2013 (2) TMI 727 - AT - Income Tax

Summary

Issues Involved:
1. Disallowance of discount expenses.
2. Disallowance of car depreciation.

Summary:

1. Disallowance of Discount Expenses:
The assessee, a private limited company engaged in trading vehicle spares, claimed a discount expense of Rs. 5,28,920/-. The AO disallowed 50% of this amount (Rs. 2,64,460/-) citing lack of confirmation and excess discount over TELCO circulars, a decision upheld by CIT(A). The Tribunal noted that similar issues in previous years were restored to the AO for verification. Following the precedent, the Tribunal restored the issue to the AO for necessary verification and adjudication, allowing the ground for statistical purposes.

2. Disallowance of Car Depreciation:
The AO disallowed depreciation of Rs. 1,15,652/- on a car registered in the director's name, arguing it was not owned by the assessee and lacked evidence of business use. CIT(A) upheld this disallowance, referencing relevant case laws. The Tribunal, however, noted that the car was purchased with company funds and used for business, aligning with the decision in *Studio-3 Architect Pvt Ltd*. It held that non-registration under the Motor Vehicles Act does not preclude depreciation claims if the vehicle is owned and used by the company. Thus, the Tribunal directed the deletion of the disallowance, allowing this ground of the appeal.

Conclusion:
The appeal was partly allowed, with the issue of discount expenses remanded for further verification and the disallowance of car depreciation overturned.