IN INCOME TAX APPELLATE TRIBUNAL MUMBAI BENCHES J , MUMBAI BEFORE SHRI C.N. PRASAD (JUDICIAL MEMBER) AND SHRI ASHWANI TANEJA (ACCOUNTANT MEMBER) I.T.A. No.570/Mum/2015 (Assessment Year: 2010-11) Mehta Equities Ltd Vs ACIT 4(2), Mumbai 612, 6th Floor, Arun Chambers Tardeo, Mumbai-34 PAN : AAACR4143C (Appellant) (Respondent) Appellant by Shri Neelkanth Kandelwal Respondent by Arju Garodia Date of hearing : 08-09-2016 Date of pronouncement : 21 -09-2016 ORDER Per ASHWANI TANEJA, AM This appeal has been filed against order of Commissioner of Income- tax (Appeals) [hereinafter called CIT(A)] dt 01-09-2014 passed against assessment order of AO u/s 143(3) dt 22-03-2013 for A.Y. 2010-11 on following grounds: Commissioner of Income-tax (Appeals) - 8 (hereinafter referred to as CIT(A)) erred in upholding action of Assistant Commissioner of Income-tax - 4(2) (hereinafter referred to as Assessing Officer) in disallowing depreciation Rs 5,01 ,924 on motor cars on ground that said cars are registered in name of directors and not in name of appellant- company and hence, appellants are not owners of motor cars. 2 I.T.A. No.570/Mum/2015 appellants contend that on facts and in circumstances of case and in law, CIT(A) ought not to have confirmed impugned disallowance notwithstanding fact that motor cars are registered in name of directors inasmuch as appellants, having paid for cost of said vehicles are owners of vehicles which have been used for purposes of business of appellants and hence, said disallowance is required to be deleted. 2. During course of hearing, Ld. Counsel filed additional ground also, which reads as follows: following ground of appeal is independent of and without prejudice to original ground of appeal - Commissioner of Income-tax (Appeals) - 8 (hereinafter referred to as CIT(A)) erred in upholding action of Assistant Commissioner of Income-tax - 4(2) (hereinafter referred to as Assessing Officer) in disallowing car insurance Rs 53,240 being, 50% of 1,06,479, interest paid on car loan Rs 81,278 being 50% of 1,62,556 and motor car expenses Rs 3,73,33 1 on motor cars on ground that said cars are registered in name of directors and not in name of appellant-company and hence, appellants are not owners of motor cars. appellants contend that on facts and in circumstances of case and in law, CIT(A) ought not to have confirmed impugned disallowance notwithstanding fact that motor cars are registered in name of directors inasmuch as appellants, having paid for cost of said vehicles are owners of vehicles which have been used for purposes of business of appellants and hence, said disallowance is required to be deleted. 2.1. Further, with regard to admissions of additional ground it was submitted that this ground was omitted to be raised in appeal memo inadvertently and no fresh facts are required to adjudicate this ground. It was noted by us additional ground can be decided on basis of material held on records and therefore after hearing both parties, it was admitted. 3 I.T.A. No.570/Mum/2015 3. It is also noted that there is delay in filing of appeal by 43 days. It was submitted by Ld. Counsel that there has been inadvertent delay in filing this appeal. Our attention was drawn on petition for seeking condonation of delay in filing this appeal which is duly supported with affidavit. It was explained that delay occurred due to negligence of accountant of assessee which happened inadvertently. affidavit filed by said accountant reads as follows:- I, VIKRAM K ABRA , aged about 38 years, residing at 4/002, GAURAV CITY, MIRA ROAD (E)-Mumbai 401107 , do hereby solemnly affirm and state as under: 1. That I am senior accountant at Mehta Equities Ltd. 2. I look after accounts, income-tax and other matters related to finance of said Company. 3. I received order of Commissioner of Income-tax (Appeals) - 8, dated 01.09.2014 in case of Mehta Equities Limited for assessment year 2010-11 on 16th October, 2014 and kept them separately in my drawer. I also kept other papers and documents together with aforesaid order. As practice, all income-tax related papers/ documents are sent to Messrs P. D. Saraf & Co, Chartered Accountants for further action but somehow inadvertently, Commissioner of Income-tax (Appeals) order for assessment year 2010-11 remained in drawer; as result of which said order could not be given to Chartered Accountants in time for filing appeal. said order was later noticed and immediately sent to them on 14th January, 2015. I further state that whatever is stated hereinabove is true to my own knowledge and belief and I believe same to be true. 4. Ld. Counsel submitted that there was no intention to file appeal belatedly. delay occurred on part of accountant inadvertently. It was beyond knowledge of assessee. reasons given are duly explained in affidavit. 4 I.T.A. No.570/Mum/2015 5. Ld. DR could not rebut facts narrated before us that led to delay in filing this appeal. No serious objection was made by her in condoning delay. Therefore, taking into account all facts and circumstances of case, delay in filing this appeal is condoned. 6. First we shall take up additional ground. In this ground assessee has challenged action of Ld. CIT(A) in not allowing fully expenses incurred by assessee on motor car maintenance, car insurance and interest paid on car loan. 7. brief facts are that AO disallowed 50% of motor running and maintenance expenses and 100% of car insurance and interest paid on car loan. Being aggrieved, assessee filed appeal before Ld. CIT(A) and contended that no disallowance should have been made. But, Ld. CIT(A) sustained disallowance on motor car expenses @50% as has been made by AO, but brought down disallowance on account of car insurance and interest paid on car loan to 50% to make disallowance at par with motor car expenses. While doing so, Ld. CIT(A) did not give any proper reasoning as to why this 50% disallowance should be made. Being aggrieved, assessee came in appeal before Tribunal and contented that it is case of company, complete details have been furnished before lower authorities, there cannot be any disallowance on ground of personal user and, therefore, disallowance should be fully deleted. 8. On contrary, Ld. DR did not object to admission of additional ground and submitted that Ld. CIT(A) has fairly brought down disallowance to 50% which should be sustained. 5 I.T.A. No.570/Mum/2015 9. We have considered submissions made by lower authorities. It was submitted that complete details have been furnished before lower authorities. There are no basis to disallow 50% of expense incurred on motor car which was used exclusively for purpose of business of assessee. Nothing has been detected to show he user of motor car for non business purposes. No reasoning whatsoever has been given by AO as to why these expenses have not been allowed fully. Ld. CIT(A) also has not given proper reasoning to sustain 50% disallowance of motor car expenses. It is noted by us that it is case of company which is separate legal juristic person. There cannot be any disallowance on account of alleged personal user. It was shown that complete details and evidences were submitted in this regard. Nothing has been brought on record by either of authorities to show any discrepancies in details and evidences with regard to running and maintenance of motor car, car insurance and payment of interest on car loan furnished by assessee company. Under these circumstances, we find action of lower authorities as unjustified in making disallowances on surmises and conjectures. Therefore, AO is directed to fully allow motor car expenses, car insurance and interest paid on car loan as claimed by assessee. Thus, additional ground is hereby allowed. 10. Now we shall take up original ground. In this ground, assessee has contested action of lower authorities in disallowing depreciation of Rs.5,01,924 on motor cars on ground that said cars were registered in name of director and not in name of assessee company. 11. brief background of this issue is that AO disallowed depreciation on motor car on ground that it was registered in name of one of directors of assessee company and, therefore, depreciation 6 I.T.A. No.570/Mum/2015 was not allowable. Ld. CIT(A) upheld action of AO. Being aggrieved, assessee filed appeal before Tribunal. 12. During course of hearing, Ld. Counsel of assessee brought our attention upon written submissions filed before Ld.CIT(A) wherein it was explained in detail along with requisite evidences that actually assessee company is owner of car but due to certain reasons it was purchased in name of director. assessee had paid requisite amount for purchase of car and it was shown in its balance-sheet as such. assessee was its owner and, therefore, entitled for depreciation. It was further submitted that since AO had himself allowed 50% of motor car expenses which indicated that cars were used for purposes of business of assessee company. It was also submitted that assessee company had passed resolution to clear any doubt with regard to ownership of car with assessee company keeping in view provisions of Companies Act. He further placed reliance on following judgements in support of proposition that even if asset is not registered in name of assessee, but if assessee is de-facto owner of asset, then claim of depreciation shall be allowed to assessee:- 1. Mysore Minerals (1999) 106 Taxman 166 (SC) 2. Navdurga Transport Co 149 CTR 219 3. Dilip SinghSardarsingh Bagga 201 ITR 995 4. Electro Ferro Alloys Ltd 25 Taxmann.com 458 (Ahd) 5. Aravali Finlease Ltd 341 ITR 383 (Guj) 6. Basti Sugar Mills Co Ltd 257 ITR 88 (Del) 13. In view of above said legal position and facts of case, Ld Counsel requested for allowing claim of depreciation. 14. It was also submitted by Ld. Counsel that car was purchased in earlier year and this is second year. Since car has already entered into 7 I.T.A. No.570/Mum/2015 block of assets in A.Y. 2009-10 and depreciation on same was allowed by AO, same cannot be disturbed now in A.Y. 2010-11. 15. Ld. DR submitted that since assessee is not legal owner of car as same is registered in name of director, it cannot be granted benefit of depreciation. Reliance was placed on decision of Mumbai Bench of Tribunal in case of Edwise Consultants Pvt Ltd (A.Y. 2007-08 in ITA No.391/Mum/2011 order dated 19-04-2013). 16. In reply, Ld. Counsel submitted that in case of Edwise Consultants Pvt Ltd, Tribunal (vide its order dt 14-10-2015 for A.Ys 2008-09, 2009-10 and 2010-11 in ITA Nos 4376/Mum/2011, 4121/Mum/2014 and 594/Mum/2013) considered issue again in light of aforesaid judgments of High Court in case of Aravali Finlease Ltd (supra) and Basti Sugar Mills Co Ltd (Del) (supra) and held that depreciation was allowable to assessee if car was de- facto owned by assessee company even if it was registered in name of director. Thus he requested that as per latest position of law, depreciation claim is available to assessee. 17. We have gone through he orders passed by lower authorities and copies of judgments placed before us and submissions made by both parties before us. It is not in dispute that car has actually been purchased by assessee company from funds of company and same has been shown by company in its balance-sheet. It was also stated that resolution was passed by company wherein it was clarified that though car, for some reasons, has been purchased in name of director, but it belongs to company and is owned by company. director has never claimed ownership of car. company has undisputed ownership of car. Both parties involved in transaction are clear about this factual and 8 I.T.A. No.570/Mum/2015 legal position. There is no confusion on that. Under these circumstances, it can be safely said that company is de-facto owner of car. It is also not disputed that car has been actually used by company for its business purposes. Similar position came up before Hon ble Gujarat High Court in case of Aravali Finlease Ltd (supra) wherein it was held that where vehicle though registered in name of director of company, but if entire funds for purchase of vehicles had gone from coffers of company and same was used for purpose of business of company, under these circumstances, company was entitled to depreciation on said vehicle. Similarly, Hon ble Delhi High Court in case of Basti Sugar Mills Co Ltd (supra) held that company was entitled to depreciation on car which was owned by it but not registered in its name. law in this regard was also clarified by Hon ble Supreme Court way back in case of Mysore Minerals Ltd vs CIT 239 ITR 775 (SC). It is further noticed by us that co-ordinate bench of Mumbai Tribunal in its later judgment passed in case of Edwise Consultants Pvt Ltd (supra) clarified correct legal position in this regard and following aforesaid judgements of high courts held that depreciation will be allowable in such situation. 18. It is further noted that in this case car was purchased by assessee company in preceding year i.e. A.Y. 2009-10, wherein depreciation was claimed by assessee and allowed by AO. Thus, said car had entered into block of assets in A.Y. 2009-10. Once asset is entered into block of asset and is brought forward as part of opening WDV, there arises no question for not allowing depreciation on opening amount of WDV of car, so long as continues to be used for business of assessee. It is further noted that in this case, AO has himself allowed motor car expenses on same car 9 I.T.A. No.570/Mum/2015 @50%. Thus, AO himself has accepted user of car for purpose of business of assessee company. Under these circumstances, contradictory decision could not have been taken for purpose of allowing depreciation. Thus, taking into account aforesaid legal position and peculiar facts and circumstances of this case, we find that depreciation is allowable on car and, therefore, same is directed to be allowed. Thus, impugned ground is allowed. 19. As result, appeal of assessee is allowed. Order pronounced in court on this 21st _day of September, 2016. Sd/- Sd/- (C.N. PRASAD) (ASHWANI TANEJA) JUDICIAL MEMBER ACCOUNTANT MEMBER st Mumbai, Dt: 21 September, 2016 Pk/- Copy to: 1. appellant 2. respondent 3. CIT(A) 4. CIT 5. Ld. Departmental Representative for Revenue, J -Bench (True copy) By order ASSTT.REGISTRAR, ITAT, MUMBAI BENCHES Mehta Equities Ltd. v. ACIT 4(2), Mumbai