1992 (9) TMI 74 - HC - Income Tax

Purchaser using truck after paying consideration entitled to depreciation under Section 32 despite registration remaining in vendor's name

Commissioner Of Income-Tax Versus Dilip Singh Sardarsingh Bagga

HC held that a purchaser who paid valuable consideration and used a truck in his business is entitled to depreciation under section 32, despite the ... Depreciation on the truck which was registered in the name of another person - Whether the depreciation was admissible under section 32 of the Income-tax Act, 1961, to the beneficial owner of the truck and the decision of the Tribunal was in accordance with the provisions of law ? - assessee claimed that the truck was beneficially owned by him for his business of transportation for hire - HELD THAT:- From a plain reading of 31 of the Motor Vehicles Act, 1939 (corresponding to section 50 of the Motor Vehicles Act, 1988), it is clear that this section does not deal with transfer of the ownership of any motor vehicle nor does it impose any restriction on transfer of such ownership. It simply obligates the transferor and the transferee to report within the specified time from the date of transfer the fact of transfer to the registering authority. This section, in fact, presupposes transfer of ownership of a motor vehicle. It is only after the actual transfer is effected that the obligation contemplated by this section comes into operation. Moreover, non-compliance with the requirement of this section does not in any way affect or invalidate the transfer of ownership of the vehicle it only makes the transferor or the transferee liable to prosecution or penalty. Under the circumstances, reliance on section 32 of the Motor Vehicles Act, 1939, for determining the ownership of a vehicle is completely misplaced. This section has no bearing on the validity of the transfer of a motor vehicle which has to be decided in each case having regard to the facts and circumstances thereof. Thus, we are of the clear opinion that the assessee, who had purchased the motor vehicle for valuable consideration and used the same for his business, cannot be denied the benefit of depreciation on the ground that the transfer was not recorded under the Motor Vehicles Act or that the vehicle stood in the name of the vendor in the records of the authorities under the Motor Vehicles Act. Accordingly, both the questions referred to us are answered in the affirmative and in favour of the assessee and against the Revenue. Issues Involved:1. Whether the Appellate Tribunal was correct in upholding the order of the Appellate Assistant Commissioner allowing depreciation on the truck which was registered in the name of another person.2. Whether the depreciation was admissible u/s 32 of the Income-tax Act, 1961, to the beneficial owner of the truck and whether the decision of the Tribunal was in accordance with the provisions of law.Summary:Issue 1: Depreciation on Truck Registered in Another Person's NameThe assessee purchased a truck from a vendor who did not have sufficient funds and thus registered the truck in his own name due to restrictions under the Motor Vehicles Act. The assessee financed the purchase, operated the truck, and paid all related expenses. The Income-tax Officer disallowed the depreciation claim because the truck was not registered in the assessee's name. However, the Appellate Assistant Commissioner allowed the depreciation, recognizing the assessee as the beneficial owner. The Tribunal upheld this decision, leading to the Revenue's appeal.Issue 2: Admissibility of Depreciation u/s 32Section 32 of the Income-tax Act allows depreciation on assets 'owned by the assessee' and 'used' for business purposes. The court noted that ownership under this section does not require registration under the Motor Vehicles Act. Citing various precedents, including R. B. Jodha Mal Kuthiala v. CIT and CIT v. Alpana Talkies, the court emphasized that beneficial ownership and the ability to exercise ownership rights are sufficient for claiming depreciation. The court also referenced decisions from the Allahabad, Calcutta, and Kerala High Courts, which supported the view that registration is not essential for ownership under the Income-tax Act.Conclusion:The court concluded that the assessee, having purchased the truck for valuable consideration and used it for business, is entitled to depreciation despite the truck being registered in the vendor's name. Both questions were answered in the affirmative, favoring the assessee and against the Revenue. No order as to costs was made.