MATA SECURITIES INDIA P.LTD,MUMBAI vs. ASST CIT CIR 4(3), MUMBAI

Date of Hearing: 17.11.2016 Date of Pronouncement: 28.12.2016 O R D E R

PER N.K. PRADHAN, AM

filed by the assessee read as under:

1. (a) The Hon'ble Commissioner of Income-tax (Appeals)-8, Mumbai [hereinafter referred to as "CIT (A)"] erred in up-holding the action of the learned Asstt. Commissioner of Income-tax (hereinafter referred to as 'ACIT) by confirming disallowance of Rs. 1,99,993 u/s 14A of the of Act. (b) The appellant-company submits that on the facts and circumstances of the case, as well as in law, the grounds on which the Hon'ble CIT (A) has confirmed the disallowance of Rs. 1,99,993 u/s 14A of the Act is contrary to the spirit of the Act and is bad in law and therefore, the impugned disallowance be set-aside. II. (a) The Hon'ble CIT (A) erred in up-holding the action of the learned ACIT by confirming disallowance of depreciation of Rs.12,75,070 on vehicles acquired by the appellant-company. (c) The appellant-company submits that on the facts and circumstances of the case, as well as in law, the grounds on which the Hon'ble CIT (A) has confirmed the disallowance of depreciation of Rs.12,75,070 is contrary to the spirit of the Act and is bad in law and therefore, the impugned disallowance be set aside. III The order of the Hon’ble CIT(A), to the extent of the above matters, being contrary to the facts and circumstances of the case, as well as in law, appropriate relief be granted to the appellant company in view of the grounds of appeal

.”

3. We begin with 1st ground of appeal. The Assessing Officer (AO) noticed that the assessee had received dividend income of Rs. 3,94,943/- which was not a part of total income. The assessee had not computed the amount of expenses attributable to earning of such exempt income. The AO asked the assessee to furnish details of investments on which it had derived the exempt income and explain as to why disallowance of expenditure should not be made u/s 14A read with rule 8D of the Income Tax Rules 1962. The AO then computed the disallowance u/s 14A read with Rule 8D at Rs. 1,99,993/-.

4. The assessee preferred appeal against the above disallowance made by the AO before the learned CIT(A). Relying on the decision in the case of Cheminvest Ltd. vs. ITO 317 ITR 86 (AT), Southern Petro Chemicals Industries (3 SOT 157), ACIT vs. Citicorp Finance (India) Ltd. (108 ITD 457), ITO vs. Daga Capital Management Pvt. Ltd. vide its order dated 20.10.2008, in the learned CIT(A) upheld the disallowance of Rs. 1,99,993/- made by the A.O. u/s 14A of the Act.

5. Before us, the learned counsel of the assessee submits that as per its financial statements, the shareholders fund is almost Rs. 1300 lacs; the interest expense during the year was only Rs. 3.15 lacs, the year end amount of loan on which interest was paid was only Rs. 25.73 lacs and the investment in shares was Rs. 300 lacs out of which investment in shares of subsidiary companies was approximately Rs. 250 lacs. It is submitted that where investment in shares are made out of assessee’s own funds and non-interest bearing funds, then, as such, no disallowance u/s 14A can be made. The learned counsel further states that investment in associates and subsidiaries for strategic business purpose cannot be considered for disallowance u/s 14A read with Rule 8D. Reliance was placed by her inter alia on the decision in the case of Garware Wall Ropes Ltd. vs ACIT – [(2014) 65 SOT 86 (Mum –Trib.)], M/s. JM Financial Limited vs. Addl. CIT – [ITA No. 4521/Mum/12, Order Dated 26.03.2014], Thomas Cook (India) Ltd. vs DCIT – [(2016) 49 ITR (T) 178 (Mum. – Trib.)], Capgemini India (P.) Ltd. vs I.T.O. – [(2016) 66 taxmann.com 163 (Mum – Trib.)], Aditya Birla Nuvo Ltd. vs ACIT – [(2015) 68 SOT 403 (Mum – Trib.)].

8. We now come to the 2nd ground filed by the assessee in this appeal. The assessee had claimed depreciation of Rs. 12,75,070/- on purchase of motor cars. The AO on perusal of the details filed by the assessee found that the motor cars were purchased and registered in the name of the Directors during the F.Y. 2009-10. The AO disallowed the claim of the depreciation as the assessee was not the legal owner of the vehicle. As per him even though the motor cars are purchased from the funds of the company, the depreciation would be allowed only if the same is in the name of the company. In view of the above, the AO disallowed the claim of depreciation of Rs. 12,75,070/-.

9. The assessee preferred appeal before the learned CIT(A) against the above disallowance made by the AO The learned CIT(A) agreed with the findings of the AO and confirmed the disallowance.

“ 3. First we shall take up the appeal filed by the Revenue. The first issue relates to disallowance of Rs.5,30,107/-, being depreciation claimed on motor car. The assessee had purchased vehicles in the name of its Director, but disclosed the same as part of its assets. Accordingly, it claimed depreciation on the vehicles. However, the AO disallowed the depreciation on the reasoning that the vehicles were not in the name of Assessee Company. The ld. CIT(A), however, allowed the deprecation by following the decision dated 30.9.2010 rendered by the Tribunal in assessee’s own case in and 4821/Mum/2009 relating to assessment year 2006-07. 3.1 The assessee has furnished a copy of the order passed by the Mumbai Bench of the Tribunal for the assessment year 2006-07, wherein the Tribunal has followed the decision rendered on an identical issue in assessee’s own case for assessment year 2005-06. In the assessment year 2005-06, the Tribunal had followed the decision rendered by the Delhi Bench of the Tribunal in the case of USHA RECTIFIER CORPORATION (I) PVT. LTD. V/s INSPECTING ASSISTANT COMMISSIONER [1989] 35 TTJ 602 (ITAT)[Del]) and also the decision of the Jurisdictional High Court in the case of CIT V/s Dilip Singh Sardarsingh Bagga reported in 201 ITR 995 (Bom), wherein it has been held that the registration under Motor Vehicle Act is not an essential requirement for acquiring ownership of the motor vehicle and that an assessee purchasing a motor vehicle for valuable consideration and using the same for his business cannot be denied benefit of depreciation on the ground that the vehicle was not registered under Motor Vehicle Act. 3.2 In the instant case, the ld. CIT(A) has only followed the decision of the Co-ordinate Bench of this Tribunal on this issue and hence, we do not find any reason to interfere with his order on this issue.” 12.1 The facts being similar, we follow the above order of the Coordinate Bench and delete the disallowance of Rs. 12,75,070/- made by the AO. Thus the 2nd ground of appeal filed by the assessee is allowed.

Order pronounced in the open court on 28/12/2016