Discrimination in depreciation norms

While a businessman get depreciation allowance on his vehicles used for both personal and buisness purposes, why a salaried person with a vehicle is not allowed for deduction although he also uses his vehicle for both personal and official purposes?
Asked 1 year ago in Income Tax from Bengaluru, Karnataka
Under Section 37(1) of the Income Tax Act, expenditure, including depreciation is allowed only to the extent they are meant for business purposes and not for personal purposes. If the assessee is subject to tax audit u/s 44AB, the auditor is bound to report if the expenditure debited to Profit and Loss includes any personal expenses. Hence, by law personal expenditure is not allowed, but in practice there may be aberrations and personal expenses may have been claimed without getting detected.

As regards your query on educational institutions, the simple answer may be "ask the legislators whom elected". Even when educational institutions are meant to be for public service, the schools and colleges are, as you rightly observed, mushrooming with sole intention of making profit. If we allow commercialization of educational institutions, then profit motive may be more dominant than service motive. Though these educational institutions are run as charitable trusts, they are still called as corporates. I also feel that education should be allowed to be imparted by corporates also, which will have more disclosure norms to be complied with. 
B Vijaya Kumar
CA, Hyderabad
290 Answers
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It is true that salaried individual is discriminated by Income Tax Act, but this has a long history of misuse of deductions by making false claims by individuals  drawing salary income on other account.  Income tax department found it self incapable to handle the menace of false claims. Still if you can negotiate with your employer, you can ask the employer to provide you with car with a chauffer and user allowed for personal user and official user. In such an event a fixed amount is added to your income as perquisite value and taxed.

Vijay N. Kale
CA, Hyderabad
248 Answers
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It is true that educational institutions are not subject to income tax as they are imparting education to the society. And still there is lot of uncovered ground to achieve a fully educated society. Under the guise of educational institution many persons are engaged in profit making activity by running them on commercial organisation. Mostly MLAs and MPs are promoters of educational societies. The government is turning a blind eye to the activities of such institution by collecting huge capitation fees and tution fees due to inadequacy of government machinery. You may move a interest litigation before Supreme Court to appoint a commission  to requlate the activities of educational societies. Present regulation by education department is grossly inadequate and highly corrupt. 
Vijay N. Kale
CA, Hyderabad
248 Answers
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Answer to Q1:

Salaries are taxable under section 15 of the Income-tax Act,1961.

Deductions from Salaries are dealt under section 16 of the Income-tax Act,1961. As per this section,  'Tax on employment' and 'Entertainment Allowance to Government Employees' are the only deductions available against the salary income. Depreciation is not finding any place in section 16. Hence, you cannot claim depreciation against salary income though you are using your vehicle for official purpose.

Please note that if the assessee is using his/her vehicle for the personal purpose, the same will not be eligible for claiming as an expense against his income. Determining the fact that how much % the assessee has used the vehicle for hi/her personal use depends up on the facts and circumstance of the case.

Q2 & Q3: It is already settled in the Honorable Supreme Court of India. Hence, no comments.

Regards,
CA. Rajeev P T
Partner
Rajan Chakravarthy & Associates, Chennai
Email: ca.rajeevpt@gmail.com

*****This Opinion is based on stated facts and the legal position as on date. The views expressed may not be relevant where there is any change in facts or law. This Opinion is not in the nature of an assurance that an alternative view or interpretation cannot emerge.
Rajeev P T
CA, Chennai
34 Answers
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Sir, in case of salaried person CBDT has not given the allowance for deduction of depreciation on vehicle. As in the case of business where expenditure for depreciation can be claimed, on personal purpose it is not so.

Sir in other case all the department knows about the happening in educational institutions but no one can help. you can gather valid information with proof and approach the income tax investigation wing.
Shyam Sunder Modani
CA, Hyderabad
955 Answers
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Hello Sir,

Yours is an interesting question Difficulty of which is faced by every human being. You can form a consortium of like minded people and fight against it, which is again very difficult practically.

Rohit R Sharma
CA, Mumbai
719 Answers
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