JEYPORE TIMBER AND VENEER MILLS (P.) LTD. Vs. THE COMMISSIONER OF INCOME TAX

JUDGEMENT

(1.) THE question referred to us for opinion is as follows. Whether, on the facts and in the circumstances of the case and on a true Interpretation of the provisions of Section 10(2)(vi), the Assessee was entitled to depreciation on the value of the buildings amounting to Rs. 2,50,000/ - for the assessment year 1956 -57? The Assessee is a private limited company registered under the Indian Companies Act. By a resolution dated the 20th December, 1954 passed by the Board of Directors of the Company, the Assessee company entered into an agreement on the 22nd December 1954, with Sri R. G. Saharia, Managing Director of the company for the purchase of a building consisting of a two -storied house, office and garage together with some land. The price was agreed upon to be Rs. 2,50,000/ - and the consideration was adjusted with the account of Sri R. G. Saharia during 1955. The company took full possession of the property after the adjustment of the account. The sale deed was, however, executed and registered on the 25th March 1961. For the assessment years 1956 -57, 57 -58 and 58 -59 the Assessee claimed depreciation on the sum of Rs. 2,50,000/ -, the price agreed upon between the parties, it appears that as some dispute between several persons as to the ownership of the property had been referred to an arbitrator, the sale deed could not be executed till after the award was finalised on the 25th March 1961. The department disallowed the depreciation to the Assessee on the ground that during the period of: assessment the Assessee had not become the owner of the property and thus the Assessee was not entitled to any depreciation.

(2.) RELEVANT portions of Section 10 of the Income Tax Act, 1922 provide as follows:

(3.) THE Tribunal has held that unless, the assesses is the owner of the building which he uses for the purpose of his business, he is not entitled to claim depreciation in respect of the said building. The Assessee's contention is that for all practical purposes he had become the owner of the building, inasmuch as possession has been obtained by him on payment of the full consideration a sale has been defined under Section 54 of the Transfer of Property Act as a transfer of ownership in exchange to a price paid or promised or part -paid and part -promised. A contract for the sale of immovable property is a contract that a sale of such property shall take place on terms rattled between the parties. It does not, of itself, create any interest in or charge on such property. A contract by itself thus cannot create any interest in or charge on the property.