buying a new car at firms name or in assessee's own name?

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  1. TANVI_23

    TANVI_23 New Member

    An assesse wants to buy a car worth of rs 12lakhs and funding will be done via taking loan The nature of business assesse is doing, is done through online mode or through mobiles. Visits at clients place by assesse is negligible. Now assesse wants to know whether he should purchase car in his personal name or at firms name(assesse is a partner in a partnership firm)?
    If he purchases car at his firms name will he gets any benefit of it I.e. can he show car as an asset in his books and claim depreciation and also charge interest on loan as an expense in his p&l ? or else he should buy a car in his personal name & pays instalment from his personal a/c?
    Which option is more suitable so that assesse gets benefited? Please advise?
  2. ZED

    ZED Well-Known Member

    If the car is purchased in the name of the firm, then it would mean that car is the property of the firm and hence the firm would be eligible to claim depreciation on it. If the loan was also taken by the firm then interest payment can be allowed to be debited in the accounts of firm.

    But, if the loan is taken by him in his personal capacity , then he might not be able to claim the interest for loan.

    Also note that if any asset is not used solely for the purpose of business or profession, then there should be a proportionate disallowance of the expenditure (Eg depreciation claim would be reduced proportionately)
    Its a vehicle, so I can reasonable presume that it will be used by the person for the personal use aswell (moreso, when you have specifically mentioned that visits are low).

    The car will be treated as property of firm and not of the owner.

    If the car is bought in own name, then also depreciation can be claimed if the asset is used for the purpose of business or profession. But, I do not recommend this route AT ALL. There can be certain complications in this mode. Avoid it.
  3. TANVI_23

    TANVI_23 New Member

    As the assesses visits at clients place are very less almost negligible, it is clear from this that car is not used for the purpose of business and profession, in that case is there any benefit of taking car on firms name, instead of making disallowance of expenses relating to car purchase (i.e depreciation, interest on car loan....), isn't it better that assesse should purchase a car in his own name???? Please advise.
  4. ZED

    ZED Well-Known Member

    Then there's no benefit of having the car in firms name. it should also not be shown as an asset in the firms account.
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