1995 (3) TMI 184 - AT - Income Tax

Assessing Officer, Assessment Order, Income From Property, Mistake Apparent From Record, Original Assessment, Portuguese Civil Code

Summary

Issues:
- Rectification of assessment order under section 154 of the Income-tax Act.
- Claim of depreciation by the assessee on assets.
- Interpretation of ownership rights under the Portuguese Civil Code.
- Applicability of Supreme Court decision in Seth Banarsi Das Gupta case.
- Provisions of section 5A of the Income-tax Act regarding apportionment of income between spouses.
- Legal entitlement to depreciation on assets under section 32 of the Income-tax Act.

Analysis:

The appeal before the Appellate Tribunal ITAT Pune involved the rectification of an assessment order for the assessment year 1984-85 under section 154 of the Income-tax Act. The assessee, a consultant surgeon governed by the Portuguese Civil Code, had claimed depreciation on various assets. The Assessing Officer initially allowed the depreciation but later issued a notice of rectification, withdrawing the depreciation on the grounds that the assessee was not the full owner of the assets. The Assessing Officer relied on the Supreme Court decision in Seth Banarsi Das Gupta case to support this decision. The assessee's argument was based on the provisions of section 5A of the Income-tax Act, which deal with the apportionment of income between spouses governed by the Portuguese Civil Code.

The counsel for the assessee contended that the assessee, being part of the communion of wife and husband, was entitled to claim depreciation as the full owner of the assets. The counsel highlighted the communal ownership concept under the Portuguese Civil Code and cited relevant case laws to support the argument. On the other hand, the departmental representative supported the decision to withdraw depreciation, emphasizing that the assessment should be made on the individual, not the communion of wife and husband.

The Tribunal analyzed the provisions of section 5A of the Income-tax Act, which mandate the equal apportionment of income between spouses governed by the Portuguese Civil Code. The Tribunal also examined the ownership rights under the Portuguese Civil Code, as explained in the Bombay High Court case of Purushotam Gangadhar Bhende. The analysis revealed that under the Portuguese Civil Code, the husband and wife each have a fixed and certain half-share in the communal property, making them only fractional owners. Therefore, the Tribunal concluded that the assessee was not entitled to claim depreciation as the full owner of the assets.

Furthermore, the Tribunal interpreted section 32 of the Income-tax Act, which allows depreciation to an assessee only if they are the full legal owner of the depreciable asset. Citing the Supreme Court judgment in Seth Banarsi Das Gupta case, the Tribunal held that the assessee, being a fractional owner, was not entitled to depreciation. Consequently, the Tribunal dismissed the appeal, upholding the decision to withdraw the depreciation.