TMI Blog1998 (3) TMI 61X X X X Extracts X X X X X X X X Extracts X X X X ..... Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the compensation of Rs. 1 lakh paid to MCMSU is a capital expenditure and hence not allowable as deduction under the provisions of the Act ? 3. Whether, on the facts and in the circumstances of the case, the Tribunal was right in holding that the provision for urban land tax was not an allowable deduction under the Income-tax Act ?" Regarding question No. 1, the Tribunal and the authorities below rejected the assessee's claim for depreciation on the short ground that there was no registered sale deed of the building in respect of which the assessee claimed depreciation. Though it was not disputed that the assessee had under any agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Patna High Court in Addl. CIT v. Sahay Properties and Investment Co. (P.) Ltd. [1983] 144 ITR 357. The decisions so dissented from, inter alia, placed reliance upon the decision of the Supreme Court in the case of R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570, wherein the Supreme Court considered the concept of ownership in the context of section 9 of the Indian Income-tax Act, 1922. In that decision, the court held that the owner must be a person who can exercise rights of the owner and not on behalf of the owner but in his own right. The assessee in that case was the owner of a property which was situated at Pakistan and which property had vested in the custodian of the properties, by the relevant ordinance passed in Pakistan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f this court in the case of Tamil Nadu Agro Industries Corporation Ltd. [1987] 163 ITR 61. From pages 639 to 644 of the decision, the apex court set out with approval the relevant portions of the judgment of the Patna High Court in the case of Sahay Properties and Investment Co. (P.) Ltd. [1983] 144 ITR 357 wherein the Patna High Court, inter alia, observed that one cannot reasonably and logically visualise as to when a person in actual physical control of the property realising the entire income and usufructs of the property for his own use and not for the use of any other person, having the absolute power of disposal of the income so received, should be held not liable to tax merely because a vestige of legal ownership or a husk of title ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . B. Jodha Mal Kuthiala [1971] 82 ITR 570, the apex court was directly concerned with the concept of ownership for the purpose of section 22 of the Act, it is clear from the approval given by it to the decisions of the Allahabad, Patna and Calcutta High Courts, already referred to, that the principle enunciated in the case of Podar Cement (Pvt.) Ltd. [1997] 226 ITR 625 is applicable to the interpretation of the term "owner" under section 32 of the Act. The apex court on the larger question of the meaning of "owner" has observed in the case of Podar Cement (Pvt.) Ltd. [1997] 226 ITR 625, that the court was conscious of the settled position under the common law, that the term "owner" means a person who has got valid title legally conveyed to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he persons who are complete legal owners. It is for this reason that the apex court, though seized of a matter arising under section 22 of the Act, considered it appropriate to approve the decisions of the High Courts interpreting the term "owner" in section 32 of the Act. The decisions so approved by the apex court are to the effect that "owner" for the purpose of section 32 of the Act, is not confined to those who have full legal ownership, but extends to persons who are entitled to exercise rights of an owner without having to claim, that such rights are being exercised on behalf of the owner. Exclusive possession, the right to exclude others from enjoyment of the assets, full control over the. assets, the right to retain possession and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... quiring assets and goodwill as also to avoid competition in trade by the vendor. The payment made as compensation was clearly an expenditure of capital nature as the right acquired was of enduring benefit, the vendor having undertaken not to market the milk in Madras city. A similar question was considered by another Bench of this court in the case of Chelpark Co. Ltd. v. CIT [1991] 191 ITR 249 wherein it was held that the amount paid to ward off competition from a potential competitor resulting in the acquisition by the assessee of a right as well as protection to carry on its business activities as a whole so long as the assessee carried on such business was in the nature of capital expenditure and not revenue expenditure. The view take ..... X X X X Extracts X X X X X X X X Extracts X X X X
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