1985 (11) TMI 93 - AT - Income Tax

Summary

Issues:
- Claim of depreciation on a building (shed) by a private limited company.
- Dispute over ownership of the shed between the company and the director.
- Interpretation of provisions of section 32 of the Income Tax Act, 1961.
- Validity of depreciation claimed by the company.
- Comparison with relevant case laws.

Analysis:
The case involved two appeals by the revenue regarding the claim of depreciation on a shed by a private limited company. The dispute arose as the shed was formally allotted to the director of the company, not the company itself. The Income Tax Officer (ITO) held that since the ownership remained with the director, the company was not entitled to depreciation under section 32 of the Income Tax Act, 1961. The CIT (A) initially agreed with the assessee's representation, leading to an appeal by the revenue.

The Departmental Representative contended that the ownership of the shed vested in the director and not the company during the relevant assessment years. Referring to a letter from the Director of Industries, it was argued that the company was not the legal owner of the shed and thus not eligible for depreciation. Relevant case laws were cited to support this argument.

On the other hand, the authorized counsel of the assessee argued that despite the formal allotment to the director, the ownership and occupancy of the shed belonged to the company. Various documents, including board resolutions and financial statements, were presented to support this claim. It was asserted that the company had paid for the shed and had all rights of ownership and occupancy.

After considering the submissions and provisions of section 32 of the IT Act, the Tribunal found that the company had occupied the shed for its business purposes from the beginning. It was noted that the director was a nominal owner, and the company had the rights of enjoyment over the shed. Therefore, depreciation was deemed allowable to the company under section 32(1A) of the IT Act.

In conclusion, the Tribunal dismissed the appeals, upholding the depreciation claim of the company based on the facts and circumstances of the case. The reliance on previous case laws by the Department was deemed irrelevant due to the differing facts of the present case.