Company entitled to depreciation on car purchased in director's name for business use ITAT Ahmedabad allowed the assessee's appeal regarding depreciation on a car purchased in the director's name. The AO had disallowed 15% depreciation ...
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Company entitled to depreciation on car purchased in director's name for business use
ITAT Ahmedabad allowed the assessee's appeal regarding depreciation on a car purchased in the director's name. The AO had disallowed 15% depreciation claiming the asset didn't belong to the company, while allowing interest and insurance deductions. The Tribunal held that since the car purchase was recorded in company books and used for business purposes, depreciation cannot be denied. The decision was supported by precedents from Gujarat HC in Asian Mills case and SC in Mysore Minerals Ltd case, establishing that commercial use justifies depreciation claims.
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.
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