The Commissioner Of Income Tax Erode v. K.p.arumugam

In the High Court of Judicature at Madras Dated : 23.11.2009 Coram :- The Honourable Mr.Justice K.RAVIRAJA PANDIANandThe Honourable Mr.Justice M.M.SUNDRESH Tax Case (Appeal ) Nos.1261 and 1262 of 2009and M.P.No.1 of 2009 The Commissioner of Income TaxErode. ... Appellantin both T.Cs. Vs.Smt.A.Sivakami5/760-A, Mettupalaniandavar Koil StreetBhavani. ... Respondentin T.C.A.No.1261 of 2009 K.P.Arumugam5/760-A, Mettupalaniandavar Koil StreetBhavani. ... Respondentin T.C.A.No.1262 of 2009 Appeals filed under Section 260A of the Income Tax Act against the order of the Income TaxAppellate Tribunal, Madras 'D' Bench, dated 21.9.2007 passed in I.T.A.Nos.2805 and2806/Mds/2005. For Appellant : Mr.J.Naresh KumarJUDGMENT(Judgment of the Court was deliveredby K.RAVIRAJA PANDIAN,J.) The revenue has come up on appeal against the common order of the Income Tax Appellate Tribunal,Madras 'D' Bench, dated 21.9.2007 passed in I.T.A.Nos.2805 and 2806/Mds/2005 against theassessees- wife and husband respectively in respect of the assessment year 2002-2003 byformulating the following common substantial questions of law:"1. Whether, on the facts and in the circumstances of the case, the Tribunal was right in allowingdepreciation of Rs.4,88,901/- when the assessee was only a beneficial owner of the bus?2. Whether under Section 32 of the Income Tax Act, 1961 depreciation can be claimed by thebeneficial owners or the real owner of the asset?" 2. As the issue involved in both these appeals is one and the same, the facts relating toT.C.A.No.1261 of 2009 are stated below by taking it as a typical case for the sake of discussion:The relevant assessment year is 2002-2003. The assessee is an individual and filed return of incomefor the assessment year 2002-2003 on 31.10.2002 admitting total income of Rs.74,100 +Agricultural income of Rs.74,000/- and the same was processed under Section 143(1). A survey under Section 133-A was conducted in the business premises of the assessee on 13.3.2002 and anotice under Section 143(2) was issued to the assessee during the course of survey. The assessee'shusband in his sworn statement stated that he and his wife had borrowed Rs.50 to 55 lakhs for theirtransport business and incurred expenses towards maintaining the buses and as such entitled todepreciation. On scrutinising the return of income it was found that the assessee claimeddepreciation of Rs.8,25,883/-. To verify the correctness of the claim the assessee was asked toproduce the copies of route permit under RC books of all the vehicles. It was found that the assesseewas not the owner of three buses and the basic condition under Section 32(1) of the Income-tax Actto claim depreciation is that the assets should be owned by the assessee and on that ground theclaim of depreciation in respect of 3 buses bearing Registration Nos.TN.36 L-7888, TN.36.M-7888and TN.36.H.7889 stood in the name of K.Chinnusamy for the former two buses and one K.Poongodifor the later bus was denied on the ground that according to Section 32(1) of the Income-tax Act thebasic condition to claim depreciation was that the assets should be owned by the assessee. Despitethe fact that the assessee has made available much more voluminous documents to prove that theincome and the expenditure has been received and expended only by the assessee the assessingofficer on the ground that mere admission of the income of the assessee in the assessee's handscannot per se permit the assessee to claim higher rate of depreciation and rejected the claim ofdepreciation sought for by the assessee. On appeal at the instance of the assessee, the Commissioner of Income-tax (Appeals) accepted the case of the assessee and allowed the appeal.The further appeal to the Tribunal has also ended in dismissal. The present appeals are filedchallenging the common order of the Tribunal dated 21.9.2007 made in respect of the assessee aswell as her husband. 3. We heard the argument of the learned counsel for the revenue, who assailed the order of the Commissioner of Income-tax (Appeals) accepted the case of the assessee and allowed the appeal.The further appeal to the Tribunal has also ended in dismissal. The present appeals are filedchallenging the common order of the Tribunal dated 21.9.2007 made in respect of the assessee aswell as her husband. 3. We heard the argument of the learned counsel for the revenue, who assailed the order of the Tribunal on the premise that in respect of the three vehicles as stated in the summation of facts, theassessee was not the owner. 4. The relevant portion of provision Section 32(1) reads as follows: "In respect of depreciation of (i) buildings, machinery, plant or furniture, being tangible assets; (ii) know-how, patents, copyrights, trade marks, licences, franchises or any other business or commercial rights of similar nature, being intangible assets acquired on or after the 1st day of April,1998, owned, wholly or partly, by the assessee and used for the purposes of the business or profession, thefollowing deductions shall be allowed - (i) in the case of assets of an undertaking engaged in generation or generation and distribution of power, such percentage on the actual cost thereof to the assessee as may be prescribed; (ii) in the case of any block of assets, such percentage on the written down value thereof as may beprescribed. ..." 5. From the above provision, it is clear that the provision required that the tangible assets should be owned by the assessee wholly or partly. The words "owned wholly or partly" have been consideredby the Supreme Court and various High Courts and explained that under the common law ownermeans a person who has got a valid title legally conveyed to him after complying with therequirements of law such as Transfer of Property Act, the Registration Act, etc., in the context of theincome Tax Act, 1961, having regard to the ground realities and further having regard to the objectof the Act viz., to tax the income, "owner" is a person who is entitled to receive income from theproperty in his own right. In order to claim the benefit of Section 32 of the Income-tax Act, it is notnecessary that the assessee should be a complete owner. The expression "owner" used in Section 32of the Act has been considered by taking into account all its phrases and aspects. The owner neednot necessarily be a lawful owner entitled to pass on the title of the property to another. Vide CITVS. PODAR CEMENT PVT.LTD. reported in 226 ITR 625 (SC), CIT VS. GENERAL MARKETING & MANUFACTURING CO.LTD. reported in 222 ITR 575 (Calcutta) and CIT VS. FAZILKA DABWALITPT.CO.PVT.LTD. reported in 270 ITR 398. 5. Having in mind the above proposition of law laid down by the Courts, we shall consider the factsof the case. It could be seen from the order of the first appellate authority � the Commissioner ofIncome-tax (Appeals) that it is the case of the assessee before him that though the buses were not intheir names and permits were also not in their names they were the beneficial owners. In order toestablish the beneficial ownership of the estate, the assessee has furnished the documents relatingto the loans obtained by the assessee for the purchase of the buses which are in the names of others,the repayment of the loans were made out of the collections from the buses, the road tax, insurance,etc., were paid by the assessee; the appellant has obtained undertaking from the persons in whosenames the vehicles and permits are there for plying the buses in the name of M/s.K.A.S.Transports;the entire collections from the buses is shown in their income and expenditure account; and theentire expenditure pertaining to the buses including driver's salary, diesel, spares, R.T.O. tax,interest on the loans and other expenses were met by the assessee. The assessee has also shown inthe balance sheet the buses under dispute as assets of M/s.K.A.S.Transports, which is a proprietaryconcern of the appellant. 6. Thus, the assessee has made available all the documents relating to the business and alsoestablished before the authorities that she is a beneficial owner, though not her name has not beenshown as owner of the buses in the permit as well as the R.C.book and she is virtually the beneficialowner and receiving the income from exploitation of buses and incurred expenses as stated above.The above stated principle laid down by the Supreme Court and other High Courts is in favour of theappellant and in similar circumstances. Hence we are of the view that the view taken by the firstappellate authority as confirmed by the Tribunal is in accordance with the requirements of thestatutory provision, which has been explained by the Supreme Court and other various High Courts.As such, there is no illegality or irregularity in the order of the Tribunal, which warrantsinterference by this Court by entertaining the appeals. 7. For the foregoing reasons, the appeals are dismissed as devoid of merits and much less nosubstantial question of law is involved to entertain the same. (K.R.P.,J.) (M.M.S.,J.)23.11.2009Index: YesInternet: YesuskCopy to:1.The Income-tax Appellate Tribunal,Madras D Bench, Chennai2. The Commissioner of Income Tax (Appeals)-1Coimbatore.3.The Income-tax Officer,Ward II(2), Erode. K.RAVIRAJA PANDIAN,JANDM.M.SUNDRESH,J. usk T.C.(A).No.1261 and 1262 of 2009