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2023 (6) TMI 662 - AT - Income TaxDisallowance of depreciation - assets (Vehicles / Car) are purchase in the name of the Directors of the company - HELD THAT - It is a well settled position that even if the assets are purchase in the name of the Directors of the company and the same are used for the purpose of the business of the assessee company, then the assessee company is eligible to claim depreciation on the same, irrespective of the fact that the assets (vehicles) are not registered in the name of the company. In the case of Bajaj Herbals (P.) Ltd 2021 (7) TMI 729 - ITAT AHMEDABAD held since car was reflected as an asset of company and car loan also appeared as a liability in balance sheet of company and car was used for business of assessee, assessee was to be allowed benefit of depreciation on said car even though it was bought by company in name of its Director. In the instant facts, CIT(Appeals) has made a specific observation that firstly, the assets (vehicles) have not been acquired out of funds of the assessee company, secondly, the assets have been purchased in the names of Shri Bharat Agarwal, Dinesh Chandra Agrawal, however, the assessee has not been able to show the relation of these person with assessee company. We are hereby restoring the file to the Ld. CIT(Appeals) to verify whether the firstly, assets (vehicles) have been acquired out of funds of the assessee company, secondly, whether Shri Bharat Agarwal, Dinesh Chandra Agrawal i.e. person in whose names the vehicles have been registered are the Directors of the assessee company. In case, the assessee is able substantiate the above two aspects, Ld. CIT(Appeals) may allow the appeal of the assessee. Addition u/s 40A(3) - payment by bearer cheque - HELD THAT - Out of the total payment of Rs. 3.09 crores made to the same party i.e. Shri Dharmendra Rajput, proprietor, Sunrise Construction, a sum of Rs. 6,35,000/- was paid by way of bearer cheque, on account of an inadvertent mistake, wherein account payee cheque was omitted to be mentioned on the face of the cheque. It is not the case of the Department that any cash withdrawal was made in the instant facts. Payee also treated the aforesaid bearer cheque as account payee cheque and deposited the money in the bank along with other account payee cheques. The genuineness and details of the payee/transaction are not also doubted. In the case of Ramaditya Investments 2003 (5) TMI 56 - DELHI HIGH COURT it was held that the provisions of section 40A(3) are not attracted where the parties are identified and there was no material on record to doubt the genuineness of payment. Where a transaction is found to be genuine and the identity of the payee is established, a liberal view on compelling and mitigating circumstances should be taken. This principle was also affirmed in the case of Janam Bhoomi 1996 (12) TMI 37 - GAUHATI HIGH COURT In the present case, the mistake is clearly bona-fide and inadvertent looking into the totality of circumstances. Decided in favour of assessee. Non-deduction of TDS - payments made to transporters - assessee has failed to submit the PAN of recipients and thus there was violation of the provisions of section 194C - HELD THAT - As per the facts placed before us, admittedly the assessee has not deducted TDS on payments made to some parties and has also not furnished in their PAN numbers. Accordingly, we find no infirmity in the order of CIT(Appeals), who on appreciation of the instant facts, gave partial relief to the assessee.
Issues Involved:
1. Disallowance of depreciation and RTO expenses. 2. Addition under section 40A(3) of the Income Tax Act, 1961. 3. Disallowance for non-deduction of TDS from payments made to transporters. 4. Levying interest under section 234B/C of the Act. 5. Initiating penalty proceedings under section 271(1)(c) of the Act. Issue-wise Detailed Analysis: 1. Disallowance of Depreciation and RTO Expenses: The assessee claimed depreciation on certain vehicles not registered in its name. The Assessing Officer (AO) disallowed this claim, arguing that the assessee failed to prove dominion over these assets and their use for business purposes. The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting the absence of evidence linking the vehicles to the company's business and the lack of documentation proving the vehicles' expenses were borne by the company. The Tribunal, however, cited precedents where companies were allowed depreciation on assets registered in directors' names but used for business purposes. The case was remanded to CIT(A) to verify if the vehicles were funded by the company and if the individuals in whose names the vehicles were registered were directors of the company. 2. Addition under Section 40A(3) of the Income Tax Act, 1961: The AO disallowed Rs. 6,35,000 paid via bearer cheques to a contractor, invoking Section 40A(3) which mandates payments above a certain threshold to be made through account payee cheques. The CIT(A) confirmed this disallowance, stating that the payments violated the specified mode of payment. The Tribunal, however, noted that the payments were inadvertently made via bearer cheques and credited to the contractor's bank account, with no cash withdrawals involved. Given the genuine nature of the transactions and the bona fide mistake, the Tribunal allowed the assessee's appeal on this ground. 3. Disallowance for Non-deduction of TDS: The AO disallowed Rs. 2,83,505 due to the assessee's failure to deduct TDS on payments to transporters. The CIT(A) provided partial relief for payments where PANs were submitted but upheld the disallowance for others. The Tribunal found no fault in the CIT(A)'s decision, as the assessee had not furnished PANs for all recipients, thereby violating Section 194C of the Act. 4. Levying Interest under Section 234B/C: The Tribunal did not provide a detailed analysis for this issue, implying that it was not a primary ground of appeal or was subsumed under other decisions. 5. Initiating Penalty Proceedings under Section 271(1)(c): Similarly, the Tribunal did not elaborate on this issue, suggesting it was not a focal point of the appeal or was contingent on the outcomes of the primary issues. Conclusion: The appeal was partly allowed for statistical purposes, with specific directions to the CIT(A) for further verification on the depreciation claim. The Tribunal provided relief on the disallowance under Section 40A(3) but upheld the disallowance for non-deduction of TDS.
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