Partnership Firm Can Claim Depreciation on Motor Vehicle Even if Registered in Partner's Name: ITAT [Read Order]

The Ahmedabad bench of the Income Tax Appellate Tribunal (ITAT) has held that the name of the partner in which a motor vehicle is registered is not relevant for the purpose of claiming depreciation on the vehicle. The ITAT ruled that the important factor is that the vehicle is purchased with the funds of the partnership firm and is used exclusively for the business purposes of the firm.

The assessee is a partnership-based business. The assessee acquired a car for professional use. The vehicle was purchased in the name of the Karta of HUF, who was also a working partner in the firm. Due to the fact that the car was not acquired using partnership company funds, the Assessing Officer denied the claim of depreciation on the vehicle. The assessee challenged the order in the ITAT.

The assessee stated that the motor vehicle was bought using partnership company funds and was only utilized for the firm's commercial needs. Additionally, the assessee claimed that the partnership company owned the car outright and that the partner's name was simply used on the registration paperwork for convenience.

The Assessing Officer contended that the partnership firm lacked ownership rights over the car and that the vehicle was not acquired using partnership business cash. The Assessing Officer also argued that the vehicle's registration in the partner's name was substantial evidence that the partnership company did not actually own it.

The Tribunal observed that the treatment provided by the partnership firm to the new motor vehicle acquired as well as the old motor vehicle sold plainly demonstrated that the partnership firm's finances were utilized for the acquisition of the aforementioned motor vehicle and the car was only ever utilized for the partnership firm's commercial purposes.

A Single Bench Member Suchitra Kamble (Judicial Member) allowed the appeal of the assessee and restored the claim of depreciation on the vehicle. The Tribunal held that the mere fact that the vehicle was registered in the name of the partner did not deny the partnership firm the depreciation on the said vehicle.

To Read the full text of the Order CLICK HERE

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