The Delhi bench of the Income Tax Appellate Tribunal (ITAT) has held that the element of personal use has a significant role to play while granting depreciation on any vehicle under Section 32 of the Income Tax Act, 1961.
The assessee engaged in the business of contractor for Mahanagar Telephone Nigam Limited. The Assessing Officer noted that the assessee had claimed expenses of Rs.5,42,015/- and on account of depreciation of Rs.4,90,928/-. The AO for want of logbook made disallowance of 1/5th of the said expenses to prevent the revenue leakage against personal use of vehicle and accordingly made an addition of Rs.2,06,589/-. Further, the AO noticed that the assessee had debited telephone expenses to the extent of Rs.1,35,211/- in the P&L A/c. Since the assessee did not maintain any personal telephone call register for partners/employees, therefore, in order to prevent leakage of Revenue on account of personal use, he disallowed 1/5th of these expenditures, amounting to Rs.27042/- u/s 37(1).
The first appellate authority upheld the addition of Rs.5 lakhs on account of purchase of material and reduced the disallowance of vehicle expenses and telephone expenses by 50%.
The Tribunal observed that the depreciation of Rs.49093/- is included in it. “The depreciation is fixed expenditure in nature whether it is used exclusively for the business or partially for personal use. Thus, the element of some personal use has no role to play while granting depreciation on vehicle. Therefore, the assessee deserves deduction of depreciation of Rs.49,093/- and rest of the addition deserves to be sustained for want of proper verification. In respect of telephone expenditure, the CIT(A) has rightly dealt with this issue and there is no justification to interfere with the same,” the Tribunal said.
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