TaxTMI 
TaxTMI 
2014 (1) TMI 1290
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.... and in law, the Ld. CIT (A) has erred in deleting the addition of Rs.15,00,407/- made by the Assessing Officer disallowing the proportionate interest. 3.1 The Ld. CIT (A) ignored the fact that the assessee is paying interest on borrowed capital on one hand and has advanced interest free loans to its sister concerns. 3. The appellant craves leave to add to alter or amend any grounds of the appeal raised above at the time of the hearing." 2. The brief facts of the case are that the assessee was engaged in the business of trading in shares. The case of the assessee was selected for scrutiny. During assessment proceedings, the Assessing Officer observed that assessee had claimed depreciation of Rs.11,41,773/- on a car purchased during the previous year. The assessee was asked to produce copies of bills of additions to fixed assets. From the copies of bills, it was noticed that car was purchased in the name of Director of the company. The assessee was required to explain as to why depreciation amounting to Rs.11,41,773/- be not disallowed as the vehicle was not in the name of the assessee. Vide letter dated 21.11.2008, the assessee submitted that the ....
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....annot be said that the money borrowed from these brokers has been advanced as interest free loan to other parties. The amount advanced by the assessee company to other parties has no nexus with the interest paid by the assessee company to the brokers. Hence, you are requested not to disallow any interest paid by the assessee company." 5. The Assessing Officer did not accept the contentions of assessee and made a disallowance of Rs.15,00,407/- being interest @ 15% on average interest free advances. 6. Dissatisfied with the order, the assessee filed appeal before Ld. CIT (A) and submitted various submissions in respect of additions made by Assessing Officer. In respect of first addition of depreciation reliance was placed on a number of case laws with the proposition that registration under the Motor Vehicle Act was not necessary to enable the assessee to claim depreciation on the vehicle. In particular reliance was placed on the following cases: i) Mysore Minerals Ltd. Vs CIT reported in 239 ITR 775. ii) CIT vs. Salkia Transport Assoc. reported in 143 ITR 39 (Cal.) iii) CIT vs. Basti Sugar Mills Co. Ltd. reported in 257 ITR 88 (D....
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....by Delhi High Court in CIT vs. Basti Sugar Mills CO. Ltd. (2002) 257 ITR 88 (Del.). Reliance is also placed upon the decisions in CIT v. Nidish Transport Corp.(1990) 185 ITR 669 (Krt.) and CIT vs. Salkia Transport Associates (1983) 143 ITR 39 (Cal.). 4.3 It is also observed that the Assessing Officer has not made out a case that the asset in question was not used for the purposes of business. The Assessing Officer has not given a finding to the fact that the car has not at all been used during the accounting year under appeal or was kept idle. It is also observed that the Assessing Officer has not found any discrepancy in respect of the supporting evidences regarding the acquisition of the car during the year under consideration. Further, even in the succeeding assessment year i.e. assessment year 2007-08, no disallowance of depreciation on car has been made in the assessment made u/s 143 (3) of the Act and that too, after the impugned order of assessment for assessment year 2006-07 (which is the subject matter of present appeal). The action of the Assessing Officer in disallowing the identical claim in the year under consideration is not tenable on the principles o....
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....t free advances to the sister concern were not out of the bank overdraft but were advanced from unsecured interest-free loans and capital of the firm. In other words, the theory of mixed funds was accepted by the Hon'ble Court and the principle and basic ground for deleting the disallowance was that sufficient interest free funds, capital, etc. were available with the assessee." 9. Aggrieved, the revenue is in appeal before us. At the outset, the Ld. Departmental Representative read from relevant portion of assessment order and argued that assessee was not owner of the vehicle and though assessee's funds were used for the purchase of car but it cannot be said that car was being used by the assessee for its business purposes, as the nature of business of assessee did not warrant use of such car. She further argued that it is a case of deemed dividend wherein the director/ shareholder has used the funds of company for his personal purposes. As regards CIT (A) findings that in the succeeding year the claim of depreciation was allowed, the Ld. Departmental Representative argued that if a mistake happens in succeeding year that does not mean that in the earlier year also it was a mis....
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....see or not. Section 32(1) of the Income Tax Act deals with the allowability of depreciation which reads as under: "Depreciation. 32. (1) [In respect of depreciation of- (i) Buildings, Machinery, Plant or furniture, being tangible assets; (ii) Know-how, patents, Copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature being intangible asets acquired on or after the 1st day of April, 1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-] "From the above definition it can be concluded that for claiming depreciation existence of two conditions is a must. That is asset must be owned wholly or partly by the assessee and secondly it should be used for the purpose of business or profession of the assessee. For meeting first condition as to ownership the Ld. AR has relied upon a number of case laws wherein the courts has held that non registration under the Motor Vehicle Act alone cannot be the basis for denial of depreciation, but on the second condition, the Ld. AR has ....