Dominion Ownership of Car Rest with the Assessee: ITAT rules that Assessee is Eligible for Depreciation of Cars [Read Order]

The Ahmedabad Bench of Income Tax Appellate Tribunal ( ITAT ) has held that if dominion ownership of car rest with the assessee, the assessee is eligible for depreciation of cars.

The appellant, Shivam Water Treaters Pvt. Ltd., engaged in the business of manufacturing & marketing of water treatment plants and parts. The appellant in the year under consideration has purchased 5 cars which were claimed to be registered in the name of the directors.

The AO in the ledger of the cars found that the appellant has shown payment against the purchase of the cars but failed to supply the copy of the invoice for the purchase. The AO based on the absence of the supporting documents, disallowed the hundred percent depreciation claimed by the appellant on 3 vehicles namely Audi A-6, INNOVA and SONATA car amounting to ₹ 5,03,490/- and added to the total income of the appellant. With respect to the remaining cars the appellant has failed to furnish the logbook, the AO made a disallowance of 20% of the depreciation amounting to ₹3,68,655/- and added to the total income of the appellant. Aggrieved appellant preferred an appeal before CIT-A and it confirmed the order of AO. Hence the appellant is before ITAT.

The Tribunal further observed that the documents with respect to Audi A-6, INNOVA and SONATA car are not legible and hence the issue with respect to the depreciation for the cars as discussed above namely Audi A-6, INNOVA and SONATA car needs to be reconsidered by the AO for fresh adjudication as per the provisions of law. The Tribunal further submitted that the depreciation is an allowance and not an expenditure which has to be allowed in pursuance to the provisions of section 32 of the Act irrespective of its use by the director or the company. The Coram of Sri Waseem Ahmed, Accountant Member and Sri T.R. Senthil Kumar, Judicial Member, has held that “there is no dispute to the fact that all the cars were purchased in the name of the directors but the payment was made through the assesse company. Thus it is transpired that the legal ownership though vest with the individual directors but the Dominion ownership rest with the assessee. For the reason that, the assessee has made the payment for the purchase of the car from its books of accounts. Therefore the assessee is very much eligible for depreciation on these cars”.

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