TMI Blog2014 (5) TMI 1080X X X X Extracts X X X X X X X X Extracts X X X X ..... infirmity in the order of learned CIT(A) on this issue. Accordingly, this ground of Revenue is rejected.- Decided against revenue. Disallowance of depreciation on the vehicle - whether the assessee did not own the assets and it did not furnish the certificate of transfer of vehicle on which it had claimed depreciation at any point of time during the relevant part of the year - Held that:- In the facts of the present case, the entire purchase price paid by the assessee was received back because the car had some technical defects. For allowing depreciation on an asset, the assessee has to fulfill two preconditions that the asset should be owned by the assessee and it should be used by the assessee for business purposes. So far the user is concerned, it was submitted by the assessee that the assessee was using the car till it was returned to the seller but for the other condition i.e. the assessee was owning the car, we find that although the car in question was in possession of the assessee and the assessee used it also but no effort was made to get the car transferred in the name of the assessee company. It may have been different case if an effort was made to get the car transf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e and not related to the business of the assessed and was not deductible u/s 37 of the IT Act 1961 as expenditure incurred wholly and exclusively for the purpose of business. 3. That Ld. CIT (A) has erred in law and on facts in deleting the addition of ₹ 75,000/- made on disallowance of depreciation claimed on the vehicle without appreciating the fact that the assessee did not own the assets and it did not furnish the certificate of transfer of vehicle on which it had claimed depreciation at any point of time during the relevant part of the year. 4. That the order of the Ld. CIT (A) being erroneous in law and on facts be vacated and the order of the A.O. be restored. 5. That the appellant craves leave to amend any one or more of the grounds of the appeal as stated above as and when need for doing so may arise. 3. Learned D.R. of the Revenue supported the assessment order and placed reliance on the judgment of Hon'ble Apex Court rendered in the case of Bengal Enamel Works Ltd. Vs Commissioner of Income-tax as reported in [1970] 77 ITR 119 (SC). 4. As against this, Learned A.R. of the assessee supported the order of learned CIT(A). He also placed reliance on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n was paid on extra commercial consideration and that part of the remuneration, paid to the director was disallowed. In the present case, it is not the case of the Assessing Officer that any part of the remuneration paid by the assessee company to the directors was on account of extra commercial consideration and hence, this judgment of Hon'ble Apex Court cited by learned D.R. of the Revenue is not applicable in the facts of the present case. We also find that it is noted by CIT(A) that his predecessor has also adjudicated upon the same issue in favour of the assessee in assessee s own case in the immediately preceding year and nothing has been brought on record before us by learned D.R. of the Revenue that the order of CIT(A) in the earlier year was reversed or modified by the Tribunal. We also find that although the Assessing Officer has invoked the provisions of section 40A(2)(b) of the Act but he has not established that the increase in remuneration to the directors is excessive or unreasonable. Under these facts, we do not find any infirmity in the order of learned CIT(A) on this issue. Accordingly, this ground of Revenue is rejected. 6. Regarding ground No. 2, learned ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the said receipt is towards membership fees but in the assessee s own submission before the Assessing Officer dated 30/06/2010, which is after the date of this confirmation, it was submitted by the assessee before the Assessing Officer that this amount has been paid to United Smokeless Tobacco Association as special contribution. On page No. 3 4 of paper book being part of written submissions filed by the assessee before the CIT(A), it is submitted by the assessee before the CIT(A) that the basis of disallowance of the Assessing Officer is that it is either capital expenditure or an expenditure not related to the business of the assessee and therefore, it cannot be allowed as business expenditure. It is also stated on page No. 4 that since no certificate for the claim of deduction u/s 80-G has been filed by the assessee, such deduction was also not allowed. Before us, apart from submitting a confirmation dated 07/06/2010 on page No. 34 of the paper book in which it is stated that this amount was received by them towards membership fees, nothing has been brought on record to show that the submission made before the Assessing Officer in the letter dated 30/06/2010 that this amo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t is a membership subscription to the association, it will result into creation of enduring benefit and since no such circumstances were shown for leading to an opposite conclusion, the same has to be treated as capital expenditure. 8.1.3 Now we examine the applicability of various judgments cited by Learned A.R. of the assessee. The first judgment cited by Learned A.R. of the assessee is the judgment of Hon'ble Delhi High Court rendered in the case of Commissioner of Income-tax Vs Engineers India Ltd. (supra). In that case, it was noted by Hon'ble Delhi High Court that the amount in dispute was paid by the assessee for acquiring membership of the organization but mere membership do not entitle the assessee to get the desired information till the subscription is paid from year to year. It was also found that if the annual subscription is not paid, the assessee will not receive any technical information. Under these facts, it was held that the assessee has not acquired any asset by payment of initial membership fees. In the present case, inspite of specific query, terms of membership were not brought on record and hence, it cannot be said that the assessee will not get th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n it is membership fees and as per assessee s own submission after the date of such confirmation, it was special contribution. After considering all these facts, we are of the considered opinion that the order of CIT(A) is not sustainable. Hence, we reverse the order of CIT(A) on this issue and restore that of the Assessing Officer. Accordingly, ground No. 2 is allowed. 9. Regarding ground No. 3, it was submitted by learned D.R. of the Revenue that it was a sale consideration repaid by the seller and, therefore, depreciation is not allowable because the assessee was not owner. He supported the assessment order. 10. As against this, Learned A.R. of the assessee supported the order of learned CIT(A). He also submitted that on page No. 47 and 48 of the paper book is the confirmation issued by the seller and sale receipt and delivery letter. Inspite of specific query, Learned A.R. of the assessee could not bring on record any document regarding the transfer of the vehicle. He placed reliance on the judgment of Hon'ble Allahabad High Court rendered in the case of Commissioner of Income-tax Vs Varanasi Auto Sales (P) Ltd. as reported in [2010] 326 ITR 182 (All). 11. We have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the asset should be owned by the assessee and it should be used by the assessee for business purposes. So far the user is concerned, it was submitted by the assessee that the assessee was using the car till it was returned to the seller but for the other condition i.e. the assessee was owning the car, we find that although the car in question was in possession of the assessee and the assessee used it also but no effort was made to get the car transferred in the name of the assessee company. It may have been different case if an effort was made to get the car transferred but the same could not be transferred for some technical defects. In the present case, no document has been brought on record to show that any effort was made by the assessee to get the vehicle transferred in its name. In fact, in the same year, the assessee intimated to the seller to take back the vehicle and refund the entire amount and the entire amount was refunded also although in a subsequent year. The assessee was retaining the car only because the seller did not return the money. As and when he returned the money, the assessee returned the car. Since the seller was using the money, the assessee was usi ..... X X X X Extracts X X X X X X X X Extracts X X X X
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