Problem in Tax Planning

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CA. ALOK SHARMA (Querist)
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30 December 2010 Sir,
I just want to know any thing wrong in my following planning

1) I (Director) purchased around 10 luxury cars which are actually used by my various relatives for personal purposes. Now I showed these cars in company’s BS (by cash) and claimed depreciation. Now, IT Act or Comp. Act never says bills should be in name of company. At the most AO will disallow personal portion u/s 38(2). And I claimed depreciation.

ALOK
CA FINAL

Zeeshan

Zeeshan (Expert)
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30 December 2010 Definately the property should be in the name of company...
In both the act owenership is important criteria.

As per IT act you can claim the depreciation only when you have owenership of the Assets and the asset is used for the business purpose. Now business purpose is the issue in which you can argue but Owenership is must. CAR MUST BE REGISTERED IN THE NAME OF COMPANY.

CA. ALOK SHARMA

CA. ALOK SHARMA (Querist)
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30 December 2010 Sir,
I have one more doubt.
As per IT Act, ownership must be ‘beneficial ownership’, actual ownership is not required as per sec32.
As per company act, only one section i.e. 205 states that depreciation should be provided before declaring divided. There is no other section regarding depreciation.

Kindly rectify me with appropriate section
Thanks
ALOK

Zeeshan

Zeeshan (Expert)
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30 December 2010 As far as income tax is concern:

Actual ownership or beneficial ownership you have to prove. And there should be convincing evidence for the same to claim the depreciation on the assets in which assessee has a beneficial ownership.

As far as Companies Act is concern:
There is no such provision that the assets should be in the name of company except section 49 for Investments.

However your auditor will not accept the recognition of assets in company's books which are not in the name of company. Because in that case books will not be true and fair. There should be some contractual evidences either Invoice & posession in the name of company or Lease agreement (finance lease as per AS 19) for the recognition of assets in books.

hope I resolved the query.

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CA. ALOK SHARMA

CA. ALOK SHARMA (Querist)
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03 January 2011 Thanks a lot
Hope u vl always be there for me.
Again Thanx
and
Happy New Year 2011

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