Fractional ownership and depreciation: ownership alone supports the claim, and later Supreme Court law can justify rectification.

Depreciation under the Income-tax Act was confined to the owner of the asset, so a fractional owner of rice mill assets could not claim depreciation on a partial share. The Court treated the ownership requirement in the 1922 and 1961 Acts as substantively the same and applied the later Supreme Court ruling on fractional ownership. It also recognised that a subsequent authoritative Supreme Court decision can justify rectification under section 154 where the earlier assessment is contrary to declared law, and upheld refusal to refer questions under section 256(1) because the Tribunal had followed binding precedent.

---

---

Issues: (i) Whether a fractional owner of the assets of a rice mill is entitled to depreciation allowance under the Income-tax Act, 1961. (ii) Whether a subsequent Supreme Court decision can furnish the basis for rectification of an earlier assessment order under section 154 and whether the Tribunal was justified in refusing reference under section 256(1).

Issue (i): Whether a fractional owner of the assets of a rice mill is entitled to depreciation allowance under the Income-tax Act, 1961.

Analysis: The governing principle applied was that depreciation is available only to the owner of the asset and not to a person having only a fractional share. The Court treated the language of section 10(2)(vi) of the Indian Income-tax Act, 1922 and section 32(1) of the Income-tax Act, 1961 as expressing the same substantive requirement of ownership for claiming depreciation. On that basis, the earlier Supreme Court ruling on fractional ownership was held to govern the claim.

Conclusion: The claim to depreciation on a fractional share was not maintainable and was decided against the assessee.

Issue (ii): Whether a subsequent Supreme Court decision can furnish the basis for rectification of an earlier assessment order under section 154 and whether the Tribunal was justified in refusing reference under section 256(1).

Analysis: The Court held that a later authoritative decision can form the basis for rectifying an assessment if the earlier order is contrary to the law declared by the Supreme Court. Applying that principle, the rectification orders passed after the subsequent Supreme Court ruling were held to be proper. Since the Tribunal had proceeded on binding precedent, it was also justified in declining to refer the questions to the High Court under section 256(1).

Conclusion: Rectification under section 154 was upheld and the refusal to make a reference under section 256(1) was upheld.

Final Conclusion: The assessees were not entitled to depreciation on their fractional shares, and the rectification based on the later Supreme Court ruling was valid; the reference was rightly declined and the cases were dismissed.

Ratio Decidendi: Depreciation is allowable only to the owner of the asset, and a subsequent authoritative declaration of law by the Supreme Court may validly be applied in rectification proceedings under section 154.

---