Fixed assets

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vineesh chandran.k (Querist)
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26 February 2016 A partnership firm has purchased a car. Payment has been effected from firms bank account. In RC, partner name is mentioned as registered owner (eg: kishore). Is there any problem with that? Can the firm show this asset in its books??

Suresh Ramaswamy

Suresh Ramaswamy (Expert)
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26 February 2016 Yes the firm can show the motor car in its fixed assets. Your case is somewhat similar to a case decided by the Ahmedabad Bench of the Hoorable ITAT. In that case, the firm had also borrowed money from the bank to pay for the purchase of the assets. That is not so in your case. Else the circumstances are similar. The case was ASSISTANT COMMISSIONER OF INCOME TAX vs. GOPAL FABRICS [ ITA No. 3338 / Ahd / 2010 & 463 / Ahd / 2013 ] wherein the ITAT confirmd the deletion of disallowance by the CIT (A) with the following observation "Since the Learned Commissioner of Income Tax (Appeal) has given relief to the assessee by following the Honourable Supreme Court’s decision in the case of MYSORE MINERALS LIMITED vs. COMMISSIONER OF INCOME TAX [239 ITR 775(S.C.)], we feel no need to interfere with the order passed by the Learned Commissioner of Income Tax (Appeals)and the same is hereby upheld”.

The Learned Commissioner of Income Tax (Appeals) had deleted this addition by observing as follows: “I have carefully considered the rival submissions. Perusal of the balance sheet of the appellant reveals that all these cars are reflected in the schedule of fixed assets. The appellant had claimed depreciation on these cars the claim is regularly allowed. Perusal of the balance sheet further reveals that the appellant raised loans from bank to purchase some of these cars. Secondly, the Assessing Officer had accepted the running and maintenance expenses debited by the appellant in the P & L Account. These facts makes it abundantly clear that these cars were purchased from the funds of the appellant firm and is being used for the business of the appellant firm. In such a case, in my considered view the appellant is entitled to claim depreciation on these cars. The appellant’s case is fully covered by the decision of the Honourable Supreme Court in the case of MYSORE MINERALS LIMITED vs. COMMISSIONER OF INCOME TAX [239 ITR 775(S.C.)]. In view of the above facts, I am inclined to agree with the contentions of the appellant. The Assessing Officer is directed to allow depreciation on motor cars of Rs.2,93,196/-. This ground of appeal is allowed.”

In view of the above, you can treat the assets as belonging to the firm and also claim depreciation thereon. The entries in the blue book are immaterial for this purpose.