The order of the Bench was delivered by
Vikram Singh Yadav (Accountant Member)- This is an appeal filed by the assessee against the order of the Commissioner of Income-tax (Appeals)-II, Jaipur, dated October 30, 2013, wherein the assessee has taken the following effective grounds of appeal :
"(1) The learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts of the case in confirming the disallowance made on account of depreciation claimed under section 32 of the Act of Rs. 21,02,033 made by the assessee. The disallowance so made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is contrary to the provisions of law and facts of the case. Hence, the same kindly be deleted in full.
(2) The learned Commissioner of Income-tax (Appeals) erred in law as well as on the facts of the case in confirming the disallowance of Rs. 1,00,000 on account of trip expenses out of Rs. 15,20,280 made by the Assessing Officer. The disallowance so made by the Assessing Officer and confirmed by the learned Commissioner of Income-tax (Appeals) is contrary to the provisions of law and facts of the case. Hence, the same kindly be deleted in full."
2. The brief facts of the case are that the assessee derives income from transport and fleet transport. During the assessment proceeding, the Assessing Officer noted that the assessee claimed depreciation of Rs. 21,02,033 on 16 tankers which were not found registered in the name of the assessee though were shown as assets of the assessee. Out of 16 tankers, 11 tankers were in the name of Shri Narendra Palsania and remaining was in the name of Shri Prabhu Dayal. On being asked, the assessee, vide reply dated December 10, 2010, stated that the assessee has purchased these vehicles from the above named persons, vide agreements, both dated April 1, 2006. The vehicles were financed by HDFC and ICICI Banks and, hence, the registration certificates were bearing hypothecation. The assessee purchased the same continuing with the loans as were due against these tankers as on March 31, 2006. The Assessing Officer, however, disallowed depreciation of Rs. 21,02,033 claimed in respect of the tankers.
2.1 Being aggrieved, the appellant carried the matter in appeal before the learned Commissioner of Income-tax (Appeals) who has given findings as under :
"I have considered the facts of the case and the submission made. It is stated that the authorised representative could not controvert the findings of the Assessing Officer the assessee claimed for depreciation on trucks is not allowable because he was not the owner of those trucks. The Assessing Officer categorically mentioned in the assess ment order that the expression 'owner' is a much comprehensive term which denotes the full ownership as per law, i.e., without a valid registered document, the right title and interest would not pass to the assessee. The disallowance made by the Assessing Officer is consid ered to be fair and reasonable and does not call for any interference. Hence, the addition made by the Assessing Officer on account of depreciation of Rs. 21,02,033 is held to be justified and the same is sustained. The appellant fails on this ground."
2.2 The learned authorised representative has submitted that there is no dispute raised by the Assessing Officer that the assessee has shown such tanker, trailers and trucks in the audited balance-sheet (schedule D) as an owner. The said tankers are admittedly used for the business of the asses see and day-to-day running expenses are also claimed by the assessee in its profit and loss account and the same have been allowed by the Assess ing Officer without any dispute. Notably even the income from the truck plying has been duly declared by the appellant and assessed as such though the tankers are registered in the name of Shri Narendra Palsania and Shri Prabhu Dayal.
The facts are not denied that the assessee was not the registered owner of the truck. However, the facts are also admitted that the assessee purchased these trucks from two persons, namely, Shri Prabhu Dayal Choudhary and Shri Narendra Singh Palsania through agreements both dated April 1, 2006, along with loans (hypothecation). The trucks were got financed by these two persons through banks, however, all the instalments and EMIs are being paid by the appellant to the bank directly. Copy of the ledger account in the books of the appellant showing the payment with cheque number as also the corresponding bank statements are enclosed. As theses tankers were purchased by the first parties, i.e., Shri Prabhu Dayal Choudhary and Shri Narendra Singh Palsania on finance, there has been some restriction to operate the said tankers as owner under the Motor Vehi cles Act because of the charges of hypothecation put on RC by the RTO. Therefore, the subjected tankers could not be registered immediately in the name of the assessee until the entire loan was paid off but use of the same for business is not denied. Hence, the benefit of depreciation on the ground that the assessee was not a registered owner, cannot be denied.
These trucks were purchased in the assessment year 2007-08 wherein also depreciation was claimed and allowed through assessment was completed under section 143(1), however, such assessment has not been disturbed under section 147 or under section 263 and, therefore has become final. Thus, the Assessing Officer himself treated the appellant to be beneficial owner of these trucks.
The concept of registered owner is not at all relevant under section 32. In support of its contention the learned authorised representative drawn our attention to following :
"1. The apex Court, while interpreting section 32 of the Act, in Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC) has held that the term 'owned' occurring in section 32(1) must be assigned a wider meaning. 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 assessee having paid part of the price, has been placed in possession of the houses as an owner and is using the buildings for the purpose of its business, denial of depreciation not justified.
2. In the case of CIT v. Podar Cement P. Ltd. [1997] 226 ITR 625 (SC), it has been held that anyone in possession of the property in his own title exercising such dominion over the property as would enable the others being excluded therefrom and having the right to use and occupy the property and/or to enjoy its usurp in his own right would be the 'owner' of the building though the formal deed or title may not have been executed or registered as contemplated by the Transfer of Property Act and the Registration of Property Act, etc. In that case, it was held that 'owner', for purposes of section 22, is a person who is entitled to receive income from the property in his own right and the requirement of registration of sale deed in the context of section 22 is not warranted.
3. Anil Bulk Carriers P. Ltd. v. CIT [2005] 276 ITR 625 (All) held that : 'Fact that registration of the vehicles under the Motor Vehicles Act, 1988, was granted on April 1, 1997, was of no relevance as regards the allowability of depreciation. That apart, the word 'used' under section 32 has to be given wider meaning and it will include assets ready for use'."
Hence, the impugned disallowance kindly be deleted in full and the assessee be held entitled to the claim of depreciation as made.
2.3 The learned Departmental representative is heard who has submitted the test of ownership is governed by the registration under the Motor Vehicle Act and, in the instant case, since the tankers were not registered in the name of the appellant, the Assessing Officer was right in denying the depreciation claim in respect of said tankers.
2.4 We have heard the rival submissions and perused the material on record. The depreciation claim under the provisions of the Act is subject to twin tests of ownership and the test of usage for the purposes of business. In the instant case, the limited dispute relates to whether the assessee satisfies the ownership test and whether for the purposes of determining the ownership, the registration of tankers in the name of the appellant under the Motor Vehicles Act is an essential requirement. The assessee has purchased these vehicles from two above named persons vide agreements, both dated April 1, 2006, which has not been disputed by the Revenue. It is also an undisputed fact that the vehicles were financed by HDFC and ICICI banks and, hence, the registration certificates were bearing hypothecation. Further, the loans taken have been shown as liability in the balance-sheet and the EMI and interest thereon was paid by the assessee only. Further, the income earned from the vehicles has been booked to the revenue account by the assessee and duly offered to tax. All these facts remain uncontroverted by the Revenue authorities. The only reason why the Revenue feels that the appellant is not eligible for claim of depreciation is that registration of vehicles has not been transferred in the name of the appellant under the Motor Vehicles Act. In response, the learned author ised representative has submitted that it has bought the vehicles and have taken over the loan liabilities of the sellers and the vehicles are currently under hypothecation with the bank and as soon as the loan liability is fully discharged, the registration of vehicles would be transferred in his name under the Motor Vehicles Act. Regarding registration under the Motor Vehicles Act, the hon'ble Supreme Court incase of I. C. D. S Ltd. v. CIT [2013] 350 ITR 527 (SC) ; [2013] 29 taxmann.com 129 has held that "the Motor Vehicles Act is not a statement of law on ownership in general and perhaps, the repository of a general statement of law on ownership may be the Sale of Goods Act". Further, the hon'ble Supreme Court decision in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC) 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 and, accordingly, we allow ground No. 1.
3. Regarding ground No. 2, the brief facts of the case are that during the assessment proceeding the Assessing Officer noted that the assessee has debited a sum of Rs. 15,20,280 on account of trip expenses. On verification it was noticed by the Assessing Officer that the expenses are incurred by the drivers on the way for toll tax, RTO/police expenses, wages, inspection charges, food depot expenses, etc., and the expenses accounted for on the basis of slips prepared by the drivers and no external supporting was available. Therefore, he made an ad hoc disallowance of Rs. 1,00,000 which has been confirmed by the learned Commissioner of Income-tax (Appeals).
3.1 The learned authorised representative submitted that a bare perusal of the impugned order shall reveal that the various disallowances have been made simply on surmises and conjectures. No specific instance has been given. The contention of the appellant was that details were never mentioned in the accounts or slips, etc. The payments were only at Rs. 1,500 as a fixed allowance per trip to the drivers and helpers to meet the lodging, boarding and other incidental expenses and, therefore, the appellant never accounted for these expenses in the way, the Assessing Officer alleged. The allowances so paid were duly supported by the vouchers with the signature of the payee drivers and helpers, etc. Thus, the expenses were duly supported. The learned Commissioner of Income-tax (Appeals) summarily confirmed the disallowance.
3.2 We have gone through the order of the Assessing Officer and the learned Commissioner of Income-tax (Appeals) as well as considered the submissions made by the learned authorised representative and the learned Departmental representative. 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 of Rs. 1 lakh. Hence, ground No. 2 is allowed.
In the result the appeal filed by the assessee is allowed.
The order pronounced in the open court on March 31, 2016.