1986-VIL-84-ITAT-DEL

Equivalent Citation: TTJ 029, 022,

Income Tax Appellate Tribunal DELHI

Date: 29.11.1986

DS. CONSTRUCTION PVT. LTD.

Vs

INCOME TAX OFFICER.

BENCH

Member(s)  : RAM RATTAN., U. S. DHUSIA.

JUDGMENT

One of the two issues raised in this appeal filed by the assessee for asst. yr. 1981-82 relates to a claim for depreciation on cars purchased and deployed for execution of the construction contracts inLibya. The assessee is an Indian Company which during the year under assessment bagged two service contracts inlibya. The first contract was for the construction of 120 beds hospital in theLibyacities of Beniwalid and Mizda. Another contract was for the construction of sewerage treatment plant at Zawarah. The two contracts were awarded to the assessee company by Arab Union contracting Company a semi-government company, based in Tripalli. To enable it to carry on the work of contract the assessee purchased a few cars and pick-up vans for the mobilisation of material and labour. On these the assessee claimed depreciation. The ITO disallowed the claim for depreciation because the cars and the vans were purchased after 1975. These cars and vans not being manufactured inIndiainvited third proviso to cl. (ii) of sub-s. (1) of s.32.

2. Having failed before the ITO the assessee took up the matter in appeal before the Commissioner (A). The assessee reiterated his plea that for efficient execution of the contract inLibyait was considered economic to purchase foreign vans and cars and not those which were manufactured inIndia. As there is no doubt that these were used for the purpose of business the assessee should be held entitled for depreciation. The Commissioner(A) considered the facts of the case but he could not bring himself to persuade that the plea of the appellant could be accepted. He also threw out the other pleas made out by the assessee that no doubt the cars and the vans were foreign and not those manufactured inIndiabut these were not imported inIndia. They were used for business carried on outside the taxable territories.

3. Having failed to find any redress the assessee brought the issue in appeal before the Tribunal. The ld. counsel for the assessee Shri C.S. Agarwala made three-fold submissions. His first submission was that as far as the case of pick up vans is concerned it was not to be considered as motor cars. In this connection he not only relied on a Calcutta High Court decision in the case of CIT vs. Wool Combers of India Ltd. (1984) 41 CTR (Cal) 63 but also on a circular issued by the CBDT in Circular No. 315(F) No. 202/89/79-IT(A)-II dt.24th September, 1981, in which motor vans were held different from motor-cars and it was provided that motor vans being more akin to motor lorries deprecations @ 30 percent may be allowed on motor vans as is done in the case of motor lorries and motor buses. He, therefore, made it a point that as far as the application of the aforesaid proviso is concerned it is not to be applied to the pick-up vans. Regarding the claim for depreciation on the motor cars purchased of foreign brand it was submitted that these are not imported in the taxable territories. Therefore, the bar placed in the aforesaid proviso should not be made applicable. Revenue cannot take the stand that the purchase of the motor car was not required in the exigencies of business. If the purchase was made for carrying on of the business there was no point in disallowing the claim for depreciation as provided in s. 32 for other vehicles. Another submission was also made that alternatively he should be allowed allowance as provided in s. 37 of the Act.

4. Having considered the facts of the case we are of the view that as far as the case of motor vans is considered it would not be fair not to act on the distinction between the motor vans and the motor cars made by CBDT in the above noted circular. Acting on the basis of distinction between the motor car and the motor van we are persuaded that assessee can be allowed depreciation as the bar in the aforesaid proviso relates only to the cars manufactured outside India after 1st April, 1975 As for as the claim of depreciation on cars is concerned, we have no doubt that it is not possible to over look the bar contained in the aforesaid proviso. Admittedly the car made by the foreign manufacturers was purchased after1st April, 1975. No doubt it is a case of hardship for the assessee who had not imported these cars in the taxable territory but the provision contained in the aforesaid proviso is so clear and unambiguous that it is not possible to overlook it on the ground that the application of this proviso to the facts of the case would constitute a hardship for the assessee. We are to carry out the mandate of law understanding in to the best of our ability, but no to bring out any alteration in the and clear unambiguous purpose of the provision as a superior legislature removing the hardship from the operation of such hardship. Therefore, we find no case for allowing the claim or depreciation on the cars purchased by the assessee during the year. We also find no substance in the second submission made by the assessee that his case should be considered for a lowing under s. 37. We reject his plea in this respect. Accordingly we vacate the finding of the lower authorities and direct the ITO to allow after obtaining the necessary particulars from the assessee, depreciation on the motor vans only.

5. Another issue raised in this appeal is regarding a disallowance of Rs. 5,000 on account of expenses incurred in the maintenance and running of cars by the Directors According to the facts brought on record, a total expenditure of Rs. 2,28,246 was incurred on the maintenance and running of cars in its head office and at its two sites of operation in Libya, Beniwalid and Mizda and at Zawarah. The ITO disallowed 15 per cent of the total expenditure on account of personal use by the Directors. This worked out to a disallowance of Rs. 34,296. Before the CIT(A), it was explained by company that under the terms of the contract the Director stayed alone inLibyaand they were not entitled to bring their families. Therefore, there was no possibility of any personal user of this vehicles. The Commissioner(A) taking into consideration the plea of the assessee reduced the disallowance of Rs. 5,000. The assessee feeling aggrieved has brought the issue in appeal before the Tribunal.

6. It was explained to us by the ld. counsel for the assessee that the company reimbursed the expenditure incurred by the Directors on the maintenance and running of the car. It was not the case of company which itself expended any amount on the maintenance and running of the car. As far as the user of the cars by the Directors is concerned, the Directors had their own cars who initially made the expenditure on maintenance and running of the car themselves. The company reimbursed the expenditure.

7. Having considered the facts brought on record we are of the view that maintenance of any disallowance on this issue will not be warranted by facts. It is the case of the company a corporate entity which is not owned by the Directors. The case of a partnership is different where the partners own the partnership. In fact firm is a compendious name for all the partners acting together under the agreement of partnership. Once the company had undertaken an expenditure to reimburse the expenditure made by the Directors, the expenditure of the company cannot be considered personal expenditure of the company and therefore. there could be no possibility of any disallowance on the ground that any expenditure to maintenance and running of the car which were made to reimburse the Directors could be held personal expenditure of the company. We find no substance in the disallowance and we accordingly delete it.

8. In the result appeal, is partly allowed,

 

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