2024 (2) TMI 1236 - AT - Income Tax

Depreciation on car purchased in the name of the Director - depreciation @15% claim has been disallowed as asset could not be said to be of the company - However, AO allowed deductions for interest on car loan and insurance expenses. - HELD THAT - As the purchase of a car was made by the appellant company which is also reflected in the books of account of the appellant company and therefore it can be well said that the car is commercially used for the purpose of business of the company and the depreciation thereon cannot be denied; more so, the interest on car loan and car insurance was allowed by the department. Thus, we find that the appellant s case is squarely covered in the case of PCIT vs. Asian Mills (P.) Ltd. 2021 (12) TMI 365 - GUJARAT HIGH COURT following the judgment passed in the case of Mysore Minerals Ltd 1999 (9) TMI 1 - SUPREME COURT we allow depreciation in accordance with law. Appeal of assessee is allowed.

Summary

Issues involved: Disallowance of depreciation on car purchased in the name of the Director for Assessment Year 2017-18.

Summary:
The appeal was filed against the order disallowing depreciation on a car amounting to Rs. 11,75,823/-, purchased in the name of the Director of the assessee company. The issue revolved around whether the car was used for the business of the company, as it was not purchased in the name of the company. The appellant contended that the company was the practical owner of the vehicle and had dominion over it, justifying the depreciation claim. Reference was made to relevant case laws to support this argument.

The First Appellate Authority was informed that the funds for the car were from the company, and the vehicle was considered an asset of the company. It was argued that the car was exclusively used for business purposes, warranting the depreciation claim. The Assessing Officer (AO) mentioned that interest on car loan and insurance expenses were allowed, indicating no grounds for disallowing depreciation. Reference was made to a judgment by the Jurisdictional High Court to support this stance.

After considering the arguments and relevant judgments, the Tribunal found that the car was purchased by the company and used for business purposes, aligning with the decision in a similar case by the Jurisdictional High Court. The appeal was allowed, directing the AO to allow depreciation as per the law. The Tribunal's decision was based on the ownership and commercial use of the car by the company, in line with legal interpretations provided by higher courts.

This Order was pronounced on 23/02/2024.