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Case Law Details

Case Name : Span Air Pvt Ltd Vs ACIT (ITAT Delhi)
Appeal Number : ITA No. 2755/Del/2019
Date of Judgement/Order : 31/05/2023
Related Assessment Year : 2015-16
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Span Air Pvt Ltd Vs ACIT (ITAT Delhi)

Introduction: In a significant judgment, the Income Tax Appellate Tribunal (ITAT) Delhi has interpreted the phrase ‘used for the purposes of business’ to include assets ready for use but not actually put to use. The ruling came in the case of Span Air Pvt Ltd Vs ACIT, pertaining to the disallowance of a portion of depreciation under section 32 of the Income Tax Act.

Analysis: Span Air Pvt Ltd had claimed full depreciation on a vehicle purchased in 2014, which was ready for use in the first half of the financial year but registered in the second half. The Assessing Officer (AO), and later the Commissioner of Income Tax (Appeals), disallowed 50% of the depreciation on the grounds that the vehicle was registered after 180 days from the start of the financial year.

The ITAT, however, sided with the assessee, noting that the vehicle was purchased, insured, and ready for use well within the first half of the year. In support of its ruling, the ITAT referred to judgments by the Delhi High Court, which interpret the term ‘used for the purpose of the business’ in a broader sense, including both active and passive use of an asset.

Conclusion: The ITAT’s ruling in the Span Air Pvt Ltd Vs ACIT case expands the interpretation of ‘used for the purposes of business’ to cover assets ready for use but not necessarily in active use. This provides valuable guidance for businesses, particularly in terms of claiming depreciation on assets. This judgment further reinforces the need for a comprehensive understanding of the law and judicial precedents while dealing with taxation issues.

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July 2024