G.R. FASHIONS P.LTD,MUMBAI vs. ASST CIT 4(2), MUMBAI

In grounds no.1.1 to 1.3, assessee has challenged the re– opening of assessment under section 147 of the Income Tax Act, 1961 (for short "the Act").

As could be seen from the order of the learned Commissioner (Appeals), though, the assessee had raised a ground before the first appellate authority challenging the re–opening of the assessment but at the time of hearing, assessee did not press the ground, hence, it was dismissed as not pressed. This fact is evident from para–2.1 of the learned Commissioner (Appeals)’s order. To a pertinent question from the Bench, the learned Counsel for the assessee also accepted this fact. That being the case, ground raised before this forum again challenging the validity of re–opening of assessment under section 147, in our view, is thoroughly misconceived, hence, cannot be entertained. Accordingly, we dismiss grounds no.1.1 to 1.3 raised by the assessee.

Grounds no.2.1 to 2.2, assessee has challenged disallowance of ` 4,20,450, on account of claim of depreciation on motorcar.

Briefly stated the facts are, during the assessment proceedings, the Assessing Officer, while verifying the claim for depreciation, noticed that two motorcars on which assessee had claimed depreciation aggregating to ` 4,20,458, were purchased in the name of directors. The Assessing Officer relying upon the decision of the Hon'ble Supreme Court as referred to by him in the assessment order,

Learned Counsel for the assessee submitted before us that though the vehicles were purchased and registered in the name of directors under the Motor Vehicle Act, but for all practical purposes, they were used by the assessee company. It was submitted, investment in purchase of cars was not only done by the assessee but it had absolute right to use, sell or repair the motorcar. It was submitted, all expenditures relating to use and maintenance including insurance of vehicles are borne by the assessee company and debited in its books of account. He, therefore, submitted, only because the motorcars were purchased in the name of the directors, it cannot be said that the company has no right over the vehicles, hence, not eligible for depreciation. For such proposition, he relied upon the following two decisions of the Tribunal, Mumbai Bench:–

The learned Departmental Representative supported the order of the Assessing Officer and learned Commissioner (Appeals).

We have considered the submissions of the parties and perused the material available on record. As far as factual aspect is concerned, it is clearly evident that the disallowance of depreciation by Departmental Authorities is solely for the reason that two motorcars were purchased and registered in the name of the directors without controverting the fact that the investment in vehicle were made by the assessee company and for all practical purposes, the assessee company is exercising its rights as owner of the motorcars. As could be seen, identical issue of disallowance of depreciation in respect of motorcars purchased in the name of directors came up for consideration before the co–ordinate Bench of the Tribunal in the decisions relied upon by the learned counsel. The Tribunal following the decision of the Hon'ble Supreme Court in ICDS Ltd. v/s CIT, 350 ITR 527 (SC), held that only because the vehicles are purchased and registered in the name of directors as per the provisions of Motor Vehicle Act, it cannot be said that assessee company is not eligible for depreciation even though for all practical purposes, the vehicles are G.R. Fashions Pvt. Ltd. 5 used by the assessee company for its business. Respectfully following the consistent view of the co–ordinate bench of the Tribunal as referred to above, we hold that assessee’s claim of depreciation on motorcar is to be allowed. Accordingly, we direct the Assessing Officer to do so. Grounds no.2.1 to 2.2, are allowed.

In the result, appeal is partly allowed. Order pronounced in the open Court on 05.01.2016