By TIOL News Service

MUMBAI, DEC 27, 2018: THE issue before the bench was a motor boat used to commute between places in furtherance of professional work, can be treated as a business asset, on which depreciation can be claimed. YES IS THE ANSWER.

The Tribunal also held that expenses incurred on such boat cannot be disallowed in entirety, where the assessee made self-disallowance of part of such expenses to account for personal use of the boat.

Facts of the case

The assessee is a professional actor. On assessment for the relevant AY, the assessee's income was determined at about Rs 124.39 lakhs, against income declared at about Rs 105.30 lakhs. The AO noted that the assessee claimed to have incurred expenses of about Rs 9.2 lakhs on a motor boat owned by him. The assessee claimed that he used the boat to travel from one location to another within the city, instead of other modes of transportation. He also claimed to have earned Rs 96900/- as boat hire charges. The AO did not accept such reasoning given by the assessee & disallowed such amount. On appeal, the CIT(A) sustained such findings on grounds that the assessee failed to prove that the boat was used for professional purposes only & not for personal use.

On appeal, the Tribunal held that,

++ the assessee was saddled with similar additions in AYs 2009-10 & 2010-11, however, the claim of the assessee was allowed by the CIT(A) in both the years. The appellate order for AY 2009-10 records a clear-cut finding that the assessee had been using speed-boat for travelling from Mumbai to Alibaug for his professional activities like acting, practice, health, maintenance, story telling etc. and hence, business asset has been utilized by assessee for commutation for professional work and therefore, the expenditure against the same was allowable to the assessee like any other travelling mode like motor-car. Another important fact to note is that the speed-boat forms part of the 15% block of Fixed Assets which is evident from depreciation chart as placed on record and therefore, constitute business/professional asset for the assessee. It is further noted that the assessee has claimed depreciation on opening written down value of the speed-boat which is being carried forward from earlier AY and already merged under 15% block of fixed assets. Further, the assessee has suo moto disallowed 25% of the expenditure on estimated basis to account for personal element/usage. Therefore, considering the totality of facts, the additions cannot be sustained.

(See 2018-TIOL-2493-ITAT-MUM)