Decided on January 12,1995



K.C.Agarwal, C.J. - (1.)This reference application under Section 256(2) of the Income-tax Act, 1961, has arisen at the instance of the Revenue raising the following question for our opinion :
"Whether, on the facts and in the circumstances of the case, the Tribunal was justified in holding that the assessee was entitled to depreciation allowance on the building, the ownership of which was not transferred to the assessee by the registered deed of conveyance?"
The facts relevant for appreciating the question are as follows : The assessment year involved in the case is 1986-87. The assessment under Section 143(3) was completed on September 15, 1986. The Assessing Officer, while completing the assessment under Section 143(3), allowed depreciation on the buildings, viz., (1) Makar Bhavan, Bombay, (2) Blue Garden, Bombay, and (3) Sangam Apartment, Bombay. The total depreciation allowed on the three buildings was Rs. 4,65,572. The Commissioner of Income-tax, however, considered that the order passed by the Assessing Officer was to the prejudice of the Revenue and, therefore, made an order under Section 263 of the Income-tax Act revoking the same by taking the view that the depreciation allowed was not permissible in law to the assessee. According to him, since the assessee was not the owner of the building aforesaid it was not entitled to depreciation under Section 32 of the Income-tax Act. The relevant portion of Section 32 of the Act which comes for interpretation before us is being quoted below :
"32. (1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of Section 34, be allowed--. . ."
The interpretation sought for was for the word "owner". This expression has several meanings and has to be considered in the light of the context of the Act or the provisions of law with reference to which it has been used. The expression "owner" by itself is not conclusive or does not lead the court to a result which must necessarily follow. Section 22 of the said Act also uses the same expression.
(2.)A question arose before this court as well as before the other courts about the meaning of the expression "owner". The Allahabad High Court in a decision in the case of CIT (Addl) v. U. P. State Agro Industrial Corporation Ltd. [1981] 127 ITR 97 was called upon to consider a similar controversy. The view taken by the High Court was that for claiming the benefit of Section 32 of the Act it was not necessary that the assessee should be a complete owner. By the words "complete owner", what the Allahabad High Court meant, was a document of title -- that title must have passed to the person claiming the benefit in the manner the law requires it to be. If an assessee is the person using a property otherwise also it can get its benefit. The court held that an assessee is nothing but the owner for the purpose of Section 32 of the Act even if it is not the owner enjoying the lawful title by obtaining a document. The Calcutta High Court was called upon to consider a similar controversy in the case of Madgul Udyog v. CIT [1990] 184 ITR 484. The Calcutta High Court agreed with the decision of the Allahabad High Court as above and also relied on the Supreme Court decision in the case of R.B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570. The view was that for all intents and purpose the person who is in possession of the property which is saved by section 53A of the Transfer of Property Act was entitled to get the benefit of Section 32 of the Income-tax Act. This decision took into consideration, Section 9 of the old Income-tax Act (which is equivalent to Section 22 of the new Act). Reliance was also placed to another decision of the case of CIT v. Sahney Steel and Press Works (P.) Ltd.This was the decision of the Andhra Pradesh High Court. The Andhra Pradesh High Court held that the assessee who may not have the legal title is the owner of the property for the purposes of getting the benefit of Section 32 of the said Act. The relevant portion of the said decision is being quoted below (at page 814) :
"'We are, however, not concerned with this controversy at the present moment. It has to be borne in mind that in interpreting the liability for wealth-tax, normally equitable considerations are irrelevant."
Therefore, it is not possible for us to depart from the principles laid down by the Supreme Court in R.B. Jodha Mal Kuthiala v. CIT, while interpreting the meaning of the expression 'owner' occurring in Section 22 of the Act which is in pari materia with Section 9 of the Indian Income-tax Act, 1922, for the purpose of determining the question whether the assessee is entitled to claim depreciation under Section 32(1) of the Act.
"For the foregoing reasons, following R.B. Jodha Mal Kuthiala v. CIT and expressing our respectful agreement with the view taken by another Division Bench of this court in R. C. No. 91 of 1978, dated August 23, 1984--CIT v. Shahney Steel and Press Works (P.) Ltd. [1987] 165 ITR 399, we answer the question in favour of the assessee and against the Revenue. There shall be no order as to costs."
Learned counsel for the Department contended that in none of the decisions mentioned above, the submission which was to the effect that the person can be an owner only when he is legally competent to dispose of the property and execute the conveyance, was taken into consideration. It is true that the submission of the Revenue as made before us was not considered but that would not clinch the controversy in its favour. The expression "owner" used in Section 32 of the Act has been considered by taking into account all its phases and aspects. It was held by the courts mentioned above that the owner need not necessarily be a lawful owner entitled to pass on the title of the property to another. What is required for physical purpose under Section 32 of the Act is different than to be the owner entitled to pass on the title of the property. We are, therefore, unable to accept the Revenue's argument and in agreement with the decisions mentioned above hold that the assessee was entitled to depreciation as held by the Income-tax Officer.

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