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Income Tax Appellate Tribunal, MUMBAI BENCH “B”, MUMBAI
Before: SHRI C.N. PRASAD, HONBLE & SHRI MANOJ KUMAR AGGARWAL, HONBLE
2 (A.Y:2011-12) ITA Nos. 265 & 266/MUM/2018 M/s. Bangalore Shirt Co. Pvt. Ltd., O R D E R PER C.N. PRASAD (JM) 1. These three appeals are filed by the assessee for the Assessment Years A.Y. 2011-12 and A.Y. 2013-14. Appeals in ITA.No. 498/Mum/2015 and ITA.No. 265/Mum/2018 for the A.Y. 2011-12 relates to quantum disallowance made by the Assessing Officer i.e. depreciation, interest and running expenses of a motor car on the ground that the car is not registered in the name of the assessee company and there is personal use by the Directors. Appeal in ITA.No. 265/Mum/2018 is the penalty appeal for the A.Y. 2011-12 on the quantum disallowances.
Learned Counsel for the assessee submitted that identical issue has come up before the Tribunal for the A.Y. 2012-13 in ITA.No. 6042/Mum/2016 dated 08.08.2018 and the Tribunal allowed the claim for depreciation and interest on borrowed funds for purchase of the very same car as deduction. Copy of the order is placed on record.
Ld. DR vehemently supported the orders of the authorities below.
We have heard the rival submissions, perused the orders of the authorities below and the case laws relied on. On a perusal of the order of the Tribunal for the A.Y. 2012-13 dated 08.08.2018 we noticed that the 3 (A.Y:2011-12) ITA Nos. 265 & 266/MUM/2018 M/s. Bangalore Shirt Co. Pvt. Ltd., Tribunal allowed the claim for depreciation and interest expenditure as allowable deduction observing as under: - “6. Coming to the additional grounds, the Assessing Officer while completing the assessment noticed that assessee purchased BMW Car and registered the same in one of the Director’s relatives. The assessee contended that the car was purchased by taking loan and the company repaid the loan through EMI. It is also contended that the car was used for the purpose of business and the car was purchased through the funds of the company. The asset belongs to the company and therefore the depreciation as well as the interest was rightly claimed as deduction. However, the Assessing Officer not convinced with the submissions of the assessee denied depreciation and interest on car loan. On appeal the Ld.CIT(A) following the decision of the Apex court in the case of Mysore Minerals Ltd. v. CIT [239 ITR 775] and the Hon'ble Jurisdictional High Court in the case of CIT v. Dilip Singh Sardarsingh Bagga [201 ITR 995] allowed the claims of the assessee.
7. Ld. DR strongly supported the orders of the Assessing Officer and the counsel for the assessee strongly placed reliance on the orders of the Ld.CIT(A).
We have heard the rival submissions, perused the orders of the authorities below. In this case the depreciation was denied as the vehicle was registered in the name of the relative of the Director. The Ld.CIT(A) following the decision of the Apex Court in the case of Mysore Minerals Ltd. v. CIT (supra) and the Hon'ble Jurisdictional High Court in the case of CIT v. Dilip Singh Sardarsingh Bagga (supra) wherein it has been held that depreciation is allowable in the hands of the company even if the vehicle is registered in the name of its Directors, allowed the claim of the assessee. Similarly, the interest paid on car loan is allowable as deduction. Thus, we do not find any infirmity in the order passed by the Ld.CIT(A). The additional ground raised by the Revenue is rejected.”
4 (A.Y:2011-12) ITA Nos. 265 & 266/MUM/2018 M/s. Bangalore Shirt Co. Pvt. Ltd., 5. Respectfully following the said decision, we direct the Assessing Officer to allow depreciation and interest on borrowals for the purchase of the said car as deduction. For the same reasons we hold that the running expenses of the vehicle should also be allowed as deduction. In the result, the grounds raised by the assessee in these appeals are allowed.
Coming to the penalty appeal for the A.Y. 2011-12, as the penalty was levied on the disallowance of depreciation, interest and running expenses of the motor vehicle and since we have held that these expenses are allowable as deduction and deleted the disallowances, the penalty levied on such disallowances has no legs to stand. Thus, we delete the penalty levied u/s. 271(1)(c) of the Act for the A.Y. 2011-12.
In the result, appeals of the assessee are allowed.
Order pronounced on 30.09.2020 as per Rule 34(4) of ITAT Rules by placing the pronouncement list in the notice board.