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TMI Blog2015 (1) TMI 1234X X X X Extracts X X X X X X X X Extracts X X X X ..... d order of ld. CIT(A), Assessee is now in appeal before us and has raised the following grounds;- 1. The CIT(A) has erred in fact in confirming applicability of Sec.l4A and in confirming disallowance of Rs. 3,1 !,390/- made by the AO u/s. 14A/Rule 8D. It is submitted that looking to the facts and circumstances of the case and the judicial pronouncements, the CITA ought to have deleted the disallowance of Rs. 3,1 1,390/- made u/s. 14A. 2. The CIT(A) has erred in confirming disallowance out of motor car expenses Rs. 1,15,313/-/- and motor car depreciation of Rs. 1,04.231/-treating the same to be "non business" expenditure. It is submitted that the motor car is used for business of the Appellant and there is no personal or non business element and since the expenditure is not of capital nature. CITA ought to have deleted the entire disallowance of motor car expenses of Rs. 1,15,313/- and motor car depreciation of Rs. 1,04,231/-. 3. CITA has erred in invoking provisions of Sec. 40A(2)(b) and in confirming disallowance of Rs. 7.81,962/- made by the 1TO u/s. 40(A)(2)(b). It is submitted that on facts and circumstances of the case and judicial pronouncement on the subject, the CITA oug ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he purpose of business. Aggrieved by the order of A.O, Assessee carried the matter before ld. CIT(A) who upheld the order of A.O by holding as under:- 4.3 I have considered the facts of the case; assessment order and appellant's written submission. The basic fact is that director of the company purchased motor car in his name and the bill for the said purchase is also in the name of director. Therefore appellant company is not the legal owner of the motor car. For claim of depreciation, the two conditions are to be fulfilled namely-appellant must be owner of the asset and thus if must be used for the purpose of appellant's business. In this case appellant is not the owner since the ownership vests with the director who is a separate entity than the appellant company. As regards use for the purpose of business, assessing officer called for the details of use of car but the same were not furnished. Therefore use of car for the purpose of company's business is not established by the appellant. Although the onus to prove the user of asset was on the appellant, the same was not discharged either before the assessing officer or before the undersigned. Claim of an expense in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n oh assets standing in others name cannot be allowed. 5. Aggrieved by the aforesaid order of ld. CIT(A), Assessee is now in appeal before us. 6. Before us, ld. A.R reiterated the submissions made before A.O and ld. CIT(A). He further placed reliance on the decision of Hon'ble Apex Court in the case of ICDS Ltd. 350 ITR 527 decision of Gujarat High Court in the case of Aravali Finlease Ltd. 341 ITR 280 (Guj) and the decision of Ahmedabad Tribunal in the case of Swati Autolink Pvt. Ltd. ITA No. 1471/AHD/2010. The ld. A.R. further submitted that no such disallowance has been made in earlier years. The ld. D.R. on the other hand supported the order of A.O and ld. CIT(A). 7. We have heard the rival submissions and perused the material on record. We find that A.O has disallowed the claim of depreciation on motor cars mainly for the reason that the motor car was in the name of the Director and not in the name of the Assessee. He has further disallowed the claim of the Assessee for expenses for the reason that Assessee could not prove that the expenses have been incurred wholly and exclusively for the purpose of business and were not in personal in nature. On perusing the Balance sheet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on in the case of CIT Vs. Navdurga Transport Co., 235ITR 150 (All), wherein the issue was as to whether firm was entitled to depreciation on cars, brought in to the firm for use of business of the firm, even through cars continued to be registered in the name partners. Hon 'ble Allahabad High Court held that the Tribunal rightly reached the conclusion that the assessee owned and used the three vehicles within the meaning of s. 32 of the Act. Similar view was taken in the case of CIT Vs, Mohd. Bus Shokat Ali (No.2), 256 ITR 357 (Raj), CIT Vs Fazilka Dabwali TPT Co. Ltd (2004) 270 ITR398 (P & H), CIT v. Salkia Transport Associates [1983] 143 ITR 39/13 Taxman 191 (Cal), CIT v. Nidish Transport Corpn. [1910] 185 ITR 669/[1989] 44 Taxman 351(Ker.), CITv. Dilip Singh Bagga [1993] 201 ITR 995/11994] 77 Taxaman 66 (Bom), CIT v Navdurga Transport Co. [1999] 235 ITR 158 (All.) and CIT v Basti Sugar Mills Co. Ltd. [2002] 257 ITR 88/123 Taxman 693 (Delhi) as also by the ITAT in their decision in the case of the Curious House (P) Ltd. v ITO (1980) 9 TTJ 348 (Indore) and ITO Vs. Modi Agency, ITA No. 198/Gau/l977-78 (Gauhati). 5.2. In the light of the view taken in the aforesaid decis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ried the matter before ld.CIT(A) who upheld the order of A.O by holding as under:- 5.3 I have considered the facts of the case; assessment order and appellant's written submission. It is not in dispute that the parties to whom interest was paid are related and covered within the provisions of section 40 A (2) of IT act. If any excess payment is made to the related parties, such excess payment is not allowable as an expense. Assessing officer brought out the details of interest payment to related parties and .unrelated parties and it is established that related parties were paid more interest than unrelated parties on the similar loans received by appellant. The argument of the appellant that loans received from related parties are permanent and more stable is found to be incorrect by the assessing officer since there were regular inflow and outflow of funds from the accounts of these related parties. This makes it very clear that the funds provided by relatives were not stable or permanent. Rather their loan accounts were used as current account for the convenience of lenders. By no reasons interest rate on such loan can be higher than interest paid to outsiders for relatively ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... years J974-75 and 1978-79 - T was wife of managing partner of assessee-firm -On death of T, her estate was divided equally between N and S whose father and husband respectively were oil partners of assessee-firm -Assessee-firm paid certain interest at rate of 24 per cent to successors of estate of T and claimed deduction - Whether section 40A(2j was attracted in this case and consequently, payment of interest at rate of 24 per cent by assessee to successors of estate of J was excessive and that only interest at 18 per cent could be said to be reasonable - Held, yes" Considering the aforesaid decisions, it is clear that interest paid to relatives in excess of interest paid to outsiders or bank is excessive and unreasonable and the same is disallowable. Facts of the appellant's case are identical to the facts of the case decided by 'honorable ITAT Indore bench. In that case also appellant claimed that funds borrowed from relatives were large and for long period which was not found acceptable by the tribunal and the disallowance of excess .interest was confirmed. Decisions of honorable Gujarat High Court and Kerala High Court are also supporting the assessing officer's ac ..... X X X X Extracts X X X X X X X X Extracts X X X X
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