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2015 (12) TMI 297 - AT - Income TaxDisallowance of incentive paid to directors u/s 40A(2)(a) - Held that:- All the directors are in charge of the entire operations of the assessee company and the financial/operational results of the company are growing every year. Hence, on that count alone, the salary and incentive paid to the directors could be justified and could not be found fault with, without bringing the fair market value of services. In our view, the financial and operational results, justify the payments made to the directors. The income declared by all the three directors show that the incentive received by them in respective years has suffered tax at the higher rate of taxation, i.e., equivalent to the tax rate applicable to the assessee company. Hence there is merit in the contentions of the assessee that there was no attempt to evade tax. Hence, in our view, the decision rendered by the Hon’ble Bombay High Court in the case of Indo Saudi Services (Travel) (P) Ltd (2008 (8) TMI 208 - BOMBAY HIGH COURT) squarely applies to the facts of the instant case. Hence, on this count the disallowance made u/s 40A(2)(a) is liable to the deleted in all the three years. In view of the foregoing discussions, we are of the view that there is no justification on the part of Ld CIT(A) in confirming the disallowance made u/s 40A(2)(a) of the Act. - Decided in favour of assessee. Disallowance of depreciation - Held that:- Hon’ble Gujarat High Court has considered identical issue in the case of Aravali finlease Ltd (2011 (8) TMI 814 - Gujarat High Court ) and has taken the decision that the depreciation is allowable in the hands of the company, even if it is registered in the name of its director provided that the vehicle is used for the purpose of business of company and income derived there from was shown as income of the company. In the instant case there is no dispute with regard to the fact that the vehicles are used for the purpose of business of the assessee company. In the case of Basti Sugar Mills Co. Ltd (2002 (5) TMI 27 - DELHI High Court), the Hon’ble Delhi High Court approved the decision of the Tribunal in holding that, since vehicle is a movable asset, the registration as required in the case of transfer of immovable property is not a condition precedent for legal ownership. In the instant case, the funds for purchase of vehicles have been provided by the assessee company and they have been shown as assets of the assessee company. Hence, in our view, the assessee company should be considered as owner for all practical purposes and hence it is entitled for depreciation - Decided in favour of assessee.
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