RAVI SABHARWAL Vs. INCOME TAX OFFICER
INCOME TAX APPELLATE TRIBUNAL
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D.S.Meenakshi Sundaram, -
(1.) THE only point for decision in this appeal is whether the appellant is entitled to allowance of depreciation in respect of his motor car which was used for the purposes of the business of the partnership firm, Prakash Book Depot, in which he was a partner.
(2.) The appellant is a partner in Prakash Book Depot. For the assessment year 1977-78, relevant for the previous year ended 31-3-1977, he declared an income of Rs. 19,165. While taking the share income from the firm Prakash Book Depot as determined in the firm's case at Rs. 26,689, the ITO disallowed the assessee's claim for depreciation on his car. The ITO held that the assessee was not entitled to any depreciation because the car was used by the firm Prakash Book Depot and the assessee had not claimed any expenses for running the car. According to the ITO, this clearly showed that the car was not used by the assessee and so he was not entitled to any depreciation on the car.
On appeal the AAC held that depreciation on car can legally be allowed only against the asset if it is owned by an assessee and if it is used by him in yielding business profits under Section 32 of the Income-tax Act, 1961 ('the Act'). She further held that in the instant case though the car belonged to the assessee it was used by the firm Prakash Book Depot for earning its business profits. According to the AAC, a firm and its partners are separate legal entities for purposes of income-tax and that the appellant was not using the car for earning his income, a fact borne out from records because all the running expenses of the car were being debited to the firm's account. She, therefore, held that the ITO's reasoning for rejecting the appellant's claim for depreciation on his car was in order and, therefore, dismissed the assessee's appeal. Aggrieved by this order, the appellant has come up in appeal before the Tribunal.
(3.) AFTER hearing the learned counsel on both sides, I am unable to agree with the view of the departmental authorities that the appellant is not entitled to allowance of depreciation in respect of his car, in the computation of his income. In my view the assessee's case is directly governed by the decision of the Madras High Court in CIT v. K.G. Sadagopan  104 ITR 412. It was held by the Madras High Court in that case that in the case of a partnership, the business was not carried on by the partnership as such but by the partners and, therefore, the assessee had used the assets for the purpose of his business and as he was a partner of the firm, he was entitled to depreciation thereon. Their Lordships followed the decision of the same High Court in M.Ct. Muthiah v. CIT  97 ITR 516 (Mad.) which followed the decision of the Supreme Court in CIT v. Ramniklal Kothari  74 ITR 57. In the case of the present appellant before me, there is no dispute that the car is owned by him and that the said car has been utilised for the purpose of business of his partnership firm Prakash Book Depot. It, therefore, follows that the said car has been used for the purpose of his business by the assessee and, therefore, he is entitled to depreciation on his car under Section 32. I, therefore, respectfully follow this decision of the Madras High Court and allow the appellant's claim. The decision of the Delhi High Court in CIT v. Hindustan Cold Storage Refrigeration (P.) Ltd.  103 ITR 455 relied on by the appellant in his grounds of appeal is not directly in point and it is not, therefore, necessary to discuss the same.;
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