Co. entitled to Dep. & exp. on maintenance of sports car purchased for commuting key managerial personnel’s: ITAT

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Co. entitled to Dep. & exp. on maintenance of sports car purchased for commuting key managerial personnel’s: ITAT

 

 

ITAT Mumbai in the case of Silver Spark Apparel Ltd. v. DCIT – [2023] 147 , 500 (Mumbai – Trib.) has held that Co. entitled to Dep. & exp. on maintenance of sports car purchased for commuting key managerial personnel’s. Let us have a short overview of the case as under:

Assessee, a private limited company, filed its return of income for the relevant assessment year. For the year, the assessee’s case was selected for scrutiny.

During proceedings, the Assessing Officer (AO) noticed that assessee purchased a sports car and claimed deduction for depreciation and maintenance expenses for the same.

The AO contended that the sports car was used primarily for car racing activities. The requirement of such a car in the case of the assessee, being a unit engaged in manufacturing suits and trousers, cannot be considered wholly and exclusively necessary for the purpose of the business.

He disallowed the deduction for depreciation and maintenance expenses.

Aggrieved by the order, the assessee preferred an appeal to CIT(A). CIT(A) upheld the additions and the matter then reached the Mumbai Tribunal.

The Tribunal held that the assessee was a private limited company and was to be considered a separate person and distinct assessable entity as per section 2(31) of the Act. A company is an inanimate person and there cannot be anything personal about such an entity. By virtue of its very nature, the company cannot have any “personal use”.

It cannot be stated the vehicle is used personally by the company, even though the vehicle is used by the directors for personal purposes. In addition, once the expenditure was in terms, as provided in sections 309 and 198 of the Companies Act, there could not be any ‘non-business’ purpose.

Therefore, the action of AO in disallowing depreciation and maintenance charges on the sports car owned and used by the assessee for the purpose of business was not justified.

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