A company cannot have any personal expenditure. ITAT deleted ad hoc disallowance on vehicle running and maintenance expenditure
ABCAUS Case Law Citation:
ABCAUS 3146 (2019) (09) ITAT
In the instant case, one of the issue was related to ad-hoc disallowance being 10% of the vehicle repairs and maintenance expenditure.
The Assessing Officer (AO) noted that assessee had incurred expenditure on account of vehicle running and maintenance expenditure and depreciation on motor cars respectively.
The AO further noted that the directors of the company did not own any personal vehicles and not they had offered any amount of revenue as perquisites it in their hands on account of personal use of vehicles owned by the assessee company.
Therefore he disallowed 10% of the expenditure and the depreciation on the motor car on account of personal expenses incurred.
The CIT-A confirmed the 10% disallowance with respect to vehicle repairs and maintenance expenditure however he deleted the disallowance on account of depreciation.
Before the Tribunal, the appellant assessee submitted that the assessee was a company and there could not be any personal expenditure. He further submitted that mere ad hoc disallowance could not be disallowed.
The Tribunal noted that the assessing officer had given a reason that the assessee has incurred the above expenditure is personal expenditure as the director did not own any motor car nor had they shown any income as perquisites on account of the use of the motor car.
The Tribunal rejected the said reasons as not appropriate for making the disallowance because assessee was a company which could not have any personal expenditure.
Further the Tribunal opined that if any addition was required to be made on account of perquisites, the same was required to be made in the hands of the director, if they had used it for their own benefit and not for the purposes of the business of the company.
In view of this, the Tribunal reversed the finding of the lower authorities and directed the assessing officer to delete ad hoc disallowance made on account of vehicle running and maintenance expenditure.
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