2020 (5) TMI 432 - AT - Income Tax

Disallowance of depreciation and expenses in respect of the new car purchased - questioned car was registered in the name of the Director - HELD THAT - As decided in EDWISE CONSULTANTS PVT. LTD. 2015 (12) TMI 297 - ITAT MUMBAI depreciation is allowable in the hands of the company, even if it is registered in the name of its director provided that the vehicle is used for the purpose of business of company and income derived there from was shown as income of the company. In the instant case there is no dispute with regard to the fact that the vehicles are used for the purpose of business of the assessee company. the assessee company should be considered as owner for all practical purposes and hence it is entitled for depreciation - Decided in favour of assessee.

Summary

Issues Involved:
Appeal against disallowance of depreciation and expenses for a new car for AY 2014-15 and 2015-16.

Analysis:
1. The appellant, engaged in the manufacturing and trading of dyes and chemicals, filed returns for AY 2014-15 and 2015-16. The case underwent scrutiny, and the Assessing Officer (AO) disallowed depreciation and expenses related to a new car. The appellant appealed to the Ld. CIT(A) but the disallowance was confirmed.

2. The grounds for appeal included contentions that the disallowance was unjustified, as the car was fully paid for by the appellant and used for business purposes. The Ld. CIT(A) based the disallowance on past practices and the car being registered in the director's name. The appellant cited precedents where similar disallowances were overturned by higher courts.

3. The Ld. AR argued that the issue was previously decided in favor of the appellant by the ITAT in a similar case. The Ld. CIT(A) had also ruled in favor of the appellant based on precedents and lack of evidence showing personal use of the car. The Ld. DR acknowledged that the issue was covered by the ITAT's previous decision.

4. The ITAT, after considering arguments from both sides and reviewing the orders passed by revenue authorities, found that the issue had already been decided in favor of the appellant in a previous case by the ITAT. Citing precedents from the Hon'ble Gujarat High Court and the Hon'ble Delhi High Court, the ITAT concluded that the appellant was entitled to depreciation on the vehicles used for business purposes.

5. Consequently, the ITAT allowed the grounds raised by the appellant, following the decision of the coordinate bench of ITAT applicable to the present case. As a result, both appeals filed by the appellant were allowed, and the disallowance of depreciation and expenses for the new car was overturned.

6. The judgment was pronounced in an open court on 17th Jan 2020, with the ITAT ruling in favor of the appellant on the grounds related to the disallowance of depreciation and expenses for the new car.