Partition of Hindu family property is not inheritance, and predecessor depreciation cannot reduce written down value under tax law.

Property received on partition of a Hindu undivided family is not property acquired by gift or inheritance for section 10(5)(c) of the Income-tax Act, 1922, because partition only divides existing joint family property among members or groups. On written down value under section 10(5)(b), only depreciation actually allowed to the assessee can be deducted; depreciation allowed to the predecessor Hindu undivided family cannot be carried over to the new assessee arising on partition. The stated ratio is that inheritance treatment does not apply on partition, and predecessor depreciation is not deductible against the assessee's actual cost.

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Issues: (i) Whether, on a partition of a Hindu undivided family, property taken by the smaller group could be treated as property acquired by inheritance for the purpose of section 10(5)(c) of the Income-tax Act, 1922. (ii) Whether, in computing the written down value under section 10(5)(b), the initial depreciation allowed to the earlier Hindu undivided family could be deducted from the actual cost for the assessee.

Issue (i): Whether, on a partition of a Hindu undivided family, property taken by the smaller group could be treated as property acquired by inheritance for the purpose of section 10(5)(c) of the Income-tax Act, 1922.

Analysis: Property received on partition is not property obtained by gift or inheritance within the meaning of section 10(5)(c). A partition merely allocates to each member or group what already formed part of the joint family property, and the taking of property on partition is not equivalent to succession by inheritance.

Conclusion: Section 10(5)(c) did not apply, and the assessee was not to be treated as having inherited the assets.

Issue (ii): Whether, in computing the written down value under section 10(5)(b), the initial depreciation allowed to the earlier Hindu undivided family could be deducted from the actual cost for the assessee.

Analysis: Section 10(5)(b) permits deduction only of depreciation actually allowed to the assessee. The depreciation of Rs. 1,01,814 had been allowed to the predecessor Hindu undivided family, not to the assessee who came into existence on partition. That amount could not therefore be deducted in computing the written down value for the assessee.

Conclusion: The initial depreciation allowed to the predecessor family was not deductible under section 10(5)(b), and the assessee's computation of written down value was correct.

Final Conclusion: The reference was answered in favour of the assessee on both questions, and the department's challenge to the computation of written down value failed.

Ratio Decidendi: For the purposes of section 10(5)(b) of the Income-tax Act, 1922, only depreciation actually allowed to the assessee is deductible in determining written down value, and property obtained on partition of a Hindu undivided family is not property acquired by inheritance under section 10(5)(c).

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