"Depreciation is to be allowed even if (imported) cars are used to carry on incidental business," Income-Tax Appellate Tribunal (ITAT) president Vimal Gandhi said in the case pertaining to the claim of depreciation on a Mercedes Benz car by Delhi-based Hotel Marina, the Press Trust of India reported on Wednesday.
Hotels often use imported cars to ferry guests from the airport to the hotel and back as also on visits to places of tourist attraction.
While giving the ruling in the case, the ITAT rejected the contention of the assessing officer and the accountant member of ITAT, who were of the opinion that depreciation on imported cars could not be permitted under the I-T Act, PTI reported. In the case, Hotel Marina claimed depreciation on Mercedes car that was used for transporting guests and clients.
The assessing officer disallowed the depreciation of about Rs 11 lakh that was claimed by the hotel, saying that "the assessee is not in the business of running cars on hire for tourists."
Depreciation on cars manufactured outside India is not allowed unless they are used on hire for tourists or for business.
The commissioner for appeals, I-T, however, was in favour of allowing Hotel Marina to claim depreciation as the imported car was used as a taxi for the hotel's guests.
Thereafter, the case went to ITAT. While the accountant member opposed the claim of depreciation on various grounds, the judicial member supported the assessee's case.
ITAT president said depreciation could be claimed by hoteliers even if the imported car was used for purposes incidental to the main business.
Depreciation on vehicles has to be allowed even if the assessee combines other business activities, like hiring cars for guests, with usual hotel business, the order stated.
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