Ship ownership and depreciation under section 32 require valid transfer under the Merchant Shipping Act.

Depreciation under section 32 depends on ownership of the asset, and for an Indian ship ownership must be transferred in accordance with the Merchant Shipping Act, 1958, including previous Central Government approval and a written instrument of transfer. On the stated facts, no valid approval or effective transfer document was established, so contractual descriptions and treatment of the assessee as owner were insufficient to create legal ownership. De facto ownership was not recognised for section 32 purposes in these circumstances, and depreciation was therefore not available.

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Issues: Whether depreciation under section 32 was allowable to the assessee in respect of the ship, where ownership and transfer under the Merchant Shipping Act were disputed.

Analysis: Depreciation under section 32 is available only to the assessee who owns the asset. For a ship, ownership is governed by the Merchant Shipping Act, 1958, which requires previous approval of the Central Government for transfer or acquisition of an Indian ship and an instrument in writing for such transfer. On the facts, no valid approval or duly executed transfer instrument was established. The agreements and descriptions treating the assessee as owner did not amount to a legally effective transfer, and there is no recognised concept of de facto ownership for section 32 purposes in these circumstances.

Conclusion: The assessee was not the owner of the ship for purposes of section 32 and was not entitled to depreciation.

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