Beneficial ownership governs vehicle depreciation where the assessee financed and possessed the assets despite benami or vendor registration.

Depreciation under section 32 was held allowable where motor vehicles were purchased in the name of benamidars or remained registered in vendors' names, if the assessee had paid the consideration, taken delivery, and was the real beneficial owner. The Tribunal held that, for movable property, ownership is not determined by Motor Vehicles Act registration alone; the benamidar held the asset in a fiduciary capacity under section 82 of the Indian Trust Act, 1882. It further held that the Benami Transactions (Prohibition) Act, 1988 did not retrospectively alter ownership of pre-commencement transactions or convert the benamidar into the owner. The earlier position on beneficial ownership therefore continued to apply.

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Issues: Whether depreciation under section 32 of the Income-tax Act, 1961 was allowable to the assessee in respect of motor vehicles purchased in the name of benamidars or in the name of vendors, where the assessee was the real/beneficial owner.

Analysis: The Tribunal held that for movable property such as motor vehicles, ownership is not governed by registration under the Motor Vehicles Act alone. Where the assessee paid the consideration and took delivery, the real ownership vested in the person who financed the purchase, while the benamidar held the property in a fiduciary capacity under section 82 of the Indian Trust Act, 1882. The Tribunal also held that the Benami Transactions (Prohibition) Act, 1988 did not alter ownership in respect of transactions entered into before its commencement, and that its restrictions on recovery of property did not convert the benamidar into the owner. Accordingly, the earlier legal position recognising beneficial ownership for depreciation continued to apply.

Conclusion: Depreciation was allowable to the assessee on the vehicles purchased in benami names as well as on vehicles purchased by the assessee but remaining registered in the vendor's name; the revenue's challenge failed.

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