Depreciation Claim allowable on Vehicle used Commercially for Business Purpose: ITAT [Read Order]

The Ahmedabad Bench of the Income Tax Appellate Tribunal ( ITAT ) determined that a vehicle exclusively used by a business entity qualifies for depreciation claims.

The panel that if a car is employed for commercial purposes related to the company's operations, depreciation cannot be denied. Furthermore, the department allowed deductions for car loan interest and insurance costs.

The case involved the appellant seeking depreciation benefits for an Audi Q7 purchased by the company's director, Devkinandan Gopiram Agarwal.

The issue revolved around proving the car's use for business, with the company asserting that it was indeed used for business purposes, as recorded in its books.

However, the claim for depreciation was rejected because the car was registered under the director's name, not the company's, and lacked sufficient evidence to prove exclusive business use. Consequently, the depreciation claim of Rs. 11,75,823/- at a rate of 15% was disallowed.

It was noted that, “purchase of a car was made by the appellant company which is also reflected in the books of account of the appellant company and therefore it can be well said that the car is

commercially used for the purpose of business of the company and the depreciation thereon cannot be denied; moreso, the interest on car loan and car insurance was allowed by the department.”

In a matter where depreciation and other car-related expenses were denied because the car was registered under directors' names, not the company's, leading to the conclusion that the asset did not belong to the company, facts being similar to the appellant’s case,  by the Jurisdictional High Court in the case of PCIT vs. Asian Mills (P.) Ltd, the same ratio was applied here.

In a nutshell, the Tribunal Bench, comprising Waseem Ahmed ( Accountant Member ) and Madhumita Roy (Judicial Member) observed that the car's purchase was indeed by the appellant company, as evidenced in the company's financial records.

To Read the full text of the Order CLICK HERE

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