Ownership for Depreciation: Kerala High Court Allows Claim for Unregistered Buildings

The High Court of Kerala ruled in favor of a private trust, allowing them to claim depreciation on buildings not registered in their name. The court held that ownership, for depreciation purposes under section 32 of the Income-tax Act, extends to the entity entitled to income from the property and using it for business or profession, irrespective of formal registration. The judgment emphasized that dominion over the building and its business use determine ownership for depreciation claims. Consequently, the court disposed of the Income-tax reference in favor of the trust based on these interpretations.

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Issues involved: Whether the assessee is entitled to claim depreciation on buildings not registered in their name.

Summary:
The High Court of Kerala addressed the issue of whether the assessee, a private trust, was entitled to claim depreciation on certain buildings not registered in their name. The Assessing Officer initially disallowed the depreciation claim, citing lack of registration in the name of the assessee-trust. However, the first appellate authority ruled in favor of the assessee, stating that depreciation was allowable as the buildings were constructed by the trust. The Tribunal upheld this decision, emphasizing that ownership of the land was not a prerequisite for claiming depreciation under section 32 of the Income-tax Act.

The Department's counsel referred to a previous case where it was held that depreciation cannot be claimed by someone without a real connection to the asset, emphasizing the requirement for ownership to claim depreciation. In response, the assessee's counsel cited Supreme Court decisions highlighting the broader interpretation of ownership under section 32 of the Income-tax Act. The Supreme Court's stance was that ownership, for the purpose of claiming depreciation, extends to the person entitled to receive income from the property and using it for business or profession, regardless of formal registration requirements.

Considering the facts presented and the Supreme Court's interpretations, the High Court ruled in favor of the assessee, affirming their entitlement to claim depreciation on the buildings they had constructed. The judgment aligned with the principle that the dominion over the building and its use for business purposes determine ownership for depreciation claims under section 32 of the Income-tax Act.

Therefore, the Income-tax reference was disposed of in favor of the assessee based on the above analysis and legal interpretations.

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