Car in spouse name can be used as business expense?

yes

Does it make any difference anywhere if car was purchased in Cash or Cheque or on Loan while claiming depreciation/fuel as expense?

i believe payments over 20000 in cash rule should not apply here.

Firstly, when asset is in name of spouse and spouse is not related to business, depreciation can't be claimed as business expense.

Secondly, as far as other expenses are concerned like fuel and repairs, one can make a contract stating the fixed or variable (depending on distance covered) sum to be paid to spouse for usage of car. Therein, you may mention that fuel & repairs expenses may be borne by the the user of car.

Coming to your query, you cited that individual is a consultant having professional income and is using car in the name of spouse.

So, going by facts stated above, you can't claim depreciation but can sign a contract with spouse, wherein, you can mention fixed or variable sum to be paid to spouse and claim same as business expense.

If car is owned (capitalised in books of account) and used by the assessee, depn, fuel exp, repairs and insurance etc can be claimed as business expense even though it is regd in the name of spouse. It doesnt matter whether you purchased through cash or chq etc. 

Hi Ashok,

thanks for ur reply. But i have further question regarding capitalization of asset. (Sorry, if it sounds silly question!)

When i will capitalize the car in my books, then it means payment towards car should also be reflected in my balance sheet in Bank account and inturn should be supported by bank statement.

Does it mean that if payment towards car is not made through my bank account, (for example: payment made through bank account of spouse) then car can't be shown in books of assessee?

Thanks in advance for ur help.

Yes, you can claim depreciation and all other expenses incurred in connection with the use of car in your bussiness. Registration of car in the name of assessee is not mandatory but yes assessee should be owner of the asset(car) in order to claim depreciation. (Case law mentioned for your ready reference)

Further to your query regarding how you will capitalise asset in your books

Execute an agreement for sale of car between you and your spouse. (In Rs.50 Non-judicial stamp paper). Payment via cheque or cash will not affect your claim for depreciation. But beware if you choose cash as mode of payment than be prepared to explain source of income to AO from where you have generated such a huge amt of cash. Pass the following entry afterwards in your books

CAR A/c ....Dr      XXXX
  TO Capital A/c    XXXX

To be on safe side you have to quote a reasonable amount for purchase of CAR and that will be based on your previous year's income, cash in hand balance and other aspects. It is highly recommended to consult a CA before you take any step (particularly if you choose cash as a mode of payment).

Depreciation under section 32 was allowable to the assessee company on the assets which were purchased in the name of the managing director of the assessee company and his wife but, used exclusively for the assessee’s business.CIT vs. Metalman Auto P. Ltd. (2011) 52 DTR 385

@ Poonam

If payment for car is done by spouse - entry is Asset Dr To Capital.

If payment for car is done by assessee - Asset Dr To (Cash/Bank or Loan/Lessee A/c).

For accounting purpose we adopt a convention called SUBSTANCE over LEGAL FORM which supports the above explanation. Spouse tax issues should be taken care of separately.