M/S ALD AUTOMOTIVE PVT. LTD,THANE vs. PCIT, MUMBAI-3, MUMBAI

The assessment in the hands of the assessee was completed by the assessing officer under section 143 (3) of the Act for assessment year 2015- 16 on 20-12-2017. The Learned PCIT examined the assessment record and noticed that the assessing officer has not made enquiries properly on the following issues (a) depreciation on leased assets (b) commission expenses (c) payment of information technology fees (d) loan taken from society general Paria.

Before the Learned PCIT, the assessee contended that the assessing officer has made necessary enquiries with regard to the above said issues and has taken possible view of the matter. Accordingly it was contended that the impugned revision proceedings should be dropped. The Learned PCIT noticed that the assessing officer has simply raised queries on the above said issues and thereafter did not take any action thereon. Accordingly, invoking Explanation 2 of section 263, the learned PCIT held that the assessment order is erroneous and prejudicial to the interest of the revenue. Accordingly he set aside the assessment order and directed AO to make detailed verification of the issues discussed above. The assessee is aggrieved.

We heard the parties and perused the record. The assessee is engaged in the business of leasing out motor vehicles to various corporate customers under operating lease.

The 1st issue raised by Learned PCIT relates to the claim of depreciation on vehicles leased out by it. We noticed that the assessee was leasing out vehicles under operating lease basis and accordingly claimed depreciation thereon contending that it continued to be owner of the vehicles. The learned PCIT has expressed view that the assessing officer has not examined the claim of depreciation. The learned AR submitted that the assessing officer has called for details of depreciation during the course of assessment proceedings. In this regard, the learned AR invited our attention to the reply dated 26th of September, 2017 filed by the assessee before the assessing officer, wherein the assessee has given detailed explanation with regard to the claim of depreciation. The learned AR further submitted that the issue of depreciation has since been settled by the ITAT in the assessee’s own case in 3 M/s. ALD Automotive Pvt. Ltd.

We heard learned DR on this issue and perused the records. Since the Tribunal has already decided this issue in earlier years holding that the assessee is eligible to claim depreciation on the assets leased out by it under operating lease basis and since the AO has also raised queries on this issue and considered the replies given by the assessee, we are of the view that the AO has taken possible view of the matter on proper application of mind. Accordingly we are of the view that the learned PCIT was not justified in passing revision order on this issue. Accordingly we set aside the order passed by learned PCIT on this issue.

The next issue raised by Ld PCIT relates to commission expenses claimed by the assessee. The PCIT noticed that the commission expenses claimed by the assessee have increased from 87.12 lakhs to ₹ 158.36 lakhs during the year under consideration. The learned PCIT noticed that the AO has not examined this issue properly. It was submitted before the Principal Commissioner that the assessing officer has called for details of commission expenses during the course of assessment proceedings. From the break-up details furnished by the assessee before AO, we notice that, during the year under consideration, the assessee has paid major amount of commission to M/s Maruti Suzuki India Ltd. (Rs.53.97 lakhs) and to M/s. pinnacle India (₹ 85.62 lakhs). It was submitted that the assessee got major business from above said 2 concerns, which has resulted in the increase in commission

The case of learned PCIT is that the assessing officer has simply called for details and did not examine them properly.

We heard the parties on this issue and perused the records. The details of commission have been furnished by the assessee through the letter dated 26th of September 2017 filed before the AO during the course of assessment proceedings. However, as observed by Learned PCIT, the AO has not carried out any verification with regard to the cause of increase in the commission expenses, i.e., any prudent officer would have examined the payment of commission expenses with reference to the claim of increase in business of the assessee which had necessitated the payment of commission. In the absence of such enquiry, we agree with the view taken by Learned PCIT that the assessing officer has not properly examined this issue. Accordingly we confirm the order passed by learned PCIT on this issue.

The next issue relates to payment of Information technology fee of ₹ 97.44 lakhs during the course of assessment proceeding. We notice that the AO has raised query on this issue and the assessee has furnished copies of agreement entered between the assessee and its AE for providing information technology services to the assessee. We noticed that, apart from obtaining the agreement, the AO has not taken any steps to examine this issue further during the course of assessment proceeding. Mere obtaining copy of agreement, in our view, does not amount examination of the issue and it cannot be taken as a case of taking possible view. Accordingly we agree with the view taken by learned PCIT that the assessing officer has not properly examined to this issue. Accordingly we confirm the order passed by learned PCIT on this issue.

The last issue raised by Ld PCIT relates to the foreign currency loan taken by the assessee from its AE named Society General Paris. In this case also, the assessing officer has obtained the copy of agreement entered for taking loan from its AE. Thereafter he did not examine the issue further. In the reply given, the assessee has submitted that there was gain in view of the appreciation of rupee. It is quiet normal to examine the tax implications on the gain arising on account of foreign exchange fluctuation. Mere obtaining copy of agreement, in our view, does not amount examination of the issue and it cannot be taken as a case of taking possible view. Accordingly we agree with the view taken by learned PCIT that the assessing officer has not properly examined this issue. Accordingly we confirm the order passed by learned PCIT on this issue.

In the result, the appeal filed by the assessee is partly allowed.