Transfer of vehicle registration not necessary for claiming depreciation. Transfer of ownership of vehicles is governed by the Sale of Goods Act not by Motor Vehicles Act.
ABCAUS Case Law Citation:
ABCAUS 2670 (2018) (12) ITAT
Important Case Laws Cited/relied upon:
CIT v. Nidish Transport Corporation
Panna Lal v. Chand Mal
Aliyar Kunju v. Subair Khan
Kunju raman v. Saramma
M. Swaminathan v. C. K. Jayalakshmi Amma
The appeal of the assessee was directed against the order of the Commissioner of Income Tax (Appeals) on the issue of disallowance of depreciation on the motor lorry.
The Assessing Officer (AO) disallowed the claim of the assessee with regard to depreciation on the ground that there was no addition to the capital asset because the ownership of the said vehicle was not transferred in the name of the assessee.
The assessee submitted that he did purchase a lorry during the relevant assessment year and that transfer of registration was not necessary for transfer of ownership of motor vehicle.
It was contended that the transfer takes effect when the motor vehicle was handed over to the assessee. Even before the transfer was effected in the registration certificate, the assessee used the vehicle as its own. Therefore, the assessee was entitled for depreciation.
Thus, it was argued that the Assessing Officer was not justified in saying that there was no addition to the fixed asset.
The Tribunal concurred with the contentions of the assessee that transfer of registration in the name of the assessee might not be required for the purpose of claim of depreciation. According to the ITAT what was required was delivery of motor vehicle to the assessee.
The Tribunal noted that the Hon’ble High Court had held that the transfer of ownership of the vehicles is not a matter governed by the provisions of the Motor Vehicles Act. A motor vehicle is movable property. The transfer of ownership thereof is governed by the Sale of Goods Act. Transfer takes effect from the date of sale. As between the transferor and the transferee, the sale is complete even before the transfer is effected in the registration certificate.
In view of the above, the Tribunal remanded the case to the Assessing Officer to verify the sale receipt and thereafter decide the issue afresh in the light of the judgment of the High Court.