Case Law Details
Vinod Textiles Vs ACIT (ITAT Ahmedabad)
Introduction: The case of Vinod Textiles vs ACIT (ITAT Ahmedabad) centers on the claim of depreciation for a motor vehicle registered in a partner’s name within a partnership firm. The Income Tax Appellate Tribunal (ITAT) Ahmedabad evaluates whether a partnership firm can avail of depreciation on a motor vehicle that is purchased and registered in the name of one of its partners.
Analysis: In this case, Vinod Textiles, a partnership firm, filed an appeal against an order passed by the Commissioner of Income-tax (Appeals) [CIT(A)] for Assessment Year 2017-18. The grounds of appeal included challenges to the disallowance of depreciation and the disallowance of remuneration paid to a Hindu Undivided Family (HUF) partner.
The Assessing Officer disallowed the claim of depreciation on a motor vehicle because it was registered in the name of a partner and the proof of purchase was also in that partner’s name. However, the firm contended that the vehicle was exclusively used for business purposes and the funds of the partnership were used for its purchase.
The ITAT analyzed the treatment of the motor vehicle in the firm’s financial records, including the Profit and Loss account, balance-sheet, bills, invoices, and ledger account of the vehicle. The Tribunal concluded that even though the vehicle was registered in a partner’s name, it was purchased for the business purpose of the firm, and the firm’s funds were used for its acquisition. As a result, the Tribunal found the disallowance of depreciation unjustifiable.
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