ITAT quashes Disallowance of Car Expenses Incurred for  Personal Use of Directors of  Private Company [Read Order]

The Pune bench of Income Tax Appellate Tribunal (ITAT) has recently quashed disallowance of car expenses incurred for personal use of directors of  private company.

The Assessee Pushpak Steel Industries Private Limited, had two vehicles appearing in its balance sheet, which were used by the Directors for the business purpose. The assessee claimed deduction of depreciation, interest and maintenance on these vehicles.

In absence of the assessee furnishing the log books, the Assessing Officer made the disallowance at 15% of total expenses.

Aggrieved by the order, the assesssee filed an appeal before the CIT(A), who confirmed the order. Thereafter the assessee filed a second appeal before the tribunal.

The major reason submitted by the AO for disallowing the expenses incurred on cars is the personal use of vehicles by the directors-employees of the company.

Further the tribunal observed that the user of vehicles by the employees of the company couldn't  even be considered as a non-business user.

There can be no disallowance of depreciation or other expenses on maintenance of the vehicles used by the directors/employees by treating it as personal user or non-business user of the company.

Therefore, the single  member  bench  of R.S. Syal, (Vice President) observed that the company is a separate legal entity distinct from its directors or employees hence there is no question of treating the use of vehicles by the directors/employees as a personal use by the company.

Sarvesh Khandelwal , counsel appeared for the assessee . Neha Deshpande counsel appeared for revenue.

To Read the full text of the Order CLICK HERE

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