2016 (7) TMI 683 - AT - Income Tax

Disallowance made on account of depreciation claimed u/s 32 - registration of vehicles has not been transferred in the name of the appellant under the Motor Vehicles Act - Held that - Hon ble Supreme Court decision in the case of Mysore Minerals Ltd. v. CIT 1999 (9) TMI 1 - SUPREME Court has held that anyone in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having right to use and occupy the property in his own right would be the owner of building for the purpose of section 32(1) though a formal deed of title may not have been executed and registered. The said proposition of law is fully satisfied in the instant case where the assessee has claimed depreciation on the vehicles having possession and dominion over the income and control over their operations. In light of the above, we are of the view that the appellant is eligible to claim depreciation on the vehicles - Decided in favour of assessee Disallowance on account of trip expenses - Held that - The expense have been disallowed on purely ad hoc basis and no specific expenditure/transaction has been highlighted by the Assessing Officer which suggest that these expenses have not been incurred for the purposes of the business. In the light of that, we delete the ad hoc disallowance - Decided in favour of assessee

Summary

Issues:
1. Disallowance of depreciation claimed under section 32 of the Income Tax Act.
2. Disallowance of trip expenses incurred during business operations.

Analysis:

Issue 1: Disallowance of Depreciation
The appellant claimed depreciation on 16 tankers, but the Assessing Officer disallowed it as the tankers were not registered in the appellant's name. The Commissioner of Income-tax (Appeals) upheld the disallowance, stating that ownership requires valid registered documents. However, the appellant argued that despite not being the registered owner, they purchased the tankers with loans, used them for business, and paid all related expenses. The appellant relied on legal precedents to support their claim that ownership extends beyond registration. The Tribunal agreed, emphasizing the appellant's possession, dominion, and control over the tankers, allowing the depreciation claim.

Issue 2: Disallowance of Trip Expenses
The Assessing Officer disallowed a portion of trip expenses, alleging lack of specific documentation. The appellant contended that fixed allowances were provided to drivers and helpers, supported by vouchers with signatures. The Tribunal found the disallowance arbitrary and lacking specific instances of non-business expenses. Consequently, the ad hoc disallowance was deleted, and the ground was allowed.

In conclusion, the appeal by the assessee was allowed, with the Tribunal ruling in favor of the appellant on both issues. The judgment highlighted the importance of ownership beyond mere registration for depreciation claims and emphasized the necessity of specific evidence for disallowing business expenses.