MR. OM PARKASH ARORA,DELHI vs. JCIT (OSD), NEW DELHI

The assessee is in appeal before the Tribunal against the order of the CIT(A) dated 23rd March, 2015 passed for Assessment Year 2009- 10.

The grounds of appeal taken by the assessee are not in consonance with Rule 8 of ITAT Rules. They are descriptive and argumentative in nature. At the time of hearing, the ld. Counsel for the assessee has confined the grievance of the assessee to the two issues, namely, (a) that the ld.CIT(A) has erred in upholding the disallowance of depreciation on car amounting to Rs.7,06,204/-; and (b) that the ld.CIT(A) has erred in upholding the ad hoc disallowance of expenses out of conveyance, repair and maintenance, business promotion, etc. He did not press other grounds.

As far as the first fold of grievances is concerned, the brief facts are that the assessee has filed his return of income on 30th September, 2009 declaring an income of Rs.36,93,160/-. The case of the assessee was selected for scrutiny assessment and a notice u/s 143(2) of the Income-tax Act, 1961 (for short ‘the Act’) was issued on 23rd August, 2010. It emerges out from the record that at the relevant time the assessee was running two proprietorship firms, namely, M/s Delhi Investigators and M/s DI Management International Services. Apart from these two proprietorship concerns, he was also director in M/s Citi Collections India Pvt. Ltd. The assessee has purchased a ‘Porsche’ car in the month of August, 2007 for a consideration of Rs.52,56,504/-. The assessee had claimed depreciation on this car in 2 assessment year 2008-09 which was allowed to the assessee.

The appeal to the CIT(A) did not bring in relief to the assessee.

The ld. Counsel for the assessee, at the very outset, submitted that the car was agreed to be sold for a sum of Rs.35 lac. Since possession was not given and it got scratch mark, therefore, ultimately, a sum of Rs.29,60,000/- was received by the assessee. The car was transferred on 2nd November, 2010. For buttressing this contention, he took me through page No.15 of the paper book wherein information collected from the Office of the Motor Licensing Officer has been placed on record. He also took me through page 14, where copy of Form No.29 issued under Rule 55(1) of Motor Vehicle Act, 1988 has been placed. On the strength of these documents, he contended that the transfer of the vehicle took place on 2nd November, 2010. Therefore, the depreciation should have been granted to the assessee.

On the other hand, the ld. DR relied upon the order of the CIT(A) and submitted that the ld. First appellate authority has highlighted circumstantial evidence exhibiting the fact that car might not have been used by the assessee and it was given to the prospective vendee.

I have duly considered the rival contentions and gone through the record carefully. Depreciation is being provided u/s 32 of the Income Tax Act. It is pertinent to take note of the relevant part of this section:-

A bare reading of this section would indicate that in order to claim depreciation, the assessee should demonstrate ownership over the asset and its user for the purpose of the business. The ld.CIT(A) while rejecting the claim of the assesseer has observed that the assessee failed to bring demonstrative evidence of the user of the car for the purpose of business. The ld. First appellate authority further observed that once the assessee has received substantial part of the sale consideration, then, it be assumed that the car must have been 5 transferred by the assessee. In my opinion, the ownership of an asset can be demonstrated by the relevant evidence, namely, if it is a tangible asset being building, land, etc., the registered sale deed could prove the ownership. If it is a machinery like car, ship, etc., then, the registration certificate could demonstrate the ownership. In the present case, it is pertinent to take note of the certificate issued by the licensing authority which is the authorised agency for keeping the record of vehicles under the Motor Vehicle Act. This certificate read as under:-

The ownership of a vehicle is not only necessary for the purpose of claiming depreciation, but, also relevant for other laws, i.e., Motor Vehicle Act. In case the vehicle met with an accident and injured somebody, then, who will be responsible for making the payment of compensation, to whom the insurance company would reimburse the claim in case of theft. How an assessee can afford to hand over a vehicle to an unauthorized person under attending circumstances which can expose him for payment of compensation in case it met with an accident? The owner of the vehicle could be held liable in case it is involved in some criminal or anti social activities. There could be chances for receipt of purchase price, but, to my mind, transfer of ownership could only be construed when it is effected under the Motor Vehicle Act. There may be dispute between the vendee and vendor, payments might have been made, but, unless transfer is effected under the Motor Vehicle Act, the ownership on the basis of circumstances cannot be recognized. To my mind, the ld. first appellate authority has erred in appreciating the controversy on the said strength of circumstantial evidence and holding that the assessee was not owner of the vehicle. As far as demonstrative evidence exhibiting user of this vehicle for business purposes is concerned, it is quite difficult for an assessee to bring that type of evidence. That may be a corroborative factor, but, once ownership is not in doubt and depreciation was granted in earlier year, it cannot be denied in this year also. In view of the above discussion, I allow this fold of grievances and deleted the disallowances.

In the next fold of grievances, the assessee has pleaded that the ld. First appellate authority has upheld ad hoc disallowance out of various expenses. The assessee has filed written submissions and in the submissions the ld. Counsel for the assessee has tabulated the details of expenditure claimed by the assessee, disallowed by the 8 Assessing Officer and also quantified the percentage of the disallowance to the total expenditure. For appreciating the controversy in a more scientific way, I would like to take note of these details from the submissions of the ld. Counsel for the assessee. It read as under:-

With the assistance of the ld. Representatives, I have gone through the record carefully. In order to claim expenditure for the purpose of business, the onus lies upon the assessee to demonstrate that the expenditures were incurred wholly and exclusively for the purpose of business. The ld. Assessing Officer has made analysis of the details submitted by the assessee and arrived at a conclusion that some part of the expenditure have been incurred for using these facilities for personal purposes or for non-business purposes.

In the result, the appeal of the assessee is partly allowed.