2015 PASSED BY ITAT EB ENCH, MUMBAI. FOR CLAIMING DEPRECIATION U/S 32 FOLLOWING TWO CONDITIO NS ARE REQUIRED TO BE FULFILLED: 1. THE ASSESSEE SHOULD BE THE OWNER OF THE ASSET; AND 2. THE ASSET SHOULD BE USED BY THE ASSESSEE IN THE COURSE OF ITS BUSINESS. THE USER OF THE CAR BY THE ASSESSEE COMPANY IN THE COURSE OF ITS BUSINESS HAS NOT BEEN DOUBTED BY THE DEPARTMENT. WHAT HAS BEEN DOUBTED IS THE OWNERSHIP OF THE CAR BY THE ASSESSEE COMPANY. IN OUR CONSIDERED VIEW, UNDER THE INCOME-TAX LAW, THE CONCEPT OF OWNERSHIP IS ON RECOGNISED DE FACTO BASIS, ESPECIALLY IN THE CONTEXT OF SECTION 32. THE ASSES SEE NEED NOT NECESSARILY BE AN OWNER OF AN ASSET ON DEJURE BASIS. IT IS NOT NECESSARY THAT THE ASSET SHOULD BE REGISTERED IN THE NAME OF AN ASSESSEE TO DECLARE IT AS OWNER UNDER THE INCOME-TAX LAW ESPECIALLY FOR THE PURPOSES OF ALLOW ING DEPRECIATION. IT IS NOT IN DOUBT THAT CAR HAS BEEN PURCHASED BY THE COMPANY FR OM ITS OWN FUNDS AND CONTINUES TO BE SHOWN IN ITS BALANCE-SHEET. THE CO NCERNED DIRECTOR HAS NOWHERE CLAIMED HIMSELF TO BE THE OWNER OF THE SAID ASSET. UNDER THESE CIRCUMSTANCES, WHEN BOTH THE PARTIES HAVE ACKNOWLED GED THAT ASSESSEE COMPANY AS OWNER OF THE CAR, THEN THE ASSESSEE COUL D CERTAINLY BE HELD TO BE 4 ITA NO.,6322/MUM/2014 DE FACTO OWNER OF THE SAID CAR. IT IS FURTHER NOTED THAT I N THE CASE OF M/S EDWISE CONSULTANTS PVTT LTD, (SUPRA) THE MUMBAI BEN CH OF THE TRIBUNAL HAS ALLOWED DEPRECIATION WITH THE FOLLOWING OBSERVATION S UNDER SIMILAR CIRCUMSTANCES :- 25. WE HAVE HEARD THE PARTIES ON THIS ISSUE AND PE RUSED THE RECORD. WE NOTICE THAT THE HON'BLE GUJARAT HIGH COURT HAS C ONSIDERED IDENTICAL ISSUE IN THE CASE OF ARAVALI FINLEASE LTD (SUPRA) AND HAS TAKEN THE DECISION THAT THE DEPRECIATION IS ALLOWAB LE IN THE HANDS OF THE COMPANY, EVEN IF IT IS REGISTERED IN THE NAME O F ITS DIRECTOR PROVIDED THAT THE VEHICLE IS USED FOR THE PURPOSE O F BUSINESS OF COMPANY AND INCOME DERIVED THERE FROM WAS SHOWN AS INCOME OF THE COMPANY. IN THE INSTANT CASE THERE IS NO DISPUTE WI TH 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 T HE TRIBUNAL IN HOLDING THAT, SINCE VEHICLE IS A MOVABLE ASSET, THE REGISTRATION AS REQUIRED IN THE CASE OF TRANSFER OF IMMOVABLE PROPE RTY IS NOT A CONDITION PRECEDENT FOR LEGAL OWNERSHIP. IN THE INS TANT CASE, THE FUNDS FOR PURCHASE THE FUNDS FOR PURCHASE OF VEHICLES HAV E BEEN PROVIDED BY THE ASSESSEE' COMPANY AND THEY HAVE BEEN SHOWN AS A SSETS OF THE ASSESSEE COMPANY. HENCE, IN OUR VIEW, THE ASSESSEE COMPANY SHOULD BE CONSIDERED AS OWNER FOR ALL PRACTICAL PURPOSES A ND HENCE IT IS ENTITLED FOR DEPRECIATION. IN VIEW OF THE DIRECT DE CISION OF HON'BLE GUJARAT HIGH COURT IS AVAILABLE ON THIS ISSUE, WE P REFER TO FOLLOW THE SAME TO THAT RENDERED BY THE TRIBUNAL IN THE ASSESS EE'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 VE HICLES. 5 ITA NO.,6322/MUM/2014 6. IT HAS BEEN FURTHER BROUGHT TO OUR NOTICE THAT DEPRECIATION ON THIS CAR HAS BEEN ALLOWED IN THE EARLIER YEARS U/S 143(3 ). THE DISALLOWANCE HAS BEEN MADE ONLY IN THIS YEAR. THUS, TAKING INTO ACC OUNT ALL THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN VIEW OF THE DISCUS SION MADE BY US IN EARLIER PART OF THE ORDER, WE FIND THAT DEPRECIATIO N HAS BEEN WRONGLY DISALLOWED BY THE ASSESSING OFFICER AND THEREFORE D ISALLOWANCE MADE BY THE ASSESSING OFFICER IS DIRECTED TO BE DELETED WIT H THE DIRECTION TO GRANT THE DEPRECIATION. 7. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED . ORDER PRONOUNCED IN THE COURT ON 18 TH MAY, 2016. SD/- SD/- (JOGINDER SINGH) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER MUMBAI, DT : 18 TH MAY, 2016 PK/- COPY TO : 1. THE APPELLANT 2. THE RESPONDENT 3. THE CIT(A) 4. THE CIT 5. THE LD. DEPARTMENTAL REPRESENTATIVE FOR THE REVENUE , C, BENCH (TRUE COPY) BY ORDER ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES