1997 (12) TMI 165 - AT - Benami Property

Summary

Issues Involved:
1. Claim of depreciation on motor vehicles purchased in the name of benamidar.
2. Claim of depreciation on motor vehicles purchased by the assessee but registered in the name of the vendor.

Issue 1: Claim of Depreciation on Motor Vehicles Purchased in the Name of Benamidar
The core issue pertains to whether the assessee can claim depreciation on motor vehicles purchased in the name of benamidar. The Assessing Officer disallowed the depreciation claim, arguing that the assessee was not the legal owner of the vehicles. The CIT(A) accepted the claim, following various judicial precedents that emphasized beneficial ownership over legal registration. The Tribunal examined the legal position before and after the Benami Transactions (Prohibition) Act, 1988.

Prior to the Benami Act, under Section 82 of the Indian Trust Act, the benamidar held the property in a fiduciary capacity for the benefit of the person who paid the consideration, making the real owner eligible for depreciation. The Tribunal cited decisions such as Shaik Babu Sahib v. ITO and Sardar Jogender Singh Saluja v. ITO, which supported the view that beneficial ownership suffices for claiming depreciation.

Post the Benami Act, the Tribunal noted that the Act does not apply retroactively to transactions before its commencement in May 1988. The Act prohibits the real owner from recovering possession from the benamidar but does not alter the ownership status of properties acquired before its enactment. The Tribunal concluded that the real owner, who paid for the vehicles, remains entitled to depreciation, as the legal ownership persists despite the benami nature of the transaction.

Issue 2: Claim of Depreciation on Motor Vehicles Purchased by the Assessee but Registered in the Name of the Vendor
The second issue involves vehicles purchased by the assessee but registered in the vendor's name. The Tribunal referenced the Bombay High Court decision in CIT v. Dilip Singh Sardarsingh Bagga, which held that registration under the Motor Vehicles Act is not a prerequisite for ownership if the vehicle is used for business purposes by the purchaser. The Tribunal affirmed that the assessee is entitled to depreciation, as the lack of registration transfer does not negate ownership.

Conclusion:
The Tribunal upheld the CIT(A)'s decision, allowing the depreciation claims for both categories of vehicles. The legal ownership, based on beneficial ownership and payment of consideration, was deemed sufficient for claiming depreciation. The appeals by the revenue were dismissed, reinforcing the principle that beneficial ownership and actual use of the asset for business purposes are critical factors in determining eligibility for depreciation under Section 32 of the Income-tax Act.