2022 (4) TMI 159 - AT - Income Tax

Disallowance of the claim of depreciation on Speed Boat - Purchases for purpose of the business - Assessee was selected only for limited scrutiny purposes - HELD THAT - Reasons for selecting the case of the assessee for scrutiny mentioned and we do not find that there is any mention of claim of the assessee with respect to the depreciation on speedboat - It cannot be said that the assessee has been allowed depreciation for that year by the learned assessing officer. Even otherwise each assessment year is separate and distinct assessment unit and therefore generally unless glaring irregularity or inconsistency is noticed allowability of allowance can be presumed. Even otherwise in the present case it cannot be said that the depreciation on speedboat has been allowed to the assessee consistently. We find that speed boards are specially covered Under IV of appendix - 1 of the table of depreciation rates provided as per rule 5 of The Income Tax Rules 1962. It is the only asset in the block of the asset on which depreciation is claimed by the assessee. For the allowability of depreciation on any asset it should be owned by the assessee as well as it should be used for the purposes of the business. The learned lower authorities have categorically held that the assessee has failed to show any evidence that speed boat has been used by the assessee for the purposes of the business of the assessee. Therefore user test for claim of the depreciation on speedboat fails. The other financial parameters such as turnover et cetera or the number of dealership and agents are of no relevance thus do not support the case of the assessee in absence of any evidence that the speedboat is used for the purpose of the business of the assessee. The argument of the learned authorised representative that in case of a company assessment the depreciation could not have been disallowed for the reason that assets have been used for personal purposes. We fully agree with that but in the present case there is no evidence that the speedboat is used for the purpose of the business and therefore this argument does not apply on the facts of the case. We upheld action of ld. Assessing Officer of disallowance of depreciation on the speed boat. - Decided against assessee.

Summary

Issues involved:
Disallowance of depreciation on Speed Boat claimed by the assessee.

Analysis:
1. The appeal was filed against the order confirming the disallowance of depreciation on a Speed Boat claimed by the assessee. The assessee contended that the depreciation had been consistently allowed since the purchase in Assessment Year 2012-13, except for one year, and was used for entertaining agents and dealers visiting the office.

2. The Assessing Officer disallowed the depreciation, stating lack of evidence of business use and citing disallowance in a previous year. The CIT(A) upheld the disallowance. The assessee argued that being a company, personal use was not applicable, and the boat was used for business purposes, entertaining customers and dealers.

3. The Tribunal noted the lack of evidence supporting the business use claim. Despite depreciation being allowed in some years, the disallowance in others indicated inconsistency. The Tribunal emphasized that for depreciation allowance, the asset must be owned and used for business purposes, which the assessee failed to prove.

4. Financial parameters like turnover and dealership numbers were deemed irrelevant without evidence of business use. The argument that depreciation couldn't be disallowed for a company due to personal use was rejected, as there was no proof of business use in this case.

5. Consequently, the Tribunal upheld the lower authorities' decision to disallow the depreciation on the Speed Boat, dismissing the assessee's appeal.

This comprehensive analysis highlights the key arguments, evidence, and legal principles considered in the judgment, leading to the decision to dismiss the appeal regarding the disallowance of depreciation on the Speed Boat.