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The Gujarat High Court in Sayaji Iron & Engg. Co. v. CIT (2002) 121TAX43 held that the assessing officer has no powers to disallow any expenses alleging to be of personal nature in making an assessment of a company. The Court explained that a private limited company is a distinct assessable entity as per the definition of ‘person’ u/s 2(31) of the Act. Therefore it could not be stated that when the directors’ used the vehicles even if the directors’ personally used them, the vehicles were personally used by the company, because a limited company by its very nature cannot have any ‘personal use’. The limited company is an inanimate person and there cannot be anything personal about such an entity.

In fact after the deletion of section 40A(5)/40 (c) the Act does not impose any restrictions on expenditure that is attributable to the personal purpose.

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