The Income Tax Appellate Tribunal (ITAT), Pune Bench, has recently, in an appeal filed before it, while setting aside the disallowance of vehicle expenses incurred, held that the use of vehicles by directors / employees as per the terms and conditions of employment, is not personal use.
The aforesaid observation was made by the Pune ITAT, when an appeal was preferred before it by the assessee, as against the order passed by the CIT(A) in National Faceless Appeal Centre, Delhi, under section.250 of the Income-tax Act, 1961, in relation to the assessment year 2017-18.
The only issue assailed in this appeal being the confirmation of disallowance of car expenses incurred by the assessee, a Private Limited company, towards the personal use by the two Directors, the brief facts of the case were that the assessee had two vehicles appearing in its balance sheet, which were used by the Directors for the business purpose, and the assessee claimed deduction of depreciation, interest and maintenance amounting to Rs.10,88,998/- on these vehicles.
In the absence of the assessee furnishing the log books, the AO made disallowance at 15% of total expenses, which worked out to Rs.1,51,350/-. And the CIT(A) affirmed the disallowance, thus leaving the assessee with the only option of approaching the Pune ITAT.
Hearing the contentions of both sides as presented by Shri Sarvesh Khandelwal, on behalf of the assessee, and by Ms. Neha Deshpande, on behalf of the Revenue, the ITAT Panel of R.S Syal, the Vice- President, thus held:
“I fail to see any rationale in disallowing the expenses incurred on cars as for personal use, when admittedly these have been provided to director-employees. A company is a separate legal entity distinct from its directors or employees. As such, there can be no question of treating the use of vehicles by the directors/employees as a personal use by the company. I, therefore, order for the deletion of disallowance of expenses incurred on vehicles.”
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