PUSHPAK STEEL INDUSTRIES PRIVATE LIMITED,PUNE vs. THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-10, PUNE

आदेश / ORDER

PER R.S. SYAL, VP:

This appeal by the assessee arises out of the order

dated 20-01-2023 passed by the CIT(A) in National Faceless Appeal

Centre, Delhi u/s.250 of the Income-tax Act, 1961 (hereinafter also

called ‘the Act’) in relation to the assessment year 2017-18.

of disallowance of car expenses incurred by the assessee, a Private

Limited company, towards personal use by the two Directors.

assessee had two vehicles appearing in its balance sheet, which were

used by the Directors for the business purpose. The assessee claimed

2 ITA No. 301/PUN/2023 Pushpak Steel Industries Pvt. Ltd.

deduction of depreciation, interest and maintenance amounting to

Rs.10,88,998/- on these vehicles. In the absence of the assessee

furnishing the log books, the AO made disallowance @15% of total

expenses, which worked out to Rs.1,51,350/-. The ld. CIT(A)

affirmed the disallowance, against which the assessee has approached

the Tribunal.

material on record, it is seen that the assessee under consideration is a

Private Limited Company. It as an undisputed fact that the company

provided vehicles to its employees for their use for which the purchase

price was paid by the company to the extent it did not exceed the fixed

benchmark. The major reason given by the AO for disallowing the

expenses incurred on cars is the personal use of vehicles by the

directors-employees of the company. The Delhi Bench of the

Tribunal in DCIT vs. Haryana Oxygen Ltd. (2001) 76 ITD 32 (Del)

has held that the use of cars by directors-employees of a company

cannot be characterized as user for non-business purpose and, hence,

no part of such car expenses can be disallowed. The Hon’ble Gujarat

High Court in Sayaji Iron and Engineering Company vs. CIT (2002)

253 ITR 749 (Guj) has held that once the directors of the assessee

company are entitled to use the vehicles of the company for personal

use as per the terms and conditions of their appointment, it cannot be

3 ITA No. 301/PUN/2023 Pushpak Steel Industries Pvt. Ltd.

said that there was a personal use of cars. The Hon’ble High Court

further held that such user of vehicles by the employees of the

company cannot even be considered as ‘non-business user”. There are

innumerable judgments on this point holding that there can be no

disallowance of depreciation or other expenses on maintenance of the

vehicles used by the directors/employees by treating it as personal

user or non-business user of the company. I fail to see any rationale in

disallowing the expenses incurred on cars as for personal use, when

admittedly these have been provided to director-employees. A

company is a separate legal entity distinct from its directors or

employees. As such, there can be no question of treating the use of

vehicles by the directors/employees as a personal use by the company.

I, therefore, order for the deletion of disallowance of expenses

incurred on vehicles.

Sd/- (R.S.SYAL) VICE PRESIDENT पुणे Pune; िदनांक Dated : 16th May, 2023 सतीश

4 ITA No. 301/PUN/2023 Pushpak Steel Industries Pvt. Ltd.

आदेश की �ितिलिप अ�ेिषत/Copy of the Order is forwarded to: अपीलाथ� / The Appellant; 1. ��थ� / The Respondent 2. 3. The Pr.CIT concerned 4. DR, ITAT, ‘SMC’ Bench, Pune गाड� फाईल / Guard file. 5.

आदेशानुसार/ BY ORDER,

// True Copy // Senior Private Secretary आयकर अपीलीय अिधकरण ,पुणे / ITAT, Pune

Date 1. Draft dictated on 11-05-2023 Sr.PS 2. Draft placed before author 16-05-2023 Sr.PS 3. Draft proposed & placed before JM the second member 4. Draft discussed/approved by JM Second Member. 5. Approved Draft comes to the Sr.PS Sr.PS/PS 6. Kept for pronouncement on Sr.PS 7. Date of uploading order Sr.PS 8. File sent to the Bench Clerk Sr.PS 9. Date on which file goes to the Head Clerk 10. Date on which file goes to the A.R. 11. Date of dispatch of Order. *