2018 (12) TMI 683 - AT - Income Tax

Additions on account of expenditure on speed-boat owned by the assessee - Held that - The appellate order for AY 2009-10 records a clear-cut finding that the assessee had been using speed-boat for travelling from Mumbai to Alibaug for his professional activities like acting practice health maintenance story telling etc. and hence business asset has been utilized by assessee for commutation for professional work and therefore the expenditure against the same was allowable to the assessee like any other travelling mode like motor-car etc. Another important fact to note is that the speed-boat forms part of the 15% block of Fixed Assets which is evident from depreciation chart as placed on record and therefore constitute business / professional asset for the assessee. As further noted that the assessee has claimed impugned depreciation on opening written down value of the speed-boat which is being carried forward from earlier AY and already merged under 15% block of fixed assets. Further the assessee has suo-moto disallowed 25% of the expenditure on estimated basis to account for personal element / usage. Therefore considering the totality of facts impugned additions could not be sustained. Reversing the stand of lower authorities we allow the appeal.

Summary

Issues:
Appeal against the addition of expenditure on a speed-boat for Assessment Year 2012-13.

Analysis:
1. The appeal was filed by the assessee against the order of the Commissioner of Income Tax confirming the addition of ?9,22,380 on account of expenditure on a speed-boat owned by the assessee for the assessment year 2012-13.

2.1. The assessee, a resident individual and a film actor, had his income assessed at ?124.39 Lacs after certain additions, including the disallowance of expenditure on the speed-boat. The assessee claimed that the speed-boat was used for professional activities, citing convenience and time-saving aspects due to commuting between Mumbai and Alibaug.

2.2. The Assessing Officer disallowed the expenditure, stating lack of verifiable evidence to support the claim. The assessee had also voluntarily disallowed 25% of the expenditure as personal. The Commissioner of Income Tax (Appeals) upheld the disallowance, leading to the appeal before the ITAT.

3. The ITAT observed that similar claims in earlier assessment years had been allowed by the first appellate authority. The speed-boat was considered a business asset, forming part of the fixed assets block. The ITAT noted that the speed-boat was used for professional activities, and the depreciation was claimed on its opening written down value. Considering these facts, the ITAT reversed the lower authorities' decision and allowed the appeal.

4. The Authorized Representative for the assessee reiterated that the speed-boat was used for professional purposes, while the JCIT-DR argued that the burden of proof lay with the assessee.

5. Ultimately, the ITAT found that the speed-boat was indeed used for professional activities, as evidenced by past approvals and the nature of the asset. The ITAT allowed the appeal, overturning the addition of expenditure on the speed-boat.

6. In conclusion, the ITAT allowed the appeal against the addition of expenditure on the speed-boat for the assessment year 2012-13.