HABIB TEXTILES P. LTD.,MUMBAI vs. THE DY CIT, CIRCLE-1, KALYAN

Hence, this ground is also dismissed. In ground no. 3, assessee has challenged the validity of the impugned order on the ground that it has been passed beyond the period of limitation prescribed under section 263 of the Act. Whereas, ground no. 4, 5 and 6 are on merits.

The learned Counsel for the assessee submitted, as per section 263(2) of the Act, an order can be passed within a period of two years from the end of the financial year, wherein, the order sought to be revised was passed. He submitted, since, the assessment order was passed on 07.12.2017, two year period for passing the order under section 263 of the Act would be from 01.04.2018 to 31.03.2020. He submitted, since the impugned order was 3 Assessment Year: 2015-16 passed on 24.03.2021, it is barred by limitation. Without prejudice, the learned Counsel submitted, simply because motor cars on which the assessee has claimed depreciation and has paid interest were in the name of the Directors, the assessee’s claim of depreciation and interest payment cannot be denied when the company for the purpose of its business used the assets. Learned counsel submitted, the assessee purchased the cars in earlier years and depreciation has been allowed on them in the earlier assessment years. He submitted, in the impugned assessment year, the assessee has claimed depreciation on the opening written down value (WDV). Therefore, once depreciation on the assets was allowed in the earlier assessment years, there is no scope for further examination by the AO in the impugned assessment year. Thus, he submitted, on merits also claim of depreciation and interest payment is eligible. Therefore, the assessment order cannot be held as erroneous and prejudicial to the interest of the revenue. In support of such contention, learned Counsel relied upon the following decision:- i. Commissioner of Income Tax v. Dilip Singh Sardarsingh Bagga (1993) 201 ITR 995 (Bombay) ii. Commissioner of Income Tax v. Mirza Ataullaha Baig (1994) 202 ITR 291 (Bombay) iii. Shree Laxmi Estate (P) Ltd. v. ITO, Ward – 15(3)(3), Mumbai (2019) 108 taxmann.com 195 (Mumbai) iv. Mehta Equities Limited v. The ACIT 4(2), Mumbai (2016) (Mumbai)

Learned Departmental Representative submitted, the revision order cannot be held as barred by limitation as the limitation period got extended 4 Assessment Year: 2015-16 due to the prevailing pandemic. As regards, the merits of the issue, he relied upon the observations of the learned PCIT.

We have considered rival submissions and perused the materials on record. At the outset, we will address the issue, whether, in the given facts and circumstances of the case, the assessment order can be held as erroneous and prejudicial to the interest of the revenue to vest the revisionary authority with the power to revise it under section 263 of the Act.

As discussed earlier, the two issues on which learned PCIT has held the assessment order to be erroneous and prejudicial to the interest of revenue are, claim of depreciation on motorcars and interest paid on car loans. In the opinion of learned PCIT since the motorcars are in the name of the Directors of the company, the assessee, not being the owner, cannot claim depreciation and interest expenditure. However, facts on record reveal that the motorcars on which the assessee claimed depreciation were purchased in the earlier assessment years. On the first car purchased on 12.01.2010 the assessee had started claiming depreciation from assessment year 2010-11 itself. Similarly, for the second car purchased on 04.11.2012, the assessee is claiming depreciation from assessment year 2012-13. For the third car purchased on 15.07.2012, the assessee is claiming depreciation from assessment year 2013- 14. The depreciation so claimed and the interest expenditure on loan availed for purchasing the motorcars have been allowed in the earlier assessment years. It is a fact on record that in the impugned assessment year, the assessee claimed depreciation on the opening WDV. Therefore, once depreciation on the 5 Assessment Year: 2015-16 assets have been allowed in the preceding assessment years, the AO could not have disallowed the depreciation claimed on the opening WDV.

Further, simply because the motorcars are registered in the name of the Directors of the company the claim of depreciation cannot be disallowed, if it is established that the motorcars are actually owned by the assessee and used in its normal course of business, though, purchased in the name of the Directors. The assessee has also furnished evidence to show that payment for the purchase of motorcars was on assessee’s account and the EMI for loan availed were paid by the assessee from the its bank account. Even, the motorcars have been shown as fixed assets in assessee’s books of account. That being the case, there was no reason for the AO to disallow assessee’s claim of depreciation. In any case of the matter, the judicial precedents cited before us by learned Counsel for the assessee clearly say that even if vehicles are registered in the name of directors or partners for certain restrictions/conditions under the Motorcar Vehicle Act, however, if such assets, for all intent and purpose, belong to the company and are used for its business, the company would be eligible to claim depreciation.

Thus, considered in the light of the decisions relied upon by learned Counsel for the assessee, the view taken by the AO in allowing assessee’s claim of depreciation and interest expenses can be considered to be a plausible view. That being the case, assessment order cannot be held as erroneous. Thus, the twin conditions of section 263 of the Act remain unsatisfied. For this reason the impugned order passed by learned PCIT cannot be sustained. Consequently, we set aside the impugned order of learned PCIT passed under 6 Assessment Year: 2015-16 section 263 of the Act and restore the assessment order passed by the AO for the impugned assessment.

In view of our aforesaid decision, the ground raised