1990 (12) TMI 113 - AT - Income Tax

Trust's Ownership Upheld in Property Dispute

The Tribunal rejected the Department's appeal, affirming that the property legally belonged to the trust after being allotted on dissolution of the firm. ... Factory Building, Partnership Firm Issues:Appeal and cross objection related to assessment year 1983-84.Analysis:The case involved a dispute regarding the ownership of a factory building and machinery for the purpose of claiming depreciation. The Department argued that since no registered deed was executed transferring the property, the legal ownership remained with the original owner. However, the assessee trust contended that the property belonged to the firm and depreciation had been granted prior to the entry of the trust as a partner. The key argument was whether the property transfer on dissolution of the firm required a registered deed. The AAC had allowed depreciation on the factory building, but the Department appealed the decision.The Tribunal analyzed the legal position under the Indian Partnership Act, emphasizing that property contributed to a partnership becomes part of the partnership property without the need for a registered deed. Citing various decisions, including the Supreme Court case of Addanki Narayanappa v. Bhaskara Krishnappa, the Tribunal highlighted that the interest of partners in partnership assets is movable property and does not require compulsory registration under the Registration Act. The Tribunal also referred to the decision in Sunil Siddharthbhai v. CIT, where it was held that no registered document was necessary for a partner to contribute immovable property to a partnership firm.Based on the legal principles established by previous judgments, the Tribunal concluded that when the property was contributed to the partnership as capital and treated as partnership property, the legal ownership transferred to the firm. Therefore, on dissolution of the firm, the property in question belonged to the assessee trust, entitling it to claim depreciation. The Tribunal dismissed the Department's reliance on other cases that did not address the specific issue of property contribution to a partnership and its subsequent allocation on dissolution.Ultimately, the Tribunal rejected the Department's appeal against granting depreciation to the assessee trust, affirming that the property legally belonged to the trust after being allotted on dissolution of the firm. The decision was based on the provisions of the Partnership Act and established legal precedents regarding property transfer within a partnership structure.