WHETHER A BENEFICIAL OWNER OF AN ASSET CAN CLAIM DEPRECIATION UNDER THE INCOME-TAX ACT?

WHETHER A BENEFICIAL OWNER OF AN ASSET CAN CLAIM DEPRECIATION UNDER THE INCOME-TAX ACT?

Case: CIT v. Smt. A. Sivakami and Another (2010) 322 ITR 64

Section 32 (1) of the Income-Tax Act

Facts

Even though she was not the registered owner of the same, the assessee, running a proprietary concern, claimed depreciation on three buses. The Assessing Officer rejected the claim of the assessee on the ground that the assessee was not the owner of the three buses and the basic condition under section 32(1) to claim depreciation is that the assessee should be the owner of the asset.

The Supreme Court, in CIT v. Podar Cement P Ltd. (1997) 226 ITR 625, observed that the owner need not necessarily be the lawful owner entitled to pass on the title of the property to another. Since, in this case, the assessee has made available all the documents relating to the business and also established before the authorities that she is the beneficial owner, she is entitled to claim depreciation even though she is not the legal owner of the buses.