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Hotels can claim depreciation on foreign cars: ITAT

Hotels can claim depreciation on foreign cars: ITAT


New Delhi: The tax tribunal has ruled that hoteliers can claim depreciation and consequent tax benefit on imported cars, provided they are used for ferrying guests.

“Depreciation is to be allowed even if imported cars are used to carry incidental business," Income Tax Appellate Tribunal president Vimal Gandhi said in the case pertaining to claim of depreciation on Mercedes Benz car by Delhi-based hotel Marina.

The decision comes as a big relief to the hotel industry that uses imported cars not only to pick up guests from hotels but also to transport them to other places of tourist attractions.

While giving the ruling in the case, the ITAT rejected the contention of the Assessing Officer as well as the Accountant Member of the ITAT, who were of the opinion that depreciation on imported car could not be permitted under the Income Tax Act.

In the present case, Hotel Marina claimed depreciation on Mercedes car that was used for transporting guests and clients.

Initially, the Assessing Officer disallowed the depreciation of about Rs11 lakh claimed by the hotel, stating that “the assessee is not in a business of running cars on hire for tourists".

Depreciation on cars manufactured outside India is not allowed unless it is used in a business of running it on hire for tourists or outside India for business.

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