1983 (3) TMI 118 - AT - Income Tax

Summary

Issues:
Claim for depreciation on jointly owned plant and machinery.

Analysis:
The appeal was against the Commissioner (Appeals) order regarding the claim for depreciation on jointly owned plant and machinery. The assessee had purchased the asset jointly with another entity and claimed depreciation on it. The Commissioner (Appeals) disallowed the claim based on the decision of the Allahabad High Court, stating that no depreciation is allowable for assets jointly owned by multiple persons. The assessee contended that the decision was not applicable to their case as the wording in the Income-tax Act of 1961 differs from the 1922 Act. The assessee argued that since they were earning income from the asset, they should be entitled to depreciation. The Tribunal considered the arguments presented by both parties.

The Tribunal noted that the asset was jointly owned by the assessee and another entity, and hire charges received were subjected to tax. The Commissioner (Appeals) relied on the Allahabad High Court decision, emphasizing that no depreciation is allowed for assets jointly owned. The Tribunal acknowledged the settled law that property can be jointly owned, with defined or undefined shares. It was highlighted that the income from jointly exploited assets could be assessed either jointly or separately for each owner. In this case, the income was assessed separately for the owners, including the assessee. The Tribunal referred to previous court decisions and legal interpretations regarding ownership and depreciation allowances.

The Tribunal analyzed the Allahabad High Court decision, which raised concerns about allowing depreciation for assets owned partially by individuals or entities. However, the Tribunal distinguished the facts of the present case, where the assessee claimed full ownership of half of the asset. The Tribunal concluded that the income assessed was attributable to the full extent of ownership in the proportionate part of the asset that yielded income. As the assessee was the full owner of half the asset and earned income from it, they were entitled to depreciation. Therefore, the Tribunal allowed the appeal, granting the assessee the depreciation claim on the jointly owned plant and machinery.