1996 (12) TMI 91 - AT - Income Tax

Summary

Issues:
- Disallowance of car expenses in the assessment years 1984-85 and 1985-86.

Analysis:
In the present case, the only ground raised in the assessee's appeals is against the disallowance of car expenses confirmed by the CIT(A) for the assessment years 1984-85 and 1985-86. The Assessing Officer (AO) disallowed a portion of the car expenses in both years, based on past patterns. The disallowance in 1984-85 was Rs. 9,910, and in 1985-86 was Rs. 8,333, representing 20% of the car expenses. The first appellate authority upheld these disallowances citing past patterns.

The counsel for the assessee argued that the car was used for business purposes by the company's directors, and there was no evidence to suggest personal use. Even if there was personal use, it should be considered a perquisite for the directors, not a disallowance for the company. Reference was made to Tribunal decisions supporting this argument.

On the other hand, the Departmental Representative contended that the disallowance was justified based on past history and reasonableness. The counsel for the assessee countered this by stating that tax matters should be decided on merits independently, and the doctrine of res judicata does not apply.

Upon review, the Tribunal found that the company owned the car for the directors' business use, with no evidence of personal use in the current assessment year. The Tribunal emphasized that even if there was personal use, it would be a perquisite for the directors, not a disallowance for the company. Citing previous Tribunal decisions, the disallowance of 20% of car expenses and depreciation was deemed unjustified and canceled.

In conclusion, the Tribunal allowed the assessee's appeal for both years, overturning the disallowance of car expenses.