Vehicle Registered in the Director's Name but used for Company's Business Purposes: ITAT allows Depreciation [Read Order]

The Income Tax Appellate Tribunal ( ITAT ), Chennai, has recently, while deciding a group of appeals filed before it, held that depreciation is allowable on vehicle registered in the director’s name but used for the company’s own business.

The aforesaid observation was made by the Tribunal when five appeals were filed before it by the assessee M/s. Selva Ganesh Constructions Private Limited, wherein out of these five appeals of the Assessee, two appeals were arising out of two different orders of the Commissioner of Income Tax (Appeals) – 15, Chennai for the Assessment Years 2012 – 2013 and 2013 – 2014 in ITA No.218 & 219/2018-19/CIT(A)-15; dated 29.03.2019, and the other three appeals for the Assessment Years 2014 – 2015, 2015 – 2016 and 2016 – 2017 ,arising out of the order of the Commissioner of Income Tax (Appeals) – 15, Chennai in ITA No.220, 213 & 222/2018-19/CIT(A)-15; dated 29.03.2019.

The brief facts of the case being that the Assessing Officer had disallowed the motor vehicle expenses incurred by the assessee company for the  Assessment Year’s from 2012 -2017 on the ground that the registration certificate of the motor cars were held in the name of the individual directors, it was submitted by the Counsel for the assessee that although the motor vehicle are registered in the name of the Directors,  the said motor vehicles are shown in the books of the assessee Company and are appearing in the balance sheet as assets of the assessee Company.

It was claimed by the assesse that the said motor cars being used for the purpose of the business of the Assessee Company and the payment towards the purchase of the said cars being made by the Assessee Company, depreciation in respect of the same ought to be allowed.

Hearing the opposing contentions of both the sides and perusing the materials available on record, the Tribunal observed:

“The Assessee has now contended before us that the entire invoices and bills although are in the name of the Directors individually, the entire expenses, i.e. interest expenses, repair expenses and petrol expenses are borne by the Assessee Company, while on the other hand, the learned Senior Departmental Representative supported the orders of the lower authorities.”

“we noted that the cars were registered in the name of the Directors but the vehicles are used for the purpose of business of the Assessee Company and even the funds towards the purchase of the vehicles were provided by the Assessee Company and they have been shown as assets of the Assessee Company in the balance sheet and in the fixed asset chart for claiming depreciation.” The bench added.

Thus, drawing its conclusion by relying upon the earlier decision of the it’s Co-ordinate Bench, it concluded:

“In view of these facts, we are of the view that the Assessee is entitled for the claim of depreciation and other related expenses, but subject to the verification of the Assessing Officer. This issue has been considered by the Co-ordinate Bench of this Tribunal in the case of Edwise Consultants Private Limited Vs. The Deputy Commissioner of Income Tax, [2015] 44 ITR (Trib.) 236 (ITAT [Mum]), and respectfully following the Co-ordinate Bench’s decision, we direct the Assessing Officer to allow depreciation and other related expenses claimed by the Assessee.”

To Read the full text of the Order CLICK HERE

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