Depreciation on partnership asset allotment upheld where building passed on dissolution without a registered sale deed.

Depreciation on a factory building was held admissible where the assessee received the asset on dissolution of a partnership firm without a registered sale deed. The governing principle applied was that depreciation is allowable to the owner of an asset used for business, and a dissolution does not amount to a purchase transfer requiring registered conveyance. The allotment of property on settlement of accounts was treated as a mutual adjustment of partners' rights, so the building was regarded as owned by the assessee for depreciation purposes.

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Issues: Whether depreciation on the factory building was admissible where the assessee acquired the building on dissolution of a partnership firm without execution of a registered sale deed.

Analysis: Depreciation under the governing provision is allowable where the asset is owned by the assessee and used for the purposes of the business. The earlier reliance on the rule applicable to purchase transactions was distinguished because, on dissolution of a partnership, the property falls to the share of a partner on settlement of accounts and the transaction does not amount to a transfer requiring a registered conveyance. The Court also noted that dissolution of a partnership involves only a mutual adjustment of rights between partners and does not attract the concept of transfer of assets in the relevant sense.

Conclusion: Depreciation on the building was allowable, and the assessee's claim was upheld.

Final Conclusion: The revenue's challenge to the allowance of depreciation on the building failed, while the remaining part of the appeal was disposed of in the assessee's favour only to the extent indicated.

Ratio Decidendi: An asset allotted to a partner on dissolution of a partnership is treated as owned by that partner for depreciation purposes, and no registered sale deed is necessary where there is no transfer by purchase.

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