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

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.

The only issue assailed in this appeal is against the confirmation of disallowance of car expenses incurred by the assessee, a Private Limited company, towards personal use by the two Directors.

Filtering out unnecessary details, the facts of the case are that assessee had two vehicles appearing in its balance sheet, which were used by the Directors for the business purpose. The assessee claimed 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.

Having heard both the sides and gone through the relevant 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)