Ownership requirement for depreciation and development rebate excludes a hirer of a bus under hire purchase

Depreciation allowance under the Indian Income-tax Act, 1922 is available only for an asset that is the assessee's property, and development rebate follows the same ownership requirement because it is linked to the actual cost of the machinery or plant to the assessee. Applying that principle, a bus held under a hire purchase arrangement by a non-owner does not qualify for either allowance. Section 12(3) was read consistently with this position, supporting the rule that allowances on hired assets belong to the owner of the property. Authorities cited for the assessee did not establish entitlement for a hirer without ownership.

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Issues: Whether the assessee, who held a bus under a hire purchase agreement and was not its owner during the relevant year, was entitled to depreciation allowance and development rebate under section 10(2)(vi) and section 10(2)(vib) of the Indian Income-tax Act, 1922.

Analysis: The statutory language of section 10(2)(vi) makes depreciation allowable only in respect of an asset being the property of the assessee. The same ownership requirement applies to development rebate under section 10(2)(vib), since the rebate is computed with reference to the actual cost of the machinery or plant to the assessee and is part of the same scheme of allowances. Section 12(3) also supports the position that where an asset is let on hire, the allowance belongs to the owner of the property. The authorities relied on for the assessee did not decide that a hirer who is not the owner is entitled to these allowances.

Conclusion: The assessee was not entitled to depreciation allowance or development rebate, because ownership of the asset was a necessary condition and was not satisfied.

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