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2007 (9) TMI 290 - AT - Income TaxTransfer of a capital asset - Depreciation for residential buildings and non-residential buildings - Purchase of Shares - Whether the assessee can exercise the rights of the owner in his own right to the exclusion of others - Deemed Owner u/s 27 - HELD THAT:- We are of the view that order of learned CIT(A) must be upheld on this issue. There is no dispute that in order to claim the depreciation in respect of any property it is the condition precedent that assessee must be the owner of that property and the same is used for the purpose of business. The word 'owner' has not been defined in the IT Act and, therefore, the question arises as to what meaning should be assigned to the word 'owned' used by the Legislature in section 32 of the Act. In the case of Mysore Minerals Ltd.[1999 (9) TMI 1 - SUPREME COURT] with reference to the word 'owned' in section 32 of the Act with which we are also concerned in the present case. The legal position emerging from discussion is that the word 'owned' in section 32 of the Act has to be understood in a wider sense and not in the legal sense in terms of the provisions of Transfer of Property Act. The true test would be whether the assessee can exercise the rights of the owner in his own right to the exclusion of others. If the answer is in affirmative, then assessee would be entitled to depreciation under section 32 of the Act. AO has observed that purchase of shares cannot be equated with the purchase of property. There cannot be any dispute that generally, mere purchase of shares in a company would not entitle the shareholder to enjoy the rights of an owner in respect of the properties owned by the company since both the entities are distinct and separate. However, Articles of Association of a company engaged in the business of real estate may provide that shareholder of particular shares would be entitled to exercise the rights of owner in respect of properties owned by the company. Such mode of transfer is duly recognized by the Legislature in the provisions of section 2(47)(vi), section 27(iii) and section 269UA(d)(ii) of the Act. It is because of the provisions of section 269UA(d)(ii) that assessee was required to obtain no objection certificate from the competent authority prescribed under Chapter XX of the Act. All these provisions, if read together, lead to the only inference that Legislature has accepted the fact of transfer of property through the transfer of shares of a company. Therefore, the objection of the Assessing Officer that property cannot be transferred through the transfer of shares cannot be sustained. Whether in the present case, the assessee can exercise the rights of an owner in its own rights in respect of the property acquired by it through the purchase of shares of Yerrowda Investments Ltd. - A bare reading of the aforesaid articles shows that by virtue of holding of particular Nos. of shares having particular distinctive Nos., the holder would be entitled to have exclusive possession of a particular No. of flat so as to have exclusive use and occupation of the said flat. Thus, ownership of a flat is attached with a particular and specific share having specified distinctive Nos. Therefore, if that share is transferred then the absolute ownership of that flat is automatically transferred to the other party and the company has no power to refuse the transfer of such share from one person to another. This is an acceptable mode of transfer of property in the case of a company and is duly recognized by section 2(47)(vi), section 27(iii) as well as section 269UA(d) of the Act. Thus, we are of the view that assessee had become the owner of the properties by virtue of holding of shares of Yerrowda Investments Ltd. and consequently it was entitled to claim depreciation in accordance with the law. The order of the learned CIT(A) is, therefore, upheld on this issue. In the result, all the appeals are partly allowed.
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