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Disallowance of depreciation claim under section 32 for assessment year 1983-84. Analysis: The appeal pertains to the disallowance of Rs. 1,76,382 from the depreciation claim under section 32 for the assessment year 1983-84. The assessee initially claimed depreciation proportionately for seven months, but later sought full depreciation. The Assessing Officer disallowed the claim, stating that the partner who took over the business also claimed depreciation for the same period. The Assessing Officer considered the transfer of assets to a new entity as a 'transfer' under section 34(2)(ii), citing the decision in Chittoor Motor Transport Co. v. ITO [1966] 59 ITR 238. The Assessing Officer reasoned that depreciation cannot be allowed twice in the same year on the same assets. The assessee appealed this decision. In the appeal before the first appellate authority, the assessee argued that as no assets were sold, destroyed, or discarded, section 34(2)(ii) did not apply. The CIT (Appeals) distinguished previous cases, stating that in the present situation, assets and liabilities were deemed transferred due to the dissolution of the firm and subsequent takeover by another entity. The CIT (Appeals) upheld the disallowance. The assessee then appealed to the ITAT, reiterating their arguments. The ITAT referred to a similar case, Sita Ram Saluja v. ITO [1982] 11 ITD 754, where it was held that disallowance of depreciation for the same assets in the same year was not justified. The Tribunal analyzed the ownership and usage of assets post-dissolution, emphasizing that the firm remained the owner until dissolution. Referring to the Supreme Court's decision in Malabar Fisheries Co. v. CIT [1979] 120 ITR 49, the Tribunal held that the allotment of assets and liabilities to a partner upon dissolution did not constitute a transfer as per section 155 read with section 32A(1) of the IT Act. The Tribunal concluded that the assessee was entitled to claim full depreciation under section 32 for the entire year, following the principles established in previous decisions. Therefore, the Tribunal allowed the appeal by the assessee, granting them the depreciation allowance for the full year. The decision was based on the interpretation of ownership, usage, and the definition of 'transfer' in the context of asset allocation post-dissolution, aligning with previous judicial precedents and statutory provisions.
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