ADDITIONAL COMMISSIONER OF INCOME-TAX VS UNITED MOTOR TRANSPORT SERVICE ASSOCIATION
1993 P T D 518
[190 ITR 13]
[Allahabad High Court (India)]
Before B.P. Jeevan Reddy, CJ. and G.D. Dube, J
ADDITIONAL COMMISSIONER OF INCOME-TAX
versus
UNITED MOTOR TRANSPORT SERVICE ASSOCIATION
Income-tax Reference No. 191 of 1979, decided on 23/01/1991.
Income-tax---
----Depreciation---Condition precedent ---Assessee must be the owner of the assets in question---Income-tax Act, 1922, S.10(2)(vi).
Depreciation under the provisions of section 10(2)(vi) of the Income -tax Act of 1922 is admissible only where the assessee is the owner of the assets in question.
JUDGMENT
B.P. JEEVAN REDDY, CJ.---The Income-tax Appellate Tribunal, Allahabad, has referred the following question under section ?.56(2) of the Income Tax Act, 1961, at the instance of the Revenue.
"Whether, on the facts and in the circumstances of the case, was the Tribunal in law, justified in taking into consideration the depreciation suffered by the buses in question in estimating the net taxable income?"
The respondent assessee did not file any returns for the assessment years 1951-52 to 1956-57. However, on the basis of certain material, the Income-tax Officer initiated proceedings under section 34 of the Indian Income Tax Act, 1922.
Wherein it was claimed that the buses belonged to the members individually, and that no income arising from the plying of those buses was assessable in the hands of the assessee. Its case was that the income of each bus should be assessed separately in the hands of its respective owner. This case was, however, rejected and assessment was made treating the respondent as an unregistered firm. On appeal, the Appellate Assistant Commissioner reduced the quantum but rejected the claim for depreciation to be forwarded by the assessee. On further appeal, the Tribunal adopted a different course. But, before we notice the course adopted by the Tribunal, it would be appropriate to notice its findings. These are:
(1) The respondent-assessee was not the owner of the buses and the buses were owned by individual member's.
(2) In this sense, depreciation cannot be allowed in the hands of the assessee. Since the assessee is not the owner of the buses but at the same time the buses must have depreciated on account of constant plying and, therefore, some relief must be given in the assessment.
(3) Since the exact figures of income or exact costs of the buses of written down value are not available an appropriate method may be adopted for determining the assessable income.
Accordingly, the Tribunal assessed the income of the respondent assessee taking into consideration the depreciation that may have been suffered by the buses due to their constant plying. It is thereupon that this reference was obtained. The only question is whether the Tribunal is justified in taking into consideration the depreciation suffered by the buses in question in estimating the net taxable income. Section 10(2)(vi) of the Indian Income -tax Act, 1922, provided for depreciation of machinery amongst other assets provided they were the "property of the assessee". The said idea has been made clearer in section 32 of the 1961 Act which says that the machinery, etc., must be "owned by the assessee". Be that as it may, the Supreme Court has recently construed the said word occurring in section 10(2)(vi) of the 1922 Act and held that depreciation under the said clause is admissible only where the assessee is the owner of the property. It was held inadmissible where the assessee owned only a part of machinery or other property in the case. In this case, the Tribunal has found that the buses were not owned by the assessee and so the Tribunal could not have taken into consideration the depreciation suffered by the buses while determining the net income of the assessee.
The question referred is accordingly answered in the negative, i.e. in favour of the Revenue and against the assessee. No costs.
M.BA./2047/TQuestion answered.