Law:

Section:

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance rate of - Assessment year 1986-87 - Whether assessee, a partner of dissolved firm, would be entitled to claim depreciation on property allotted to him on dissolution of partnership irrespective of fact that property allotted to share of assessee had not been registered in his name - Held, yes FACTS The assessee-company entered into a partnership agreement with two companies, and two individuals, with effect from 1.4.1975. Under the said agreement, the individuals, brought into the firm the property consisting of factory building and agricultural land owned by them, whereas the two companies made their contribution in cash. The firm was subsequently dissolved with effect from 30-3-1976. On the said dissolution, the said properties belonging to the firm, were allotted to the assessee who ran its factory in the building allotted to them, consequent to the dissolution and claimed depreciation from the assessment year 1977-78 which was allowed by the Department. For the assessment year 1986-87, also the assessee claimed depreciation in respect of said factory buildings and the same was allowed by the Deputy Commissioner under section 143(3). Subsequently, the Commissioner issued notice under section 263 and called upon the assessee to show cause as to why the assessment made by the Assessing Officer by order dated 23-3-1989 should not be revised and the Assessing Officer should not be directed to withdraw the depreciation granted to the assessee in respect of the property. Though necessary objections were filed, ultimately the Commissioner rejected the same and directed the Assessing officer to withdraw the depreciation granted to the assessee in respect of its property. The Tribunal also concurred with the finding of the Commissioner. On appeal : HELD The only requirement under section 32 is the person claiming depreciation is the owner of the property. The terms 'own', ownership and 'owned' have a wide and a narrow connotation. The meaning would depend on the context in which the terms are used. In view of the law laid down by the Supreme Court in catena of decisions, it was to held that the…

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