Law:

Section:

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/Rate of - Assessment year 1973-74 - Assessee who was proprietor of certain business constituted partnership with his son - In partnership deed, it was specified that assets brought into business of firm would continue to be exclusive property of assessee - However, in books of account of partnership, all assets and liabilities brought in by assessee were recorded as assets and liabilities of firm - Tribunal notwithstanding provision of partnership deed, held that firm was owner of assets in question and therefore, assessee was not entitled to depreciation on said assets - Despite aforesaid finding of Tribunal, question referred was only whether depreciation should be allowed on assets in question - Whether so long as there was no challenge to basic finding of Tribunal that assets belonged to firm, it was justified in holding that assessee was not entitled to depreciation thereon - Held, yes FACTS The assessee was a partner of a firm constituted by taking in the assessee's son in the business as a partner. In the partnership deed, there was a clause specifying that the assets brought into the business of the firm by the assessee would continue to be the exclusive property of the assessee would continue to be the exclusive property of the assessee and the other partner would have no manner of right over the same by reason of his becoming a partner of the firm. But, in the books of account of the partnership, all the assets and liabilities of the assessee in the business he was running were brought in as assets and liabilities of the firm. At the time of assessment, the ITO treated these assets as belonging to the firm, and, therefore, declined to give the benefit of depreciation to the assessee in his assessment. The AAC, considering the terms of the partnership deed, upheld the assessee's claim. On further appeal, the Tribunal found that though the partnership deed stated that the assessee would be the owner of these assets, for the purpose of accounting, the firm had been treated as the owner in its books. There was no inconsistency between the provisions of the partnership deed and the entries…

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