Case Law Details
Gold Finch Jewellery Ltd. Vs D.C.I.T. (ITAT Ahmedabad)
In the instant case, the depreciation claimed on the vehicles, i.e. cars and two-wheelers was disallowed by the AO on account of two reasons. Firstly, the assessee was not the owner of the assets, and secondly, the assessee failed to establish that the assets were used for the business. The learned CIT (A) subsequently confirmed the action of the AO.
Regarding the ownership of the assets, we note that the beneficial ownership vest with the assessee. It is because the payment was made for the purchase of the assets by the assessee though the assets were registered in the name of the directors of the company. Since this fact has not been doubted by any of the authorities below, therefore, we can safely presume that the assessee is the beneficial owner of the assets. In holding so we find support and guidance from the judgment of Hon’ble Supreme Court in the case of Mysore minerals Ltd. vs CIT reported in 239 ITR 775 wherein it was held as under:
“13. An overall view of the abovesaid authorities show that the very concept o f depreciation suggests that the tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset, is utilizing the capital asset and thereby loosing gradually investment caused by wear and tear, and would need to replace the same by having lost its value fully over a period of time. ”
The 2nd dispute relates whether the assets were used for the business. Indeed it is one of the pre-condition to claim the depreciation on the assets that it should be used for the business. The allegation of the authorities below is that the assessee failed to substantiate its case by filing the documentary evidence suggesting that these assets were used for the business. In this regard, we note that the assessee has claimed other expenses in connection with the vehicle as discussed above. These expenses are like interest on a car loan, petrol expenses, repair and maintenance expenses etc. The necessary details of such expenses are available in the financial statements placed on page 97 in the paper book. It is undisputed fact that these expenses have not been disallowed. Thus, it can be transpired that the Revenue has admitted these expenses incurred by the assessee for the business. Thus in our considered view, we find that the authorities below have made the addition on account of depreciation without the application of mind. Accordingly, we hold that the disallowance on account of depreciation made by the Revenue is not sustainable.
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