The Income Tax Appellate Tribunal’s Delhi bench has held in the case Ralhan Construction Company vs. ACIT that the mere possibility of personal use would have no role to play while granting depreciation on any vehicle under Section 32 of the Income Tax Act, 1961.

Revenue’s Actions:

In the present case, since the assessee had not maintained a log book of usage of the vehicle, the AO made a disallowance of 1/5th of the claimed expenses on account of personal use of vehicle. These expenses included a claim on depreciation of the vehicle as well. The CIT(A) on appeal reduced the said disallowance by 50%. Aggrieved by  this, the assessee appealed to the Tribunal.

Tribunal’s Holding:

The Tribunal noted that the depreciation claim on the vehicle was included in the total expenditure claimed and that it was a fixed expenditure in nature, irrespective of whether it was used exclusively for the business or for personal use. Thus, the element of some personal would have no role to play while granting depreciation on vehicle and the assessee deserved the deduction on account of depreciation.

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