Depreciation on partitioned HUF assets follows takeover value, not historical family cost, for tax purposes.

On partition of a Hindu undivided family, depreciation for an asset allotted to a member is computed with reference to the value at which the member takes over the asset, not the original cost to the larger joint family. Where the asset is allotted on a real valuation or auction price, that amount constitutes the member's cost for depreciation purposes under the Income-tax Act, 1922. The historical family cost does not continue to govern the asset in the hands of the divided member, although a concurring view treated the member's pre-existing share differently from the portion acquired on partition.

---

---

Issues: Whether, on partition of a Hindu undivided family, depreciation allowance for the asset allotted to a member is to be computed on the original cost to the larger joint family or on the valuation at which the assessee took over the asset.

Analysis: The relevant allowance under section 10(2)(vi) of the Income-tax Act, 1922 is computed with reference to the original cost to the assessee and, for assets acquired before the previous year, the written down value defined in section 10(5). On partition, the member who becomes entitled to a specific asset acquires absolute title to that asset in substance, and where the asset is allotted on a real valuation or through competitive bidding, that valuation represents the cost to the divided member for the asset taken over. The original cost to the erstwhile joint family does not remain the cost of the asset in the hands of the member for depreciation purposes.

Conclusion: Depreciation allowance is to be computed on the basis of the valuation at which the assessee took over the assets, not on the original cost to the larger joint family.

Concurring Opinion: Shah J. agreed that the appeal should succeed, but treated the assessee's own 10/16th share as continuing on the original family cost, while the acquired 6/16th share was to be taken at the value paid on partition. On that view also, the appeal was allowed, with the High Court's order being modified.

Final Conclusion: The partition-based valuation governed the depreciation computation and the appeal was allowed with costs.

Ratio Decidendi: Where a joint family asset is allotted on partition at a real valuation or auction price, the cost to the divided member for depreciation is the value at which the asset is taken over, not the historical cost to the former joint family.

---