• Jul
  • 03
  • 2009

Can Assessee claim Depreciation on car Registered in the name of its partners or directors?

Posted In Income Tax | 5 Comments » Print Friendly and PDF

Introduction

‘What’s in a name? That which we call a rose by any other name would smell as sweet.’ This Shakespearean quote seems to have inspired as many as five High Courts to hold that the Income-tax Department cannot refuse the claim for depreciation on a vehicle owned by a company or a firm, on a mere ground that it is not registered in its name, but stands in the name of its director or partner. Interestingly, there is no decision of any court or the Tribunal that has taken a contrary view on the subject.

Section 32 of the Income-Tax Act, 1961

Section 32 of the Income-Tax Act, 1961 entitles a taxpayer to claim depreciation at prescribed rates for assets owned and used by the taxpayer for assets owned and used by the taxpayer for assets owned and used by the taxpayer for purposes of his business or profession. In case of a vehicle such as a motor car, it is common to come across cases where the car is registered under the Motor Vehicles Act in the name of a partner or a director (since it is a lot more economical to do so), though the same has actually been purchased by a firm or company out of its own funds, or if acquired through borrowed funds the loan is repaid along with interest by the firm or company. 

Relevant Case-Laws

In CIT v. Salkia Transport Associates [1983] 143 ITR 39/13 Taxman 191 (Cal.), CIT v. Nidish Transport Corpn. [1910] 185 ITR 669/[1989] 44 Taxman 351(Ker.), CIT v. Dilip Singh Bagga [1993] 201ITR 995/[1994] 77 Taxman 66(Bom.), CIT v. Navdurga Transport Co. [1999] 235 ITR 158 (All.) and CIT v. Basti Sugar Mills Co. Ltd. [2002] 257 ITR 88/123 Taxman 693 (Delhi), it has been clearly and consistently held that mere non-registration of a vehicles in the name of the company or firm under the Motor Vehicles Act cannot disentitle it in regard to its claim of depreciation, when the facts on record are undisputed that such company or firm has in fact made the investment in purchase of the vehicle and such vehicle is being used for its business. The requirement of section 32 is that the vehicle must be owned by the taxpayer and not that the taxpayer must be a ‘registered owner’ of the same under the Motor Vehicles Act.

For arriving at the above conclusion, various High Courts and the Tribunals on the above issue have also usefully relied upon the ratio of the Supreme Court in the case of Mysore Minerals Ltd. V. CIT [1999] 239 ITR 775/106 Taxman 166, wherein the Apex Court has held that the term ‘owned’ under section 32 must be assigned a wider meaning. In the case before the Supreme Court, although a building was formally not registered in the name of the taxpayer through execution of a conveyance deed, the Court held that since the taxpayer had actually invested in the asset and was utilizing the same and thereby incurring loss on account of wear and tear of such asset, it was entitled to claim depreciation in respect of the same.


5 Responses to “Can Assessee claim Depreciation on car Registered in the name of its partners or directors?”

  1. SWATY says:

    in a partnership firm , one partner purchase a car in his personal name and payment of the same is done by himself but that car is used in partnership firm for business purpose, can firm show this car in his accounts and claim depreciation also… pls guide

  2. gaurav says:

    can company claim interest on loan as deduction if the loan is in name of company but the car is in name of director?

  3. r.rajkumar says:

    in a private company the staffmembsers provide motor cycles the company take the motor cycle on company name and given to staff member for comuting and personal usage. the caompany payback the loan on ;monthly to bank and recover 50% of cost of the loan as deposit from staff. once the loan is over the hp canceled and tdransfered to staff member. can the company claim depreciation for motor cycle . the motor cycle is carring white boad. .tks

  4. Motor buses, motor lorries and motor taxis used in a business of running them on hire: -depreciation at 30 per cent.
    If acquired b/w 01.01.2009 to 30.09.2009 then the depreciation om the same can be claimed at the higher rate of 50%.

  5. shital says:

    can we get
    higher rate of deprecation
    on assets used in transport line

    let me know the position

    please help

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