Trucks Registered in Partners’ Names Still Eligible for Depreciation: ITAT Upholds Relief to Surat Road King in Income Tax Appeal [Read Order]

The bench of the Income Tax Appellate Tribunal, Mumbai, held that depreciation on trucks registered in the names of partners but purchased and used by the partnership firm is allowable, thereby upholding the relief granted to Surat Road King by the Commissioner of Income Tax (Appeals) [CIT(A)] in an income tax assessment dispute.

The case arose from the assessment of Surat Road King, a partnership firm engaged in providing transport services, for the Assessment Year 2014–15. The firm filed its return declaring an income of ₹4,12,07,910. During scrutiny, the Assessing Officer disallowed depreciation of ₹4,61,09,712 on trucks under Section 32 of the Income Tax Act, 1961 , citing that the vehicles were registered in the name of the partners and not the firm, and further disallowed one-third depreciation on a home theatre and motor car on the presumption of personal use.

On appeal, the CIT(A) held that the firm had purchased the trucks, recorded them in its block of assets, and paid for them, including financing costs, thereby justifying depreciation. The CIT(A) also deleted the adhoc disallowance of depreciation on the home theatre and car due to lack of supporting evidence.

Aggrieved by the order, Revenue filed an appeal before the Tribunal.

Representing the Assessee, Ramesh Malpani argued that the trucks, though registered in the partners’ names, were acquired and financed by the firm and consistently used in its transport business, thus eligible for depreciation. Reliance was placed on judicial precedent of the Supreme Court’s ruling in Mysore Minerals Ltd. v. CIT(1999), which widened the meaning of “ownership” for depreciation purposes.

Representing the Revenue, Bhangepatil Pushkaraj Ramesh contended that since the vehicles were not registered in the firm’s name, it could not claim depreciation. Reliance was placed on judicial precedent of a coordinate bench ruling in Edwise Consultants Pvt. Ltd.(2013) to justify the disallowance, and supported the adhoc addition on the home theatre and car.

The Bench comprising of Vice President, Saktijit Dey and Accountant Member, Narendra Kumar Billaiya upheld the Commissioner’s order, holding that ownership for depreciation under Section 32(1) of the Income Tax Act, 1961 extends to those who have invested in and used the asset, regardless of registration.

It was further noted that the reliance on Edwise Consultants Pvt. Ltd.(supra) by the Revenue was misplaced, as the decision had been overruled in a subsequent tribunal ruling.

On the disallowance of depreciation for the home theatre and motor car, the bench observed that additions based on mere presumptions and without supporting evidence cannot be sustained.

The tribunal placed reliance on the Supreme Court judgment in Mysore Minerals Ltd. v. CIT (supra), which clarified that the tax benefit of depreciation belongs to the party who bears the cost of the asset and uses it for business, even if registration is in another’s name.

Accordingly, ITAT upheld the order of CIT(A).

Consequently, the appeal filed by the Revenue was dismissed.

Support our journalism by subscribing to Taxscan premium. Follow us on Telegram for quick updates