PAN OLEO ENTERPRISE P.LTD,MUMBAI vs. ASST CIT 10(3)(2), MUMBAI

आदेश / O R D E R

PER RAVISH SOOD, JUDICIAL MEMBER

“The appellant submits the following grounds of appeal which are separate/alternative and without prejudice to each other:

1. On the facts and in the circumstances of the case and in law, the learned CIT(A) erred in conf irming the disallowance of depreciation claimed of Rs. 2,55,051/- on the appellant's motor car on the ground that the motor car was registered in the name of the individual Director and not the appellant-company, without appreciating in right perspective the fact that the cost of the motor car was paid by the appellant-company and the motor car was really and beneficially owned by the appellant- company and it was, as a matter of fact, used wholly and exclusively for the appellant's business, and disregarding/not appreciating the direct judicial decisions of the Supreme Court, the Bombay High Court and the Tribunal cited by the appellant. The appellant prays that since the appellant's case is squarely covered by a plethora of direct judicial decisions, the disallowance of depreciation of Rs. 2,55,051/ - on motor car be deleted and depreciation be allowed to the appellant.

2. On the facts and in the circumstances of the case and in law, the appellant prays Your Honours to grant such other and/or further and/or consequential reliefs as may be deemed fit and as per law. The appellan t craves leave to add to, alter, amend or withdraw all or any of the foregoing grounds of appeal at or before the hearing of this appeal.”

2. Briefly stated, the facts of the case are that the assessee company which is a trader and commission agent in oleo chemicals had filed its return of income for AY: 2012-13 on 28.09.2012, declaring total income of Rs.1,19,78,233/-. The case of the assessee was taken up for scrutiny assessment and a notice u/s 143(2) was issued and served upon the assessee. That during the course of the assessment proceedings it was observed by the A.O that the assessee had claimed depreciation of Rs.5,10,103/- on a Mercedes benz car. That from an examination of the purchase bill of the vehicle filed by the assessee during the course of the assessment proceedings, it was gathered by the A.O that the said vehicle was registered in the name of the director of the company. That in the backdrop of the aforesaid P a g e | Pan Oleo Enterprises Vs. ACIT facts the A.O called upon the assessee to explain as to why its claim for depreciation may not be disallowed. The assessee in support of its claim for depreciation relied on the judgment of the Hon‟ble Supreme Court in the case of CIT Vs. Mysore Minerals (1999) 156 CTR 1 (SC). However, the A.O not finding favour with the submissions of the assessee, disallowed the claim of depreciation of Rs.5,10,103/- raised by the assessee.

3. The assessee being aggrieved with the order of the A.O carried the matter in appeal before the CIT(A). That it was submitted before the CIT(A) that as the purchase consideration for the motor car was paid by the assessee company, therefore, the same was “really” owned by the assessee company and not by the director. That it was further submitted by the assessee that the motor car was reflected in the balance sheet of the assessee company and the day to day running expenses were also met by the latter. Thus, in the backdrop of the aforesaid facts, the assessee had tried to impress upon the CIT(A) that though the assessee was not the legal owner of the motor car, but being vested with the beneficial ownership of the same, it was duly entitled towards claim of depreciation. The CIT(A) however did not find favour with the submissions of the assessee, and concluded that the assessee not being the owner of the motor car was thus not entitled towards the claim of depreciation on the same. Alternatively, it was submitted by the assessee before the CIT(A) that as the motor car was purchased on December 30th, 2011, therefore, the same having been used for a period of less than 180 days during the year under consideration, the assessee had thus claimed 50% depreciation on the same, but however, the A.O had wrongly disallowed the depreciation for the full financial year. The CIT(A) taking cognizance of the said contention of the assessee, restricted the disallowance of depreciation P a g e | Pan Oleo Enterprises Vs. ACIT to the amount claimed by the assessee, i.e Rs.2,55,051/-. Thus, in the backdrop of the aforesaid facts, the CIT(A) partly allowed the appeal of the assessee.

4. The assessee being aggrieved with the order of the CIT(A) had carried the matter in appeal before us. That during the course of the hearing of the appeal it was submitted by the ld. Authorized Representative (for short „A.R‟) for the assessee that the respective payments for the purchase of the motor car were paid by the assessee company. The ld. A.R in order to fortify his aforesaid contention took us through his „Paper book‟, wherein the respective payments made from the bank account of the assessee stood reflected. That it was further submitted by the ld. A.R that as the motor car was registered in the name of the director, therefore, the A.O on the said stand alone basis had disallowed the claim of depreciation raised by the assessee, and while so doing had lost sight of the material facts which substantiated the beneficial ownership of the assessee, viz. (i). the motor car was purchased by the assessee company from its own funds; (ii). the motor car was reflected as an asset in the balance sheet of the assessee; and (iii). the day to day running expenses of the car were incurred by the assessee. Thus, in the backdrop of the aforesaid contentions, it was averred by the ld. A.R that now when the assessee company was the beneficial owner of the motor car, therefore, there was no reason for the A.O to have dislodged the claim of depreciation raised by the assessee in its return of income. The ld. A.R in order to buttress his aforesaid contention, relied on the order of the ITAT Ahmedabad bench in the case of ITO Vs. Electro Ferro Alloys Ltd. (2012) 13 ITR (Trib) 594 (Ahd), wherein the Tribunal had held that where a car had been purchased by the company in the name of its director, but is reflected as an asset in the „books of account‟ of the P a g e | Pan Oleo Enterprises Vs. ACIT assessee company and is used in the business of the company, the assessee shall be taken as the de facto owner of the said car and would be entitled towards the claim of depreciation, by observing as under:

22.2 In the present case it is not disputed that investment was made by the assessee in purchase of the motor car. It is shown as asset in the balance sheet of the company. If expenditure for running the vehicle was incurred by the assessee, the assessee is de facto owner of the vehicle. It is not disputed that it was used for the purpose of business of the assessee company. Hon. Rajasthan High Court in the case of CIT vs. Mohd. Bux Shokat Ali (2001) 167 CTR (Raj) 192 : (2002) 256 ITR 357 (Raj) held that where vehicle was purchased by the firm, used by it for the purpose of its business but it was registered in the name of one of the partners, then the firm would be entitled to depreciation on vehicle. Hon’ble Delhi High Court in the case of CIT vs. Basti Sugar Mills Co. Ltd. (2002) 176 CTR (Del) 294 : (2002) 257 ITR 88 (Del) held that where vehicle was owned and used by the assessee but no registration was done in its name, still then assessee would be entitled for depreciation on such vehicle. Therefore, assessee has right to claim depreciation thereon. This ground of Revenue is accordingly rejected." The ld. A.R in order to drive home his aforesaid contention that the assessee stood duly entitled towards claim of depreciation on the motor car, also relied on the order passed by the coordinate bench of the Tribunal in the case of Edwise Consultants Pvt. Ltd. Vs. CIT (2015) 44 ITR (Trib) 0236 (Mumbai), wherein the Tribunal adjudicating on the issue involving the same facts as are there before us in the present appeal, had held as under: “23. The next issue relates to the disallowance of depreciation. The assessing officer disallowed the depreciation claim made on the cars only for the reason that the vehicles stood in the name of the directors and hence the assessee cannot be considered to be the legal owner. The Ld A.R submitted that the funds for purchase of cars were provided by the assessee company and the vehicles have been accounted as the assets of the assessee company only. He further submitted that the registration is only a formality and the same would not disentitle the assessee from claiming depreciation, even if it is registered in the name of its directors. In this regard, he placed reliance on the following case law:-

P a g e | Pan Oleo Enterprises Vs. ACIT (a) Poddar cements Ltd (226 ITR 625) (b) ITO Vs. Electro Ferro Alloys Ltd (2012)(13 ITR (Tri) 594 (c) CIT Vs. Aravali Finlease Ltd (2012)341 ITR 282 (Guj) (d) CIT Vs. Basti Sugar Mills Co. Ltd (2002)(257 ITR 88)(Delhi) 24. On the contrary, the Ld D.R submitted that the co-ordinate bench of Tribunal has confirmed identical disallowance made in the assessee’s own case in AY 2007-08.