Depreciation on vehicles cannot be disallowed merely because vehicles been registered in the name of partner

ACIT vs. Gopal Fabrics (ITAT Ahmedabad) 

AO while making this disallowance has observed as under:

6. Disallowance of Claim of Depreciation:

On perusal of the submitted details, it is noticed that the assessee has claimed depreciation on motor vehicles amounting of Rs.2,93,169/- in the year under consideration, but during the course of assessment proceeding the assessee has produced bills and proof of purchase of the assets and it is seen from the details furnished by the assessee the vehicles are registered in the name of partners and it is used by the form even though the vehicles are at the disposal of the firm the legal ownership is with the partners only. Therefore the depreciation claimed by the assessee has to be disallowed considering the ownership not belonging to the assessee. During the course of hearing, the assessee has furnished a sales invoice of, for purchase of a Hundai Getz asking Rs.4,51,900/- which is in the name of Paresh kumar Ratilal shah [partner of the firm].

The car was registered in the name of the partner of the firm and hence assessee cannot be considered as the legal owner of the vehicle. The “ownership” in the legal context means that the asset, under consideration, should be bought and registered in the name of the assessee, then only it would qualify the “Ownership” aspect. While dealing with the similar issue, the territorial jurisdictional High Court in the case of CIT Vs Bordubi Rice Mills, reported in 105 ITR 739, has held that in the eyes of law, there cannot be more than one owner for different purpose. Under such circumstances, the depreciation cannot be allowed in the firm’s case, when the car was registered in the name of the partner. While following the above ruling and considering the fact that since the car was bought and registered in the name of one of the partner, thus for all legal and practical purposes, the ownership of the same was bestowed with the partner only and, therefore, it cannot be claimed as assessee ‘s own assets under the IT Act. Since the assessee has failed to qualify one of the basic criteria to claim the depredation, stipulated u/s 32 of the Act. Therefore, the depreciation claim of Rs. 2,93,169/- made on account of car purchased in the name of partner is disallowed and added back to the total income of the assessee. Penalty, proceeding u/s 271(1)(c) for furnishing in accurate particulars and concealment of Income.”