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Issues: Whether depreciation under section 32 of the Income-tax Act was allowable to the assessee trust in respect of a factory building allotted to it on dissolution of the partnership firm, notwithstanding the absence of a registered deed from the original contributor of the property.
Analysis: Property brought in by a partner as capital contribution becomes partnership property under section 14 of the Indian Partnership Act, and no registered instrument is required for such contribution of immovable property. The mode of transfer contemplated by the Partnership Act is distinct from the ordinary modes under the Transfer of Property Act and is not controlled by the Registration Act in the manner suggested by the Department. The legal position is supported by the settled view that a partner's contribution of immovable property to the firm does not require registration, and that on dissolution the allotment of the asset to a partner or transferee represents the taking of a share in the partnership assets rather than a fresh transfer requiring a registered conveyance.
Conclusion: Depreciation on the factory building was allowable to the assessee trust, and the Department's objection based on absence of a registered deed failed.
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