9911796707
TMI Blog1993 (2) TMI 140X X X X Extracts X X X X X X X X Extracts X X X X ..... r such purpose to carry on such incidental activities as were necessary to carry on the business of hirers, transporters and owners of trucks and vehicles. The trustees of the assessee trust are partners in M/s. Atma Ram Chadha Co. They are S/Shri C.M. Chadha A.R. Chadha. M/s. Atma Ram Chadha Co., a partnership concern owed more than Rs. 5 lakhs from the assessee trust, which according to the assessee was finding difficult to pay back and the assessee was also in difficulty to realise the same. M/s. Atma Ram Chadha Co. purchased 5 trucks on18-5-1982. Since the trust was interested in carrying on incidental activities mentioned above, purchased two trucks from the said firm in order to defray the substantial part of the debt owed from the firm and also to have possession and use of a productive business assets which could generate income for the trust. Therefore, the assessee trust took possession of the two trucks from M/s. Atma Ram Chadha Co. and simultaneously entered into agreement with the firm by which the firm had taken on hire these two trucks on a monthly charges of Rs. 6,000 per month vide agreement dated20-5-1982. The case of the assessee was that the trucks bei ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Monga [1986] 162 ITR 224 (Bom.); (5) CWT v. H.H. Maharaja F.P. Gaekwad [1983] 144 ITR 304 (Guj.); (6) CIT v. Bhurangya Coal Co. [1958] 34 ITR 802 (SC); and (7) Alapati Venkataramiah v. CIT [1965] 57 ITR 185 (SC). 4. The learned counsel for the assessee submitted that in order to claim depreciation allowance under section 32 of the Income-tax Act, 1961, two conditions have to be fulfilled. No. 1 that the assessee is owner of the property and No. 2 that the property was used for the purpose of business. Whether movable property was registered in the name of the assessee or not, is not relevant factor in view of the provisions of Sales of Goods Act. The trucks are movable property. The registration of the trucks in the name of the trust with the Transport Authority is not a decisive of the date on which the ownership vest in the trust. In most of the cases of purchase and sale of vehicles including motor cars, the transfer of ownership takes place just at the moment of the delivery of possession and transfer of registration in the name of the purchaser takes place generally later than the date of delivery of possession. In the present case there is nothing unusual about it. I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... :---- (1) R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570 (SC); (2) Smt. Kala Rani v. CIT [1981] 130 ITR 321 (Punj. Har.); (3) CIT v. Shahney Steel Press Works (P.) Ltd. [1987] 165 ITR 399 (AP); (4) CIT v. Sahney Steel Press Works (P.) Ltd. [1987] 168 ITR 811 (AP); (5) Parthas Trust v. CIT [1988] 169 ITR 334 (Ker.)(FB); and (6) CIT v. Nidish Transport Corpn. [1989] 44 Taxman 351 (Ker.). It was also pointed out that the decisions of the Hon'ble Supreme Court in the cases of Bhurangya Coal Co. and Alapati Venkataramiah are favourable to the assessee. It was also submitted that the decisions relied upon by the learned CIT (Appeals) in the case of Hindustan Cold Storage Refrigerations) relates to a case of immovable property whereas the case before the Tribunal relates to a movable property where no compulsory registration is necessary. The property passes simply by delivery of possession. As against this, the learned Departmental Representative Shri H.N. Nautiyal supported the action of the revenue authorities and relied on the order of the ITO as well as of the CIT (Appeals). In substance it was submitted that it was a colourable device by which the assessee wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... very of possession. The transfer of ownership of vehicle is not a matter governed by the provisions of the Motor Vehicles Act, 1939. Motor vehicle is a movable property. The transfer of ownership is governed by the sale of Goods Act. Transfer takes effect from the date of sale. As between the transferor and the transferee, the sale is complete even before the transfer is effected in the registration certificate. The failure to report the same to the registering authority may entail levy of penalty prescribed under section 31 of the Motor Vehicles Act or section 112 of the Act. Beyond that, it does not affect the passing of title. In the case of Panna Lal v. Chand Mal AIR 1980 SC 871, question regarding transfer of ownership of motor vehicle arose before the Hon'ble Supreme Court. The Hon'ble Supreme Court held that for the transfer of ownership of motor vehicle, mention of the name in the certificate of registration is not necessary and the vehicle can be sold and purchased without following the procedure prescribed under section 31. In view of decision of the Hon'ble Supreme Court cited above, it is clear that the legal ownership of truck is vested in the trust as soon as an agree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... from hiring of the trucks for the trust. In law trust and firm are two different entities and separate provisions govern both. Merely trustees are also partners in the firm will not by itself make the whole affair as a colourable device. In the case of McDowell Co. Ltd. the Hon'ble Supreme Court has not disapproved every legitimate tax planning but it disapproved in colourable device as a part of tax planning which is clear from the opening sentence "Tax planning may be legitimate provided it is within the framework of the law". Therefore, if the planning is within the framework of law, it is not treated as a colourable device. It will be pertinent to mention here that in the case of CWT v. Arvind Narottam [1988] 173 ITR 479 the Hon'ble Supreme Court has surveyed the decision of McDowell Co. Ltd. and made certain observations at page 487. It was also pointed out by the learned counsel for the assessee that the decision in the case of McDowell Co. Ltd. is under consideration of the Hon'ble Supreme Court. In view of totality of the facts and circumstances cited above, we are of the opinion that the decision in the case of McDowell Co. Ltd. cannot advance the case of the reven ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the date on which the ownership vests with the trust. In view of this position, the assessee becomes owner of the property and he used the same for the purpose of his business. Therefore, in view of the decision of Hon'ble Kerala High Court in the case of Nidish Transport Corpn. and the decision of Hon'ble Calcutta High Court in the case of CIT v. Salkia Transport Associates [1983] 13 Taxman 191 (Cal.) and the decision of Kerala High Court in the case of Parthas Trust, the assessee is entitled to depreciation. It is pertinent to mention here that the department in subsequent assessment year 1987-88 has itself allowed depreciation to the assessee trust which is clear from the order of the CIT (Appeals) dated 18-5-1990, where following the decision of Kerala High Court in the case of Nidish Transport Corpn. and decision of Allahabad High Court in the case of Addl. CIT v. U.P. State Agro Industrial Corpn. Ltd. [1981] 127 ITR 97 the CIT (Appeals) has allowed depreciation to the assessee. In view of this, we are of the opinion that the assessee is entitled to depreciation as claimed. We, therefore, set aside the order of the CIT (Appeals) and direct the Income-tax Officer to allow depre ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
