High Court allows depreciation claim for trucks despite registration in original owners' names

The High Court upheld the Tribunal's decision, ruling in favor of the assessee and allowing the depreciation claim for the three trucks under section 32 of the Income Tax Act, 1961. The Court found that the trucks became assets of the firm and were used through agents, satisfying the conditions for depreciation claim despite registration remaining in the names of the original owners. Precedents from Bombay High Court and Allahabad High Court supported the interpretation that ownership for depreciation purposes does not require complete title vesting in the assessee, but the ability to exercise ownership rights independently.

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Issues involved: Interpretation of depreciation claim under section 32 of the Income Tax Act, 1961 for three trucks owned by a partnership firm.

Summary:
The Tribunal referred the question of whether the assessee was entitled to claim depreciation under section 32 of the IT Act, 1961 for three trucks. The firm, constituted under a partnership deed, had seven partners with some contributing capital and others contributing trucks. The AO and the AAC initially rejected the depreciation claim, stating the assessee did not satisfy the conditions of owning and using the trucks. However, the Tribunal found that the trucks became assets of the firm and were used through agents, thus allowing the depreciation claim under section 32(1) of the Act.

The Tribunal concluded that all three vehicles became assets of the firm and were used through agents, with income from the vehicles credited in the firm's books. Despite registration remaining in the names of the three partners who initially owned the vehicles, the Tribunal upheld the assessee's claim for depreciation under section 32.

Referring to a Bombay High Court case, it was noted that registration under the Motor Vehicles Act is not essential for ownership of vehicles, but rather an obligation for running them in public places. Additionally, a decision by the Allahabad High Court clarified that ownership under section 32 does not require complete title vesting in the assessee, but the ability to exercise ownership rights independently.

Based on these precedents, the High Court upheld the Tribunal's decision, ruling in favor of the assessee and allowing the depreciation claim for the three trucks under section 32 of the Income Tax Act, 1961.

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