Law: Income Tax Act, 1961

Section: 32

Income-tax----Depreciation---Requisite conditions for claiming depreciation is "ownership" and "user" of building, plant, machinery, etc.---Assessee-firm constituted of seven partners---Four partners contributing money as capital while three partners bringing; their trucks into firm as capital contribution--Vehicles becoming assets of firm and used through agents appointed by firm and income from vehicles credited in books of firm, though registration continued in names of three partners---Registration under Motor Vehicles Act not an essential prerequisite for acquisition of ownership--"Owned by the assessee" not used in the sense that complete title should vest in assessee--¬Assessee-firm was owner of vehicles and entitled to depreciation on them--¬Indian Income Tax Act, 1961, S.32. The assessee-firm was constituted of seven partners to carry on transport business. Out of the seven partners, four partners contributed money as capital while the other three partners brought their trucks into the firm as their capital contribution. The assessee-firm appointed three agents under three separate agreements for the supervision control and plying of the vehicles. The three vehicles were shown as the assets of the firm in its balance-sheet. The Assessing Officer rejected the claim of the assessee for depreciation under section 32 of the Income Tax Act, 1961, on the ground that the assessee failed to satisfy the requisite conditions that it owned and used the trucks. The Appellate Assistant Commissioner affirmed the order of the Assessing Officer. The Tribunal accepted that the three trucks became the assets of the firm and they were used through agents by the assessee-firm, though the registration of the vehicles continued in the names, of the three partners who initially acquired the vehicles. The Tribunal came to the conclusion that the assessee owned and used the trucks, that the income from the three trucks was credited in the books of the assessee-firm and that, therefore, it was entitled to depreciation under section 32 of the Act. On a reference: Held, (i) that registration under the Motor Vehicles Act was not an essential prerequisite for the acquisition of the…

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