2009 (11) TMI 127 - HC - Income Tax

Depreciation under section 32 Beneficial owner of buses The assessee claim the depreciation on three buses. The buses were not registered in the name of owner but in the name of the beneficial owner. In this case Madras High Court held that the assessee had made available all the documents relating to the business and also established before the authorities that she was the beneficial owner, thus there is no illegality or irregularity in the order of the Tribunal, The appeal is dismissed. Decision in favor of assessee against the revenue.

Summary

Issues:
- Appeal against common order of Income-tax Appellate Tribunal regarding depreciation claimed by beneficial owner of buses.
- Interpretation of section 32 of the Income-tax Act, 1961 regarding ownership for claiming depreciation.

Analysis:
1. The Revenue appealed against the Income-tax Appellate Tribunal's order concerning the depreciation claimed by the wife and husband, who were beneficial owners of buses for the assessment year 2002-03. The substantial questions of law were whether depreciation could be allowed for assets owned by beneficial owners, and if beneficial owners could claim depreciation under section 32 of the Income-tax Act, 1961.

2. The case involved the wife as the assessee for a typical discussion. The assessee filed the return for the assessment year 2002-03, claiming depreciation. However, the Revenue denied the claim as the buses were not registered in the assessee's name, a basic condition under section 32(1) of the Income-tax Act to claim depreciation. Despite providing evidence of being the beneficial owner, the claim was rejected by the Assessing Officer.

3. The court analyzed section 32(1) of the Income-tax Act, which requires tangible assets to be owned wholly or partly by the assessee for claiming depreciation. The term "owner" was interpreted to include a person entitled to receive income from the property, not necessarily a lawful owner. Previous court decisions were cited to support this interpretation.

4. The assessee demonstrated beneficial ownership through documents showing loans for bus purchase, repayment from bus collections, payment of expenses, and inclusion of buses in the balance sheet of the assessee's proprietary concern. The court found that the assessee met the requirements of being a beneficial owner, despite not being listed as the owner in permits or registration documents.

5. Considering the evidence presented and legal precedents, the court upheld the Tribunal's decision, stating that the assessee qualified as a beneficial owner entitled to claim depreciation under section 32. The court dismissed the appeals, finding no substantial question of law to warrant interference with the Tribunal's order.