HABIB TEXTILES P. LTD.,MUMBAI vs. THE DY CIT, CIRCLE-1, KALYAN
In favour of the assessee: the assessee's appeal was allowed. From the AI summary of this appeal.
What did the Tribunal hold?
The Tribunal held that the PCIT's order was unsustainable. It found that the AO's view in allowing depreciation and interest was plausible, as the cars were used for business, owned by the assessee, and depreciation was allowed on opening WDV. Therefore, the assessment order was not erroneous.
What were the facts?
The assessee company claimed depreciation on motor cars and interest on car loans. The PCIT initiated revision proceedings under section 263, considering the assessment order erroneous and prejudicial to revenue as cars were in directors' names. The assessee argued the cars were used for business and depreciation was allowed in earlier years.
What were the issues?
Whether the PCIT's revision order under Section 263 was valid when the AO's assessment order allowing depreciation and interest on cars registered in directors' names was considered a plausible view. The issue of limitation was also raised but became academic.
Which sections of the Income-tax Act were involved?
AI-generated summary — verify with the full judgment below
Cases cited in this judgment(3)Show listHide list
Detected automatically from the text. Citations are also linked where they appear in the judgment. The count shows how many other judgments on BharatTax rely on the same authority.
- CIT v. Dilip Singh Sardarsingh Bagga40 citing201 ITR 995 · 1993 · HC
- CIT v. Mirza Ataullaha Baig & Anr.31 citing202 ITR 291 · 1993 · HC
- Shree Laxmi Estate (P) Ltd. v. ITO, Ward3 citing108 Taxmann.com 195 · 2019 · ITAT
Income Tax Appellate Tribunal, MUMBAI BENCHES “H”, MUMBAI
Before: SHRI SAKTIJIT DEY & SHRI M. BALAGANESH
O R D E R PER SAKTIJIT DEY, JM Captioned appeal has been filed by the assessee assailing the order dated 24.03.2021 passed by learned Principal Commissioner of Income Tax (PCIT), Thane-1 under section 263 of the Income Tax Act, 1961 for the assessment year 2015-16.
2. Ground no. 1 being a general ground is dismissed. At the time of hearing, learned Counsel for the assessee did not press ground no.
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.
2 Assessment Year: 2015-16 3. Briefly the facts are, the assessee is a resident company engaged in the business of manufacturing of grey fabrics. For the assessment year under dispute, assessee filed its return of income on 24.09.2015 declaring total income of Rs. 43,30,817/-. Subsequently, assessee filed a revised return on 13.09.2017 declaring income of Rs. 42,70,870/-. Assessment in case of the assessee was completed under section 143(3) of the Act vide order dated 07.12.2017 determining the total income at Rs. 43,58,500/-. Subsequently, learned PCIT on examining the assessment record of the assessee was of the view that the assessment order passed for the impugned year is erroneous and prejudicial to the interest of the revenue as the AO has allowed depreciation of Rs. 3,34,517/- on motor cars as well as interest paid of Rs. 1,86,615/- on the car loans. Accordingly, he issue a show cause notice under section 263 of the Act to the assessee on 16.03.2021. Ultimately, alleging that the assessee failed to furnish its reply to the show cause notice issued under section 263 of the Act, learned PCIT proceeded to pass the impugned order setting aside the assessment order passed under section 143(3) of the Act with a direction to the AO to re-do the assessment after examining the issues pointed out in the revision order.
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
on the issue of limitation having become academic, we feel it unnecessary to deal with it.
More judgments on Section 263
- Gillette India Limited, Mumbai vs Principal Commissioner of Income Tax, JaipurITA 1316/JPR/2026[2018-19]Status: Disposed16 Oct 2026AY 2018-19
- Neo Structo Construction P. Ltd., Ahmedabad vs The Pr. CIT- 3, AhmedabadITA 1216/AHD/2026[2015-2016]Status: Disposed16 Oct 2026AY 2015-2016
- Vimal Harilal Baldania, Gandhidham vs The ITO Ward 2, GandhidhamITA 770/RJT/2025[2017-18]Status: Disposed15 Oct 2026AY 2017-18
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1493/KOL/2026[2015-2016]Status: Disposed15 Oct 2026AY 2015-2016
- J.D. Marketing, Kolkata vs ITO, Ward 37(1), KolkataITA 1492/KOL/2026[2013-2014]Status: Disposed15 Oct 2026AY 2013-2014
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