Depreciation & interest on car of partner
This query is : Resolved
CA Amit Joshi
(Querist)
19 September 2013
Can partnership firm avail the benefit of depreciation & interest on a car owned by the partner?
Ratan Sharma
(Expert)
19 September 2013
If the car used by the firm and appearing in the books of accounts of firm then the firm can take the benefit of depreciation as well as interest paid on car loan even if the car is registered in the name of partner. Generally it is found that the vehicle is registered in the name of partner and incorporated in the books of firm. The benefit is taken by the firm. There are various judicial pronouncements also in support of this view.
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CA Amit Joshi
(Querist)
19 September 2013
Can you give me such judicial pronouncements for reference?
21 July 2024
Judicial Pronouncements
While there are no specific judicial pronouncements directly addressing the issue of depreciation on a car owned by a partner in every jurisdiction, courts generally interpret tax laws and provisions based on the principle of substance over form. Here are a few principles and cases that may guide you:
Substance over Form: Courts often emphasize that the substance of a transaction should prevail over its form. If a car owned by a partner is used substantially for business purposes of the partnership, the partnership may be able to claim depreciation despite the ownership being with the partner.
Business Use Requirement: Various cases have highlighted that for any asset to be eligible for depreciation in a business entity, it must be used for business purposes. Personal use by a partner would generally disqualify the asset from being eligible for depreciation claimed by the partnership.
While there are no specific judicial pronouncements directly addressing the issue of depreciation on a car owned by a partner in every jurisdiction, courts generally interpret tax laws and provisions based on the principle of substance over form. Here are a few principles and cases that may guide you:
Substance over Form: Courts often emphasize that the substance of a transaction should prevail over its form. If a car owned by a partner is used substantially for business purposes of the partnership, the partnership may be able to claim depreciation despite the ownership being with the partner.
Business Use Requirement: Various cases have highlighted that for any asset to be eligible for depreciation in a business entity, it must be used for business purposes. Personal use by a partner would generally disqualify the asset from being eligible for depreciation claimed by the partnership.
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