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2017 (11) TMI 446 - AT - Income TaxDisallowance of depreciation on motor car - beneficial ownership - addition on the ground that the motor car was registered in the name of the individual Director and not the appellant-company - Held that - Though the vehicle was registered in the name of the director of the assessee company, but however, the other material facts which were brought to the notice of the lower authorities by the assessee, viz. (i). that the payment towards the purchase consideration for the motor car was made by the assessee company from its bank accounts; (ii). the motor car was reflected as an asset in the balance sheet of the assessee; and (iii). the day to day running expenses of the motor car were incurred by the assessee, duly established that the assessee company was the defacto owner of the motor car. We are of the considered view that the lower authorities had failed to appreciate the said material facts which have a strong bearing on the adjudication of the issue under consideration. We are of the considered view that in the backdrop of the aforesaid facts, it can safely be concluded that though the assessee company was not vested with the legal ownership of the vehicle, but then, it remained the beneficial owner of the same. We thus being of the considered view that the assessee was duly entitled towards the claim of depreciation on the aforesaid motor car, set aside the order of the CIT(A) and delete the disallowance - Decided in favour of assessee.
Issues Involved:
1. Disallowance of depreciation on a motor car registered in the name of the director but claimed by the company. Issue-wise Detailed Analysis: 1. Disallowance of Depreciation on Motor Car: Facts of the Case: The assessee company, a trader and commission agent in oleo chemicals, filed its return of income for AY 2012-13, declaring a total income of ?1,19,78,233/-. During scrutiny assessment, it was observed that the assessee claimed depreciation of ?5,10,103/- on a Mercedes Benz car registered in the name of the director. The A.O disallowed the depreciation claim, reasoning that the car was not registered in the company's name. Assessee's Argument: The assessee argued that the motor car was "really" owned by the company since the purchase cost was borne by the company, the car was reflected in the company's balance sheet, and the running expenses were met by the company. The assessee relied on the Supreme Court judgment in CIT Vs. Mysore Minerals (1999) 156 CTR 1 (SC) to support its claim. CIT(A) Decision: The CIT(A) upheld the A.O's decision, stating that the company was not the legal owner of the motor car and thus not entitled to depreciation. However, the CIT(A) adjusted the disallowance to ?2,55,051/-, acknowledging that the car was used for less than 180 days during the year. Tribunal's Analysis: The Tribunal considered the following key points: - Payments for the car were made by the company. - The car was listed as an asset in the company's balance sheet. - Day-to-day running expenses were borne by the company. The Tribunal referred to several precedents: - ITAT Ahmedabad in ITO Vs. Electro Ferro Alloys Ltd. (2012) 13 ITR (Trib) 594 (Ahd) held that a company could claim depreciation if the car was purchased in the director's name but used for business and reflected in the company's books. - Edwise Consultants Pvt. Ltd. Vs. CIT (2015) 44 ITR (Trib) 0236 (Mumbai) where it was ruled that registration in the director's name does not preclude depreciation claims if the vehicle is used for business purposes and shown as a company asset. Conclusion: The Tribunal concluded that the assessee company was the de facto owner of the motor car, despite it being registered in the director's name. This conclusion was drawn based on the company's financial involvement and usage of the car for business purposes. The Tribunal set aside the CIT(A)'s order and allowed the depreciation claim of ?2,55,051/-. Final Order: The appeal of the assessee was allowed, and the disallowance of depreciation was deleted. Pronouncement: The order was pronounced in the open court on 25.09.2017.
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