2024 (12) TMI 908 - AT - Income Tax

Proprietorship firm denied depreciation on motor car due to lack of business use documentation under section 32

Sadhana Nayyar Versus Income Tax Officer, Ward- 26 (2) (1), Mumbai

Sadhana Nayyar Versus Income Tax Officer, Ward- 26 (2) (1), Mumbai - TMI 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 DepreciationThe 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 ArgumentsThe 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 RequirementFor 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 AnalysisThe 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 EvidenceThe 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: DecisionThe 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.