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Personal car used for company

Sathis (Director) (26 Points)

13 January 2012

I am planning to buy a car worth 11 Lakhs for which I plan to take a loan of 9.5 Lakhs from a bank. I am a promoter a private limited company in which I am the major stock holder. Is there a way by which I can make the company pay for the EMI and other maintenance of the Car and also take the benifit of depreciation,etc., since the car is purely for business purpose. Since the company does not have positive P&L yet, I am not able to get the loan in the name of the company. I would appreciate if anyone can advice.

Thanks

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3 Replies

CA Sumiit B Nagpal (Business) (1077 Points)
Replied 13 January 2012

Ya u can do so. U have to show that the car is used for companys buisness only. It has been held in cases that co. need not be the registered owner of co. If car is regs. in the name of director but is in possession of company and is used for buisness purposes u are eligible to claim depreciation and other maint. expenses.

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valji (Accounts manager-MBA) (2150 Points)
Replied 13 January 2012

agreee with sumit

CA. Gopi Vijayaragavan (CA in Service) (70 Points)
Replied 16 January 2012

Depreciation;

In Case of Motor Vehicle, ownership is determined by Possession of the Vehicle and the assessee has to prove that it is used for the purpose of business. Registration under motor vehicle act is only permission for driving the vehicle on the road. (Salkia Transport Associates 143 ITR 39 (Cal), Dilip Singh Sardhar Singh Bagga ITR 985 (Bom), Nidhi Trnsport Corpn. 76 CTR 221 (ker.), K Torurism & Devep Corporation (Del).

Therefore, if you use the car entirely for business purpose and you can prove that it has been used only for business purpose, you can claim depreciation, though the asset has been registered in your name.

However, it is to be noted that for the purpose of claiming depreciation, the assessee must be the owner of the asset. There is no clear idea with me for claiming depreciation, whether beneficial ownership is enough as the above decision were held only in high courts and not in supreme court.

Therefore i suggest that, transfer the asset to the company as capital contribution and then cliam depreciation. But, it may be done if your MoA & Loan agreement with Banker permits.

In another case, you can transfer the asset to the company on the written terms that consideration for such transfer will be settled by repaying your loan with interest to the banker by the company. In Such case, Interest expenses also be claimed. It is also subject to MoA and Loan agreement conditions.

Maintenance Exps;

There is no bar for claiming maintenance expenses, as it is only incurred for business purpose.

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