2017 (4) TMI 116 - AT - Income Tax

Claim of depreciation on motor car - Held that - We are of the view that assessee should be allowed the claim of depreciation @ 50% on the WDV as on 01.04.2009 of motor car purchased for business purposes on 28.03.2009. In the result, this ground of assessee is allowed. Disallowance of travelling expenses - Held that - Undoubtedly, the assessee had incurred travelling expenditure, but specifically could not prove the business nexus of Directors travelling expenditure to the satisfaction of lower authorities. It is also not disputed that books of accounts are audited and no major adversity has been detected by the Assessing Authority while completing the assessment and it is also the fact that ledger account of travelling expenditure was placed on record. We, therefore, in view of above facts, are of the view that it will meet the ends of justice if the disallowance is restricted to 15% of the Directors travelling expenses of ₹ 3,74,069/-, which will work out to ₹ 56,110/-; and we order accordingly. In the result, this ground of the assessee is partly allowed.

Summary

Issues involved:
1. Depreciation rate on motor car
2. Disallowance of travelling expenses

Depreciation rate on motor car:
The appeal was against the CIT(A)'s order confirming the Assessing Officer's decision to allow depreciation on a motor car at 15% instead of the 50% claimed by the assessee. The motor car was purchased in the previous assessment year for business purposes. The assessee argued that as per CBDT Circular No.10/2009, depreciation should be allowed at 50% for commercial vehicles acquired in a specific period. The Tribunal referred to the Income-tax Rules and a Co-ordinate Bench decision supporting the assessee's claim. The Tribunal held in favor of the assessee, allowing depreciation at 50% for the motor car purchased for business purposes.

Disallowance of travelling expenses:
The second issue was the disallowance of travelling expenses by the Assessing Officer, which was confirmed by the CIT(A). The disallowance was based on the inability of the assessee to substantiate the business nexus of the travelling expenses incurred by the Directors. The Tribunal noted that while the expenses were incurred, the business nexus was not adequately proven. Considering the audited books of accounts and lack of major adverse findings, the Tribunal partially allowed the appeal, restricting the disallowance to 15% of the Directors' travelling expenses. As a result, the disallowance was reduced to ?56,110. The Tribunal partly allowed the appeal on this ground.

In conclusion, the Tribunal allowed the appeal partly, ruling in favor of the assessee regarding the depreciation rate on the motor car and partially in the case of disallowance of travelling expenses. The decision was pronounced on 30th March 2017 at Ahmedabad by the Appellate Tribunal ITAT Ahmedabad.