The Kolkata bench of the Income Tax Appellate Tribunal (ITAT)has recently ruled that a higher rate of depreciation cannot be granted to the vehicles used for the display of advertisement under the provisions of the Income Tax Act, 1961.
The assessee, an individual who is engaged in the business of advertisement through the display of banner, hoardings and mobile van, filed an income tax return for the relevant year where his claim for the higher rate of depreciation, i.e., 40% for the vehicles used for the display of advertisement was allowed by the Assessing Officer.
Later, the original assessment was revised by the Commissioner of Income Tax invoking his revisional jurisdiction under section 263 of the Act finding that the decision for allowing the claim was an error prejudicial to the interest of the revenue. He accordingly, directed the AO to make the assessment afresh on the issue of correct rate of depreciation allowable on hoardings and mobile display cars after making a necessary inquiry.
Allowing the contentions of the Revenue, the Tribunal observed that the depreciation at a higher rate is allowed on the motor vehicle only if it is used by the assessee in the business of running the same on hire.
“Keeping in view the nature of the assessee’s business, I am of the view that the vehicle used for the display of advertisement cannot be said to have used in the business of running the same on hire and the assessee, therefore, is not entitled to a higher rate of depreciation on such vehicles. I, therefore, uphold the impugned order of the Ld. CIT(A) confirming the disallowance made by the AO on account of assessee’s claim for depreciation at a higher rate on the vehicle,” the Tribunal said.
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