Company-funded assets: ITAT allows depreciation claim if reflected in balance sheet

The Assessee appealed against the disallowance of depreciation claimed on a car and TV owned by directors but used by the company. The ITAT held that if assets were funded by the company and reflected in its balance sheet, the company could be considered the de facto owner, allowing depreciation claims. The decision aligned with previous rulings, granting the Assessee's appeal for depreciation on the assets in question.

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Issues:
Claim for depreciation on assets owned by directors but used by the company.

Analysis:
The appeal was filed by the Assessee against the order of the Ld. CIT(A) VIII, New Delhi, for the assessment year 2007-08. The Assessing Officer disallowed the depreciation claimed by the assessee on a car and TV, as they were considered personal effects of the director and not used for business purposes. The Ld. CIT(A) upheld the disallowance based on the decision of the Hon'ble Allahabad High Court, stating that if an asset is not owned by the assessee, depreciation cannot be allowed. The appeal raised the question of whether depreciation should be allowed on assets used by the company but owned by the directors. The assessee argued that the company's funds were used to purchase the assets, which were also reflected in the company's books. Referring to a similar case, the assessee contended that the company should be considered the de facto owner of the assets. The Ld. ITAT considered the submissions and found that the assets, though in the director's name, were funded by the company and appeared in its balance sheet. Citing the decision of the Hon'ble Allahabad High Court in a similar case, the ITAT held that the Assessee was entitled to claim depreciation on the TV and car. As a result, the assessee's appeal was allowed.

In conclusion, the judgment resolved the issue of claiming depreciation on assets owned by directors but used by the company. The decision emphasized that if the company's funds were utilized for acquiring such assets, even if in the director's name, the company could be considered the de facto owner. This ruling aligned with previous decisions and allowed the Assessee's appeal, granting depreciation on the assets in question.

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