Commissioner of Income Tax vs K.G. Sadagopan

Ramaswami, J.—The assessee, a medical practitioner, was carrying on the profession of medicine in the name of Dr. K. G. Sadagopan''s

Clinic and Nursing Home, for several years On April 1, 1965, he took his son, who is also a registered medical practitioner as a partner in a newly

constituted firm. They agreed to share the earnings in the proportion of two-thirds and one-third, and it was provided in the partnership deed that

the assessee''s son shall be only a working partner and will not be entitled to the assets of the clinic and the nursing home, which shall be the sole

property of the assessee. The partnership firm claimed deduction for depreciation in respect of the assets of the clinic and the nursing home. When

the Income Tax Officer indicated that the deduction could not be allowed on the ground that the assets did not belong to the firm, the assessee

claimed a deduction of the same in his individual assessment. This was also rejected by the Income Tax Officer on the ground that the assets are

used by the partnership and the profession is carried on by the firm and not by the assessee. But, on appeal, the Appellate Assistant Commissioner

was of the view that since the firm has no legal existence in law, the business carried on by the firm is actually the business carried on by the

partners, and, that, therefore, the assessee was entitled to claim depreciation in his individual assessment. The Tribunal confirmed the order of the

Appellate Assistant Commissioner. At the instance of the assessee the following question has been referred:

Whether, on the facts and in the circumstances of the case, the Appellate Tribunal was right in holding that the assessee was entitled to deduction

on account of depreciation on assets owned by him and used for the profession of the firm of which he was a member ?

The depreciation is allowable u/s 32 of the Income Tax Act in respect of buildings, machinery, plant or furniture owned by the assessee and

used for the purpose of business or profession. On the finding of the Income Tax Officer, the assessee is the owner of the assets of the clinic and

the nursing home. The only dispute was whether these assets were used for the purpose of the business or the profession of the assessee. This

court has held in M. Ct. Muthiah Vs. Commissioner of Income Tax, following the decision in Commissioner of Income Tax, Bihar Vs. Ramniklal

Kothari, that in the case of a partnership the business is not carried on by the partnership as such, but the business shall be deemed to be the

business of the partners If that is so, certainly the assessee in this case had used the assets for the purpose of his business as he was a partner of

the firm. The Appellate Assistant Commissioner and the Tribunal were, therefore, right in holding that the depreciation was allowable in the

individual assessment of the assessee. We, accordingly, answer the reference in the affirmative and against the revenue. The assessee will be

entitled to his costs. Counsel''s fee Rs. 250.