2011 (5) TMI 1080 - AT - Income Tax

Summary

Issues Involved:
1. Entitlement to depreciation on a car registered in the name of a Director.
2. Classification of income from sale of shares as "short term capital gains" or "profits and gains of business or profession."
3. Disallowance of traveling and conveyance expenses.

Summary:

Issue 1: Depreciation on Car Registered in Director's Name
The assessing officer disallowed the claimed depreciation on a car amounting to Rs. 3,72,725/- on the basis that the car was not owned by the assessee-company but registered in the name of one of its Directors. The CIT (A) deleted the disallowance, following the decision of the Pune Bench of the ITAT in the case of Rohan Builders & Developers Pvt. Ltd., which held that depreciation on vehicles owned by the company and used for its business was allowable even if registered in the name of the Directors. The Tribunal upheld the CIT (A)'s decision, rejecting Ground No.1.

Issue 2: Classification of Income from Sale of Shares
The assessee showed Rs. 77,87,000/- as short term capital gains on the sale of shares. The assessing officer reclassified this as profit from the business, noting the short holding period of the shares. The CIT (A) concluded that Rs. 89,509/- was taxable under "profits and gains of business" and the remaining Rs. 76,97,491/- as "short term capital gains." The Tribunal, considering various factors such as the nature of transactions, maintenance of books, and the CBDT Circular No.4 of 2007, upheld the CIT (A)'s decision, rejecting Ground No.2.

Issue 3: Disallowance of Traveling and Conveyance Expenses
The assessing officer disallowed 20% of the claimed amount of Rs. 16,21,422/- on account of traveling and conveyance expenses, amounting to Rs. 3,24,284/-, citing the possibility of personal use. The CIT (A) noted that Rs. 11,37,500/- related to foreign travel expenses of the Managing Director for business purposes and should not be disallowed. The remaining Rs. 4,83,922/- was subject to a 10% disallowance. The Tribunal upheld the CIT (A)'s decision, rejecting Ground No.3.

Conclusion:
The appeal filed by the Revenue was dismissed, and the order pronounced in the court on 31st May, 2011.