Depreciation on hire purchase equipment depends on ownership, and the claim failed without a finding that title had passed.

Depreciation under section 5(1) of the Kerala Agricultural Income-tax Act was available only for buildings, machinery, plant and furniture that were the assessee's property. The Kerala HC held that depreciation on sprinkler equipment acquired on hire purchase could not be allowed without a finding that ownership had passed to the assessee for the relevant assessment year, which depended on whether the last instalment had been paid before that year began. Because the Tribunal had allowed depreciation without deciding that essential factual question, its conclusion was unsustainable. The allowance of depreciation was set aside and the matter remitted to the Tribunal for fresh determination on ownership and payment under the hire purchase agreement.

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Issues: Whether depreciation on sprinkler equipment acquired on hire purchase basis was allowable under section 5(1) of the Kerala Agricultural Income-tax Act, 1950, without a finding that the assessee had become the owner of the machinery for the relevant assessment year.

Analysis: Depreciation under section 5(1) is allowable only in respect of buildings, machinery, plant and furniture that are the property of the assessee. The Tribunal allowed depreciation merely because the sprinkler equipment was acquired on hire purchase, but it did not record a finding whether the last instalment under the agreement had been paid before the relevant assessment year commenced, which would determine whether ownership had passed to the assessee. As that factual aspect was essential to decide eligibility for depreciation, the Tribunal's conclusion was unsustainable.

Conclusion: The Revenue succeeded to the extent that the finding allowing depreciation was set aside and the matter was remitted to the Tribunal for fresh determination on ownership and payment of instalments under the hire purchase agreement.

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