Partnership assets and depreciation: business assets introduced into a firm qualify for depreciation, barring duplicate partner claims.

Existing business assets contributed to a partnership and used in the firm's business become partnership property for depreciation purposes. The exclusion of proprietary rights for working partners in the deed did not keep the assets in the original proprietor's individual ownership; it only denied those rights to the other partners. Once the assets and machinery were used by the partnership, the statutory conditions for depreciation under section 10(2)(vi) of the 1922 Act and section 32(1) of the 1961 Act were met. Accordingly, depreciation belonged to the firm, and the individual partner could not claim depreciation separately for the same assets.

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Issues: Whether assets and machinery used in the partnership business were partnership assets so as to entitle the firm to depreciation under the Income-tax Act, and whether the partner who owned the original business assets could independently claim depreciation in respect of the same assets.

Analysis: The partnership deed showed that the business was to be continued in partnership and that all existing assets were brought into the partnership for that purpose. The clause denying the working partners any right or claim in the partnership assets did not keep the assets in the individual ownership of the original proprietor; it only excluded proprietary rights in favour of the working partners. Once the assets and machinery became partnership property and were used in the business, the statutory conditions for depreciation were satisfied under section 10(2)(vi) of the Income-tax Act, 1922 and section 32(1) of the Income-tax Act, 1961. As the assets belonged to the partnership, the alternative claim of the individual partner could not stand for the same assets.

Conclusion: The firm was entitled to depreciation on the assets and machinery used in its business, and the partner's separate claim for depreciation in respect of the same properties was not sustainable.

Final Conclusion: The reference was answered mainly in favour of the assessee on the firm's depreciation claim, with the partner's overlapping claim failing as a consequence.

Ratio Decidendi: Where existing business assets are brought into a partnership for carrying on the business, and the assets are used by the partnership, depreciation is allowable to the firm as partnership property even if the other partners have no proprietary claim in those assets.

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