Chennai ITAT Rules Economic Ownership Over Vehicle Registration: Addition of ₹51.01 Lakh in Director's Hands Deleted

Overview of the Dispute

In a significant ruling concerning the intersection of corporate asset ownership and personal tax liability, the Income Tax Appellate Tribunal (ITAT), Chennai, has set aside an addition of ₹51,01,000/- made against an individual director on account of a luxury car purchase. The Tribunal conclusively held that where a company bears the full financial burden of acquiring a vehicle — recording it as a fixed asset, servicing the loan, and reimbursing any advance payments — the mere fact that the vehicle's registration certificate (RC book) reflects the director's name cannot constitute a basis for treating the purchase price as unexplained income or investment in the director's hands.

The case, Nagarajan Thiyagarajan Ganesh Vs DCIT (ITAT Chennai), pertains to Assessment Year 2020-21 and throws important light on how tax authorities ought to evaluate the concept of economic ownership when determining the true nature of a financial transaction.

Background Facts

The assessee in this case is an individual who serves as a Director of M/s. Team Works Events and Prints Pvt. Ltd. He had not filed his return of income within the time prescribed under the provisions of Section 139 of the Income Tax Act, 1961.

During the course of scrutiny, the Assessing Officer (AO) identified two significant financial transactions linked to the assessee:

  • Purchase of a motor vehicle amounting to ₹51,01,000/-
  • Purchase of immovable property amounting to ₹95,00,000/-

On account of these high-value transactions and the non-filing of the return, the AO initiated reassessment proceedings by issuing a notice under Section 148 of the Income Tax Act, 1961.

In response, the assessee filed a return of income on 29.10.2024, declaring a total income of ₹7,27,080/-. When the AO sought an explanation for the motor vehicle purchase, the assessee submitted that:

  1. The car — a Volkswagen (Audi) — was actually purchased by M/s. Team Works Events and Prints Pvt. Ltd.
  2. The seller had inadvertently raised the invoice in the name of the assessee rather than the company.
  3. The Tax Collected at Source (TCS) deducted on the purchase was not claimed by the assessee personally.
  4. The company had taken a car loan from Audi Financial Services to fund the acquisition, and the same was recorded in the company's books of account.

Despite these submissions, the AO refused to accept the assessee's position. Placing reliance on the certificate of registration — which bore the assessee's name as the registered owner — the AO treated the full sum of ₹51,01,000/- as the income of the assessee under Section 68 of the Income Tax Act, 1961.

First Appellate Stage: CIT(A) Grants Partial Relief

Aggrieved by the AO's order, the assessee approached the Commissioner of Income Tax (Appeals) / National Faceless Appeal Centre (NFAC), Delhi, under Section 250 of the Income Tax Act, 1961. The CIT(A) passed an order dated 26.11.2025, partially accepting the assessee's contentions.

Key Findings of the CIT(A)

The CIT(A) acknowledged that the vehicle had been duly recorded as an asset in the books of M/s. Team Works Events and Prints Pvt. Ltd. and that the loan repayment was being routed through the company's IndusInd Bank account. However, the CIT(A) drew a distinction regarding the margin money and the balance purchase consideration, observing as follows: