Vehicle registered in the name of Company Director Eligible for Deduction: ITAT [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Ahmedabad bench has held that the Company is eligible to get the deduction in respect of the vehicles registered in the name of its Director. The bench further clarified that the deduction is allowable for the car used for personal use of the Director of the Company treats the same as Business Expenditure.

The assessee, a Private Limited Company, engaged in the business of manufacturing, trading, and export of dyes and dyes intermediates, claimed the deduction of depreciation and vehicle expenses amounting Rs. 8,80,932/- and Rs. 4,09,830/-.

However, the claim was rejected by the Assessing Officer on the ground that the vehicles were registered in the individual name of the Directors. But the assessee claimed the depreciation and the vehicle expenses in its income-tax return. However, the Assessing Officer was of the view that the assessee cannot claim depreciation in respect of such vehicles registered in the name(s) of the directors. He also observed that The Assessing Officer also observed that the personal use of the vehicle could not be ruled out.

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Allowing the contentions of the assessee, the Tribunal observed that the assessee was a limited company and, hence, it could act through its directors only.

“Thus, if cars were used by the directors for their personal use also, the same could be added to the income of the directors as perquisite but insofar as, the assessee-company was concerned the entire expenditure was for its business as the directors were appointed to look after the business of the assessee-company. Hence, no disallowance could be made in the hands of the assessee-company on account of personal use of directors. Accordingly, there cannot be any element of personal use.”

Thus, if cars were used by the directors for their personal use also, the same could be added to the income of the directors as perquisite but insofar as, the assessee-company was concerned the entire expenditure was for its business as the directors were appointed to look after the business of the assessee-company.