Hi Mr A K Singh,
What is meant by the word "owned" within the context of Section 32of the I T Act is commercial ownership. The word "owner" isn't to beinterpreted in a manner as to mean that unless you possess some sortof documentary evidence in support of your claim to be the owner ofthe machinery, plant, etc, you'd be denied depreciation and otherexpenses incurred in the running and maintenance of the asset.Particularly in case of a proprietary concern there shouldn't be anyproblem at all. Besides Section 31, under which section you'reseeking to claim the expenditure on repairs of machinery doesn'ttalk about ownership at all. As long as the machinery has beendeployed in the business, it matters little who owns it. You couldhave incorporated the replacement cost of the machinery in theBalance Sheet of the proprietary firm to forestall any objection atleast on account of expenditure on repairs and maintenance. At themost the AO could have withheld depreciation on account of therebeing no evidence to ascertain the actual cost in terms of Section43. But expenses towards repairs, inevitable as those are in nature,can never be denied to the assessee in such a situation. The ground—lack of ownership--on which the AO is basing his disallowance ofexpenditure on repairs is too shaky.A tenant is allowed to claim expenses incurred on repairs tobuilding he occupies because the test of User trumps the test ofOwnership. It's the user of the asset, and not the ownershipthereof, that matters in the allowance of expenses under our taxlaws.The Supreme Court in the case of Mysore Minerals Ltd. v. CIT [1999]239 ITR 775 / 106 Taxman 166 (SC) has held that where the assesseedidn't have any registered deed in its name evidencing the ownershipof the building on which it had claimed depreciation, depreciationwas to be allowed to the assessee. What mattered, the court said,was who had the right to use the asset by virtue of having anexclusive dominion over the asset to the exclusion of everyone else.If this test was fulfilled, depreciation couldn't be denied to theassessee.Now if depreciation, which entails writing off the actual cost ofthe asset, can be claimed in the absence of a legal ownership,there's no reason why the claim of expenditure towards repairs andmaintenance of plant and machinery, which even a person who's hiredthose assets will have to incur, should be held back from theassessee.The ITO isn't following the law.Thanks,CA Sanjeev Bedi--- In
ICAI_CIRC_MEERUT_CA@yahoogroups.com, adamya singh
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