Use of Car for Business and Personal Purpose: ITAT restricts Depreciation to 15% [Read Order]

Considering the fact that the car was used by the owner of the Company for both business and personal purposes, the Pune bench of the Income Tax Appellate Tribunal (ITAT) has restricted the depreciation claim to 15% under section 32 of the Income Tax Act, 1961.

The assessee, Jaykumar Mangilal Nagori, filed his income tax return claiming depreciation on motor car amounting to Rs.8,65,503/-; interest on motor car loan at Rs.3,33,915/- and conveyance expenses at Rs.37,050/-. After verifying the documents, the AO disallowed 30% of car depreciation, interest on such car loan and conveyance expenses.

After hearing arguments from both sides, Shri R.S. Syal, Vice President observed that “it is indisputable that the assessee could not lead any evidence to demonstrate that the user of the car was restricted only to business purposes and did not percolate for personal use. Even the auditor has also mentioned that the personal element in vehicle expenses could not be ignored. This shows that the car was partly used for business and partly for personal purpose. In such circumstances, disallowance of some percentage of the expenses in connection with the running of car is warranted. Keeping into consideration the peculiarity of the facts and circumstances of case under consideration, I am of the considered opinion that the ends of justice would meet adequately if the disallowance is restricted to 15% of such expenses and allowance instead of 30% as sustained in the first appeal. I order accordingly.”

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