Income Tax Appellate Tribunal - Delhi
M/S. Shivalaya Construction Co. Pvt. ... vs Pr. Cit, New Delhi on 16 August, 2017
IN THE INCOME TAX APPELLATE TRIBUNAL
(DELHI BENCH 'C' : NEW DELHI)
BEFORE SHRI N.K. SAINI, ACCOUNTANT MEMBER
and
SHRI KULDIP SINGH, JUDICIAL MEMBER
ITA No.2315/Del./2015
(ASSESSMENT YEAR : 2010-11)
M/s. Shivalaya Construction Co.Pvt.Ltd., vs. Pr. CIT, Delhi-8,
9 - 10/3, IIIrd Floor, Laxman House, New Delhi.
Asaf Ali Road,
New Delhi - 110 002.
(PAN : AACCS2475A)
(APPELLANT) (RESPONDENT)
ASSESSEE BY : S/Shri R.S. Singhvi & Satyajit Goel, CA
REVENUE BY : Shri Navin Chandra, CIT DR
Date of Hearing : 01.08.2017
Date of Order : 16.08.2017
ORDER
PER KULDIP SINGH, JUDICIAL MEMBER :
Appellant, M/s. Shivalaya Construction Co. Pvt. Ltd. (hereinafter referred to as 'the assessee'), by filing the present appeal sought to set aside the impugned order dated 30.03.2015 passed by the Pr. Commissioner of Income-tax, Delhi-8, New Delhi, for the Assessment Year 2010-11 on the grounds inter alia that :-
2 ITA No.2315/Del./2015
"1(i). That the order u/s. 263 is illegal, arbitrary and without jurisdiction as the issue of claim of depreciation on vehicles was duly considered and accepted in the original assessment order.
(ii) That the claim of depreciation was in accordance with legal principles and there is no ground or basis to dispute the correctness of the claim of depreciation.
(iii) That the claim of depreciation was in respect of vehicles owned and used by the appellant for the purpose of business and merely because the vehicles were purchased in the name of directors, there could be no presumption that same were not used for the purpose of business.
2. That order u/s. 263 is illegal, arbitrary and same is not sustainable on facts and under the law."
2. Briefly stated the facts necessary for adjudication of the controversy at hand are : assessment in this case was completed under section 143 (3) of the Income-tax Act, 1961 (for short 'the Act') at Rs.6,00,48,757/- as against the returned income of Rs.5,95,60,830/-. CIT finding the assessment order erroneous invoked the provisions contained u/s 263 of the Act and thereby issued the notice to the assessee that the AO should have disallowed the depreciation claimed by the assessee for purchasing 3 ITA No.2315/Del./2015 cars / vehicles costing Rs.65,76,687/- as all the vehicles have been purchased in the individual names of the Directors of the Company. CIT, being dis-satisfied with the explanation rendered by the assessee, came to the conclusion that the AO has passed the assessment order without applying his mind and held the same to be erroneous and prejudicial to the interest of the Revenue and directed the AO to pass fresh order in accordance with law.
3. Feeling aggrieved, the assessee has come up before the Tribunal by way of challenging the impugned order passed by ld. CIT.
4. We have heard the ld. Authorized Representatives of the parties to the appeal, gone through the documents relied upon and orders passed by the revenue authorities below in the light of the facts and circumstances of the case.
5. Before proceeding further, the notice issued by ld. CIT u/s 263 of the Act in order to review the assessment order passed by the AO u/s 143 (3) is reproduced for ready perusal as under :-
"No.PR.CIT-8/Show Cause u/s 263/2014-15/813 dated 02.03.2015 To The Principal Officer, M/s. Shivalaya Construction Co. Pvt. Ltd., Plot No.51, Pocket C-8, Sector 17, Dwarka, New Delhi - 110 045.
Sir/Madam, 4 ITA No.2315/Del./2015 Subject : Show cause Notice u/s 263 of Income Tax Act, 1961 in the case of M/s. Shivalaya Construction Co. Pvt. Ltd. for AY 2010-11 regarding.
The examination of the assessment record of your case for the Assessment Year 2010-11 reveals that the assessment order passed u/s 143(3) of the Income Tax Act passed on 07.05.2012 by the DCIT, Circle 23 (1), New Delhi is erroneous as well as prejudicial to the interests of the revenue for the following reasons :-
Perusal of the assessment order reveals that the Assessing Officer completed the assessment u/s 143(3) by making an ad-hoc addition of Rs.4,87,927/- wherein 10% of the expenses under the head of Administrative and Selling Expenses were disallowed on ad-hoc basis. However, during the year, the assessee had purchased cars/vehicles costing Rs.65,76,687/-. The perusal of the purchase bills shows that all these vehicles have been purchased in the individual names of the directors of the assessee company. The vehicle wise details are summarized in the table as under :-
S.No. Name of Date of Mode of Amount Paid
Buyer purchase Vehicle (in Rs.)
1 Mr. Shripal 09.03.2010 Mahindra 4,94,430/-
Aggarwal Bolero
Camper E-
IIWD
2 Mr. Shripal 02.05.2009 Mahindra 5,30,000/-
Aggarwal Bolero LX
BS2 75 TR
3 Mr. Shripal 02.06.2009 Mahindra 5,30,000/-
Aggarwal Bolero
Camper Gold
4 Mr. Shripal 14.04.2009 Mahindra 5,40,000/-
Aggarwal Bolero SLE
BS-3
5 Mr. Pardeep 01.02.2010 Mahindra 6,07,950/-
Nandal Bolero SLX E-
II 2WD
6 Mr. Shripal 28.01.2010 Toyota 11,50,595/-
Aggarwal Innova 2.5
7 Mr. Shripal 27.07.2009 Mahindra 8,33,000/-
Aggarwal SC-RF HWK
8 Mr. Shripal 12.01.2010 Maruti Swift 5,03,712/-
Aggarwal
9 Mr. Shripal 02.06.2009 Mahindra 3,20,000/-
Aggarwal Maxi Truck
5 ITA No.2315/Del./2015
10 Mr. Shripal 14.04.2009 Mahindra 7,30,000/-
Aggarwal Scorpio LX
The Assessing Officer should have disallowed the depreciation claim in this regard since the assessee company was not eligible to claim depreciation on the above assets as the same are not owned by it.
In view of the above, the assessment order passed by the Assessing Officer is erroneous as well as prejudicial to the interests of the revenue. You are therefore provided with an opportunity to file your explanation on the above.
Your case is fixed for hearing on 11.03.2015 at 11.30 AM in my Room No.397, C.R. Building, I.P. Estate, New Delhi - 110002."
6. Ld. CIT pursuant to the show cause notice, referred to above, returned the findings as to the issue of claiming depreciation by the assessee on the vehicles allegedly used for business purpose, to the following effect :-
"5. I have considered the submissions of the assessee carefully. The assessee's contention that this issue has been examined during the assessment proceedings and beneficial ownership and use of the car has been accepted by the AO after investigation, is not borne out by the documents and correspondence placed in the relevant assessment record. A perusal of the records show that apart from placing the bills in the assessment folder, no inquiry has been done by the A.O. as to whether these vehicles on which depreciation was claimed were actually used for the purposes of assessee's business. The records also indicate most of these models of vehicles are SUVs and thus, are more likely to be put to personal use rather than being used in construction business of the assessee.
6. In the present case, the assessing officer has requisitioned the copy of bills of the new 6 ITA No.2315/Del./2015 assets by a letter dated 17.01.2012 and the assessee has submitted the bills by his letter dated 16.04.2012 and the order u/s 143(3) of the Act has been subsequently passed on 07.05.2012. A bare perusal of Section 32 indicates that in respect of the depreciation of buildings, machinery, plant or furniture being tangible assets and with which we are concerned, the deduction in sub section (1) of section 32 shall be allowed provided these assets are owned wholly or partly by the assessee and used for the purpose of his business or profession. Thus, it imposes requirement of "ownership" and "usage for business" for a successful claim u/s 32 of the Act. In the present case the vehicles are registered in the name of the Directors, and thus, prima facie, the ownership of these vehicles are vested in the Directors. Therefore, before considering the issue of any depreciation allowance on these vehicles, the AO was under an obligation to conduct thorough Inquiry regarding the usage of these vehicles to ascertain whether these vehicles were used for the purpose of business of the assessee company. As is apparent, the AO has concluded the assessment proceedings without making any examination of the claims of the assessee. As stated above, there is prima facie material available on record to show that tax which was lawfully exigible has not been imposed and there is no application of mind by the AO before allowing the claim of depreciation of the assessee. The order of the AO is, therefore, not accordance with law.
7. Undisputedly, the assessee had purchased vehicles during the year under assessment to the tune of Rs.65,76,687/- in the individual names of the Directors of the assessee company. Ld. CIT invoked the provisions contained u/s 263 on the grounds inter 7 ITA No.2315/Del./2015 alia that except taking on assessment record the bills of the vehicles, no inquiry has been conducted by AO to work out if the vehicles in question were actually used for the purpose of assessee's business before allowing depreciation; that most of the vehicles in question are SUVs and are likely to be put to personal use rather than being used in the construction business of the assessee; and that the depreciation on tangible assets can only be allowed under sub-section (1) of section 32 of the Act if the same are owned wholly or partly by the assessee and used for the purpose of business.
8. Now, coming to the assessment order, undisputedly the bills of the vehicles, though in the names of the Directors of the company, are brought on assessment record by the assessee. Assessee in reply to the notice dated 17.01.2012, available at pages 24 to 26 of the paper book, issued by AO placed on record the details of the fixed assets along with copies of bills and the assessee has also brought on record details of the secured and unsecured loans along with confirmation from the lenders.
9. Clause 18 & 19 of notice issued by AO available at pages 24 to 26 of the paper book, apparently shows that, "the AO had called upon the details of addition of fixed assets > 100000/- and deletion of fixed assets > Rs.50000. Also produce copy of the aforesaid 8 ITA No.2315/Del./2015 bills for verification. Also give details of assets purchased / sold to related parties. Details of depreciation as per IT Act claimed and the basis for the rate of depreciation claimed for various assets."
10. Ld. AR for the assessee drew our attention towards documents, available at pages 49 to 134 of the paper book, which show that all the vehicles have been purchased with loans specifically availed in the name of the assessee company. It is also shown from the documents available on file that all the vehicles have been purchased by the assessee company by passing Resolution in a Board meeting of the Directors of the assessee company. When all the vehicles have been purchased by the assessee company though registered in the names of the Director of the company, the principal of beneficiary owner is required to be invoked.
11. Furthermore, when the AO has allowed the interest claimed and expenses incurred by the assessee company qua vehicles in question which have not been questioned by the ld. CIT, the question of disputing the depreciation allowed by the AO does not arise.
12. So far as question of usage of the vehicles is concerned, the ld. CIT proceeded merely on conjectures and surmises to hold that most of the vehicles are SUVs and are more likely to be put to 9 ITA No.2315/Del./2015 personal use. However, when we peruse the list of the vehicles purchased by the assessee company reproduced by ld. CIT on page 2, it apparently shows that except one Toyota Innova, Maruti Swift and Mahindra Scorpio, all other vehicles are multi-utility vehicles invariably used for business purposes. For argument sake, even if it is assumed that the vehicles in question are used by the Directors of the company for personal use even then the Directors being full time Directors are presumed to work for the assessee company.
13. It is settled principle of law that when the AO has completed the assessment after being duly satisfied after perusing the documents produced before him, which are available at pages 49 to 134 of the paper book, the assessment order cannot be said to be erroneous by any stretch of imagination and there is no question of invoking provisions contained u/s 263 of the Act. Reliance in this regard is placed on the judgment cited as CIT, Central-III vs. Nirav Modi - (2016) 71 taxmann.com 272 (Bombay) and CIT vs. Reliance Communication Ltd. - (2016) 69 taxmann.com 103 (Bombay) and SLP filed by the Revenue in both the cases, viz. CIT, Central-III vs. Nirav Modi - (2017) 77 taxmann.com 15 (SC) and CIT-10, Mumbai vs. Reliance Communication Ltd. - (2016) 76 taxmann.com 226 (SC), have been dismissed. 10 ITA No.2315/Del./2015
14. Not only this, Hon'ble Delhi High Court in CIT vs. Basti Sugar Mills Co. Ltd. - (2002) 257 ITR 88 (Del.) while deciding the identical issue held that in case of vehicle owned and used by the assessee but no registration in its name, assessee is entitled to depreciation of such vehicles u/s 32 of the Act because in case of movable assets, rule of registration of property in the name of owner is not strictly followed as in case of immovable property under Indian Registration Act. The issue as to the non-registration of vehicle in question in the name of assessee has also been dealt with by coordinate Bench of the Tribunal in judgment cited as ACIT, Circle 7, Pune, vs. Talera Motors Pvt. Ltd. in ITA No.428/PN/2013 order dated 29.10.2013 wherein it is observed that merely on the basis of registration of vehicle being in the name of Director, the benefit of depreciation cannot be denied to the beneficial owner of the vehicle.
15. So, when undisputedly the vehicles in question have been purchased by the assessee company after passing the Board Resolution by availing of the loans which are duly recorded in the audited balance sheet of the company, the assessee company is certainly entitled for depreciation on the vehicles in question.
16. In the totality of the circumstances discussed herein before, we are of the considered view that this is not a case of lack of 11 ITA No.2315/Del./2015 inquiry on the part of the AO rather complete inquiry has been conducted on the basis of documents placed before the AO on the basis of which depreciation has been granted to the assessee. So there was not an iota of material on record before ld. CIT to hold the assessment order erroneous and prejudicial to the interest of the Revenue. So, in view of what has been discussed above, present appeal filed by the assessee is hereby allowed. Order pronounced in open court on this 16th day of August, 2017.
Sd/- sd/-
(N.K. SAINI) (KULDIP SINGH)
ACCOUNTANT MEMBER JUDICIAL MEMBER
Dated the 16th day of August, 2017
TS
Copy forwarded to:
1.Appellant
2.Respondent
3.CIT
4.CIT, Delhi-8, New Delhi.
5.CIT(ITAT), New Delhi. AR, ITAT
NEW DELHI.