Commissioner of Income Tax vs Smt. A. Sivakami

K. Raviraja Pandian, J.—The Revenue has come up on appeal against the common order of the income tax Appellate Tribunal, Madras ""D

Bench, dated September 21, 2007 passed in I.T.A. Nos. 2805 and 2806/ Mds/2005 against the assessees-wife and husband, respectively, in

respect of the assessment year 2002-03 by formulating the following common substantial questions of law:

1.Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowing depreciation of Rs. 4,88,901 when the assessee

was only a beneficial owner of the bus ?

2.Whether u/s 32 of the income tax Act, 1961, depreciation can be claimed by the beneficial owners or the real owner of the asset ?

As the issue involved in both these appeals is one and the same, the facts relating to T.C.A. No. 1261 of 2009 are stated below by taking it as a

typical case for the sake of discussion:

The relevant assessment year is 2002-03. The assessee is an individual and filed return of income for the assessment year 2002-03 on October

31, 2002, admitting total income of Rs. 74,100 + agricultural income of Rs. 74,000 and the same was processed u/s 143(1). A survey u/s 133A

was conducted in the business premises of the assessee on March 13, 2002, and a notice u/s 143(2) was issued to the assessee during the course

of survey. The assessee''s husband in his sworn statement stated that he and his wife had borrowed Rs. 50 to 55 lakhs for their transport business

and incurred expenses towards maintaining the buses and as such entitled to depreciation. On scrutinising the return of income it was found that the

assessee claimed depreciation of Rs. 8,25,883. To verify the correctness of the claim the assessee was asked to produce the copies of route

permit under RC books of all the vehicles. It was found that the assessee was not the owner of three buses and the basic condition u/s 32(1) of the

income tax Act to claim depreciation is that the assets should be owned by the assessee and on that ground the claim of depreciation in respect of

three buses bearing Registration Nos. TN 36 L 7888, TN 36 M 7888 and TN 36 H 7889 stood in the name of K. Chinnusamy for the former

two buses and one K. Poongodi for the later bus was denied on the ground that according to section 32(1) of the income tax Act the basic

condition to claim depreciation was that the assets should be owned by the assessee. Despite the fact: that the assessee has made available much

more voluminous documents to prove that the income and the expenditure has been received and expended only by the assessee the Assessing

Officer on the ground that mere admission of the income of the assessee in the assessee''s hands cannot per se permit the assessee to claim higher

rate of depreciation and rejected the claim of depreciation sought for by the assessee. On appeal at the instance of the assessee, the Commissioner

of income tax (Appeals) accepted the case of the assessee and allowed the appeal. The further appeal to the Tribunal has also ended in dismissal.

The present appeals are filed challenging the common order of the Tribunal dated September 21, 2007, made in respect of the assessee as well as

her husband.

We heard the argument of the learned counsel for the Revenue, who assailed the order of the Tribunal on the premise that in respect of the three

vehicles as stated in the summation of facts, the assessee was not the owner.

The relevant portion of provision section 32(1) reads as follows:

In respect of depreciation of-

(i) buildings, machinery, plant or furniture, being tangible assets;

(ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible

assets acquired on or after the 1st day of April, 1998,

owned, wholly or partly, by the assessee and used for the purposes of the business or profession, the following deductions shall be allowed-

(i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof

to the assessee as may be prescribed;

(ii) in the case of any block of assets, such percentage on the written down value thereof as may be prescribed.

From the above provision, it is clear that the provision required that the tangible assets should be owned by the assessee wholly or partly. The

words ""owned wholly or partly"" have been considered by the Supreme Court and various High Courts and explained that under the common law

owner"" means a person who has got a valid title legally conveyed to him after complying with the requirements of law such as the Transfer of

Property Act, the Registration Act, etc., in the context of the income tax Act, 1961, having regard to the ground realities and further having regard

to the object of the Act, viz., to tax the income, ""owner"" is a person who is entitled to receive income from the property in his own right. In order

to claim the benefit of section 32 of the income tax Act, it is not necessary that the assessee should be a complete owner. The expression ""owner

used in section 32 of the Act has been considered by taking into account all its phrases and aspects. The owner need not necessarily be a lawful

owner entitled to pass on the title of the property to another. Vide Commissioner of Income Tax, Bombay etc. Vs. M/s. Podar Cement Pvt. Ltd.

etc., Commissioner of Income Tax Vs. General Marketing and Manufacturing Co. Ltd., and Commissioner of Income Tax Vs. Fazilka Dabwali

Tpt. Co. Pvt. Ltd., .

Having in mind the above proposition of law laid down by the courts, we shall consider the facts of the case. It could be seen from the order of

the first appellate authority the Commissioner of income tax (Appeals) that it is the case of the assessee before him that though the buses were not

in their names and permits were also not in their names they were the beneficial owners. In order to establish the beneficial ownership of the estate,

the assessee has furnished the documents relating to the loans obtained by the assessee for the purchase of the buses which are in the names of

others, the repayment of the loans were made out of the collections from the buses, the road tax, insurance, etc., were paid by the assessee; the

assessee has obtained undertaking from the persons in whose names the vehicles and permits are there for plying the buses in the name of M/s.

K.A.S. Transports; the entire collections from the buses is shown in their income and expenditure account; and the entire expenditure pertaining to

the buses including drivers'' salary, diesel, spares, R.T.O. tax, interest on the loans and other expenses were met by the assessee. The assessee has

also shown in the balance-sheet the buses under dispute as assets of M/s. K.A.S. Transports, which is a proprietary concern of the assessee.

Thus, the assessee has made available all the documents relating to the business and also established before the authorities that she is a beneficial

owner, though her name has not been shown as owner of the buses in the permit as well as the RC book and she is virtually the beneficial owner

and receiving the income from exploitation of buses and incurred expenses as stated above. The above stated principle laid down by the Supreme

Court and other High Courts is in favour of the assessee and in similar circumstances. Hence, we are of the view that the view taken by the first

appellate authority as confirmed by the Tribunal is in accordance with the requirements of the statutory provision, which has been explained by the

Supreme Court and other various High Courts. As such, there is no illegality or irregularity in the order of the Tribunal, which warrants interference

by this court by entertaining the appeals. For the foregoing reasons, the appeals are dismissed as devoid of merit and much less no substantial

question of law is involved to entertain the same.