2025 (2) TMI 1373 - AT - Income Tax

Depreciation on trucks not registered in assessee's name upheld; ad hoc personal-use disallowance rejected in tax appeal

Depreciation was allowed for trucks recorded in the partner's name because the firm paid purchase consideration, used the assets in its business and ... Depreciation in respect of Block of assets - depreciation claimed on Trucks - vehicles were not registered in the name of assesses firm BUT in the name of partner - CIT(A) allowed dedpreciation as convinced that the assessee has been using these trucks regularly and the same form a part of its own balance sheet and block of assets and purchase consideration was paid by the assessee firm and also the interest on the financing of these trucks - AO in the assessment further disallowed 1/3rd depreciation in respect of home theater and motor car on estimate basis, on the ground of personal usage cannot be ruled out. CIT(A) was of the opinion that the AO has not brought anything on record to show that home theatre or the vehicle were used for personal usage. The ld. CIT(A) also deleted the adhoc disallowance made by the AO. HELD THAT:- The Hon’ble Supreme Court in the case Mysore Minerals Ltd. [1999 (9) TMI 1 - SUPREME COURT] has held that term ‘owned’ in Section 32(1) has a wider meaning. Tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset is utilizing the capital asset and thereby losing gradually investment caused by wear and tear, even if the registration of the asset may not have been completed in his name. The ld. CIT(A) has followed the decision of the Hon’ble Supreme Court, we, therefore do not find any reason to interfere with the findings of the ld. CIT(A). This grievance is dismissed. 1/3rd disallowance is made on adhoc basis and on presumption that the personal usage of home theatre and car cannot be ruled out. The additions cannot be made on presumptions and surmises that too on adhoc basis. We, therefore, do not find any reason to interfere with this finding of the ld. CIT(A) also. Accordingly, the effective ground/s raised by the revenue stand dismissed. Issues: (i) Whether the Tribunal should sustain deletion of addition of depreciation claimed on trucks where vehicles were registered in the name of a partner but reflected in the firm's block of assets; (ii) Whether the Tribunal should direct following of a Coordinate Bench decision relied upon by the revenue; (iii) Whether the Tribunal should sustain deletion of adhoc 1/3rd disallowance of depreciation on home theatre and motor car on presumed personal usage.Issue (i): Deletion of addition of depreciation on trucks registered in partner's name but claimed by the firm.Analysis: The legal question concerns who is entitled to depreciation under Section 32(1) where registration is not in the firm's name. The Tribunal examined whether the firm had invested in, used and borne financing and purchase consideration for the vehicles and whether the trucks formed part of the firm's balance sheet and block of assets. Reliance was placed on the principle that ownership for depreciation purposes may be wider than legal registration, including beneficial ownership where the firm has borne the cost and uses the asset.Conclusion: In favour of Assessee. The deletion of the depreciation disallowance on trucks is upheld.Issue (ii): Whether a Coordinate Bench decision relied upon by the revenue must be followed.Analysis: The Tribunal considered whether the relied-upon Coordinate Bench authority remained binding and whether subsequent Coordinate Bench decisions had overruled it. The Tribunal applied the controlling judicial principle and examined subsequent decisions bearing on the same point.Conclusion: The Tribunal did not follow the relied-upon earlier Coordinate Bench decision and dismissed the grievance based on intervening authority and applicable precedent favourable to the assessee.Issue (iii): Deletion of adhoc 1/3rd disallowance on home theatre and motor car for presumed personal use.Analysis: The Tribunal reviewed whether the assessing officer produced evidence to show personal use and whether an adhoc addition based on presumption was permissible. The Tribunal applied the standard that additions cannot rest on mere surmise or adhoc assumptions absent material indicating personal use.Conclusion: In favour of Assessee. The adhoc 1/3rd disallowance is deleted.Final Conclusion: The appeal by the Revenue is dismissed; the Tribunal upholds the deletion of the disputed depreciation additions and the adhoc disallowance, applying the wider concept of ownership for depreciation and requiring concrete evidence for personal-use disallowances.Ratio Decidendi: For depreciation under Section 32(1), entitled claimant is one who has invested in and utilises the capital asset (beneficial ownership) notwithstanding registration not being in the claimant's name; additions for personal use require material evidence and cannot be made on mere ad hoc presumptions.