2024 (12) TMI 908 - AT - Income Tax

Claim of depreciation on car (tangible asset) - denial of claim as car was in the name of assessee s husband - HELD THAT -Assessee may be treated to be the owner of the car, purchased in the name of her husband but funded by assessee s proprietorship concern. The first ingredient of section 32 of the Act, is therefore existing in favour of the assessee. Second ingredient of section 32 of the Act, assessee has to show that the car, purchased in the name of assessee s husband, was used for the purpose of assessee s business either wholly or partly. Learned assessing officer has mentioned in his order that the assessee could not lead any evidence such as log book, date of travel, distance travelled etc. of the car to show the travel undertaken. The same is the position before first appellate authority. Appellant assessee as an individual is at the command of her sole proprietor business. The decision-making rests in the assessee herself. The assessee, being the exclusive owner of the business, straight forward tax structure of direct and simple taxation has to be followed in respect of assessee s business income which is reported on the assessee s tax return. Since there is no legal requirement of discloser of financial information publicly, business activities and financial records can remain confidential giving certain level of discretion to the assessee as a sole proprietor of her business concern, the assessee should have been more careful in preserving the evidence by way of maintaining a log book or by documenting the terms and conditions with her husband with respect to the use of car for the purpose of assessee s business. The allowance of motor car expenses, insurance paid, etc. u/s. 37 of the Act, cannot automatically entitle assessee for the depreciation u/s. 32 of the Act as both the sections are mutually exclusive. The assessee has thus failed to prove that the car was used for the purpose of assessee s business wholly or in part. Assessee is thus not entitled for the claim of depreciation u/s. 32 of the Act - Decided against assessee.

Issues:
Assessee's claim of depreciation on a car purchased in the name of her husband for business purposes.

Detailed Analysis:

Issue 1: Claim of Depreciation
The appeal was filed against the order confirming the disallowance of depreciation on a car purchased by the assessee in her husband's name for business use. The assessing officer disallowed the claim stating the car was not owned by the assessee and was not used for business purposes. The CIT(A) upheld this decision.

Issue 2: Legal Arguments
The appellant argued that despite the car being in her husband's name, she funded its purchase and used it for business. Citing various case laws, the appellant contended she should be entitled to depreciation. The revenue supported the impugned order.

Issue 3: Ownership and Usage Requirement
For depreciation under section 32 of the Income Tax Act, the assessee must prove ownership and usage of the tangible asset for business. The car was bought with the assessee's funds but registered in her husband's name. The assessing officer and CIT(A) found the car was not owned or used for business by the assessee.

Issue 4: Case Law Analysis
The case laws referred by the assessee establish ownership rights for depreciation even if the asset is not registered in the assessee's name but used for business. However, the lack of evidence such as logbooks or travel records for business use of the car weakened the assessee's case.

Issue 5: Lack of Evidence
The assessing officer noted the absence of evidence like logbooks or travel details to prove business use of the car. The lack of documentation regarding the terms of use between the assessee and her husband was detrimental to the assessee's claim.

Issue 6: Decision
The tribunal found the assessee failed to demonstrate the car's usage for business purposes, essential for claiming depreciation. As the assessee could not provide sufficient evidence, the claim for depreciation was denied. The appeal was dismissed in favor of the revenue.

In conclusion, the tribunal ruled against the assessee's claim of depreciation on the car due to insufficient evidence of business usage, despite ownership arguments. The judgment emphasized the importance of maintaining proper documentation to substantiate claims for tax benefits.

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