2014 (1) TMI 348 - AT - Income Tax

Disallowance of Depreciation u/s 32 of the Act Fulfillment of Conditions prescribed for claiming depreciation Held that - The assessee has the ownership of the vehicle, the assessee has filed temporary registration certificate issued by the Transport Authorities and also the Permanent Registration Number before the Assessing Officer - Under the Income Tax Act, to allow the claim of depreciation, the assessee has only to prove that he has put the vehicle to use before the relevant date - If the vehicle is used in contravention of the Rules provided by the respective Transportation Department, it would not effect the claim of depreciation under the Income Tax Act - It is for the respective transportation department to take action for the contravention of its Rules but the Income Tax authorities cannot disallow the claim of depreciation thus, the claim of depreciation of the assessee allowed at the prescribed rates Decided in favour of Assessee.

Summary

Issues:
1. Condonation of delay in filing appeal due to medical reasons.
2. Disallowance of depreciation claimed by the assessee.
3. Ownership and use of the vehicle for depreciation claim.

Analysis:
1. Condonation of Delay: The appeal was filed 54 days beyond the limitation period. The assessee attributed the delay to illness and subsequent recovery from Typhoid. The Tribunal considered the medical certificate and the assessee's explanation. Citing a High Court decision, it emphasized that technical limitations should not defeat a meritorious claim. The delay was condoned based on reasonable cause and the merits of the case.

2. Disallowance of Depreciation: The dispute arose from the disallowance of depreciation claimed by the assessee on a commercial bus. The Assessing Officer found discrepancies in the usage of the vehicle for transporting goods. The CIT(A) upheld the disallowance, citing violations of transport rules. The Tribunal, however, noted that the ownership of the vehicle was established, and the usage for commercial purposes was not in question. It ruled that contravention of transport rules does not impact the claim of depreciation under the Income Tax Act. The Tribunal found the authorities' disbelief in the vehicle's usage unjustified and allowed the depreciation claim.

3. Ownership and Use for Depreciation Claim: The Tribunal emphasized that to claim depreciation, the assessee must demonstrate ownership and usage of the vehicle for business purposes. While ownership was proven, doubts were raised regarding the vehicle's use for transporting goods due to alleged violations of transport rules. The Tribunal rejected this reasoning, stating that Income Tax authorities cannot disallow depreciation based on transport rule violations. It found the circumstantial evidence in favor of the assessee and allowed the depreciation claim at the prescribed rates, ultimately ruling in favor of the assessee.

Overall, the Tribunal allowed the assessee's appeal, emphasizing the importance of proving ownership and usage for depreciation claims, while highlighting that technical limitations should not hinder meritorious claims.