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2021 (12) TMI 698 - AT - Income TaxRevision u/s 263 by CIT - claim of depreciation on motorcars and interest paid on car loans - HELD THAT - The depreciation so claimed and the interest expenditure on loan availed for purchasing the motorcars have been allowed in the earlier assessment years. It is a fact on record that in the impugned assessment year, the assessee claimed depreciation on the opening WDV. Therefore, once depreciation on the assets have been allowed in the preceding assessment years, the AO could not have disallowed the depreciation claimed on the opening WDV. Simply because the motorcars are registered in the name of the Directors of the company the claim of depreciation cannot be disallowed, if it is established that the motorcars are actually owned by the assessee and used in its normal course of business, though, purchased in the name of the Directors. The assessee has also furnished evidence to show that payment for the purchase of motorcars was on assessee s account and the EMI for loan availed were paid by the assessee from the its bank account. Even, the motorcars have been shown as fixed assets in assessee s books of account - there was no reason for the AO to disallow assessee s claim of depreciation. In any case of the matter, the judicial precedents cited before us by learned Counsel for the assessee clearly say that even if vehicles are registered in the name of directors or partners for certain restrictions/conditions under the Motorcar Vehicle Act, however, if such assets, for all intent and purpose, belong to the company and are used for its business, the company would be eligible to claim depreciation. View taken by the AO in allowing assessee s claim of depreciation and interest expenses can be considered to be a plausible view. That being the case, assessment order cannot be held as erroneous. Thus, the twin conditions of section 263 of the Act remain unsatisfied. For this reason the impugned order passed by learned PCIT cannot be sustained. - Decided against revenue.
Issues:
1. Challenge to the order passed under section 263 of the Income Tax Act, 1961 for the assessment year 2015-16. 2. Validity of the impugned order on the ground of being passed beyond the period of limitation. 3. Merits of the case regarding depreciation on motor cars and interest paid on car loans. Analysis: Issue 1: Challenge to the order passed under section 263 The appeal was filed by the assessee against the order passed by the Principal Commissioner of Income Tax under section 263 for the assessment year 2015-16. The appeal included challenges to the order and various grounds were raised and subsequently dismissed during the hearing. Issue 2: Validity of the impugned order The assessee challenged the validity of the order passed under section 263, claiming it was beyond the period of limitation prescribed by the Act. The Counsel argued that the order was barred by limitation as it was passed on 24.03.2021, beyond the two-year period from the end of the financial year in which the original assessment order was passed. The Counsel also presented arguments on the merits of the case, asserting that the claim of depreciation and interest payment was valid based on previous assessments and legal precedents. Issue 3: Merits of the case The key contention revolved around the claim of depreciation on motor cars and interest paid on car loans. The Principal Commissioner found the assessment order erroneous and prejudicial to revenue due to the allowance of depreciation and interest. However, the Tribunal examined the facts and circumstances, noting that the motor cars had been purchased in earlier years, and depreciation had been consistently claimed and allowed. The Tribunal emphasized that if the assets were owned by the assessee and used for business purposes, the claim of depreciation could not be disallowed solely based on registration in the Directors' names. Legal precedents were cited to support the eligibility of the company to claim depreciation on such assets. Conclusion: The Tribunal concluded that the assessment order could not be deemed erroneous based on the facts presented. The view taken by the Assessing Officer in allowing the depreciation and interest expenses was considered plausible, satisfying the conditions of section 263 of the Act. Consequently, the order passed by the Principal Commissioner under section 263 was set aside, and the original assessment order was restored. The appeal was allowed, and the issue of limitation was deemed academic in light of the decision.
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