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TMI Blog2006 (7) TMI 299X X X X Extracts X X X X X X X X Extracts X X X X ..... (v) of the IT Act, 1961 r/w s. 53A of the Transfer of Property Act. 3. Briefly stated the facts of the case are that the assessee is engaged in the business of manufacturing of valves. During the course of assessment proceedings, it was noticed that the assessee has claimed depreciation on residential buildings. The observation in this regard as made by the AO was that the cost of the residential buildings was met by the employees of the company. In compliance of query raised, the assessee has explained that a land measuring 62,337 sq. mtrs. at Kothrud, Pune was declared surplus under Urban Land Ceiling Act. The assessee company has obtained an exemption under s. 20(1) of ULC Act from the Government of Maharashtra with a condition that out of the said land area of 20,882 sq. mtrs. to be used for the purposes of housing for weaker section of the society or the employees of the company. Accordingly, the assessee has constructed residential flats which were given to the employees. The employees have agreed to pay the cost of construction of flats in instalments. It has also been explained that in the books of account under the head "residential plot" assets have been disclosed and de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed for "part performance" on the part of the transferor, reproduced below: "(a) there has to be a contract relating to immovable property; (b) the contract must be for a fixed consideration; (c) the contract must be in writing duly executed by or on behalf of the transfer; (d) the terms of the contract should be clearly ascertainable from the written agreement; (e) the transferee should either already be in possession of the property and be allowed to continue such possession or he must take the possession of the property; (f) the transferee must have acted in furtherance of the contract; and (g) the transferee should have performed or should be willing to perform his promises as per the contract." 5. After narrating the aforementioned conditions, he has held that the property stood transferred in favour of the employees, hence, de facto and de jure, the appellant was not the owner of the property hence not entitled for depreciation. 6. We have considered the rival submissions of both the sides. We have perused the orders of the authorities below. We have also examined the compilation filed before us. The learned Authorised Representative has relied upon the documents and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ds of the assessee. It is also pertinent to mention at this juncture, due emphasis given by Mr. Vora, the learned Authorised Representative, on an another development pertaining to the asst. yr. 1986-87. Vide notice under s. 263 dt. 25th Feb., 1991 a query was raised in respect of allowance of depreciation on residential building stated to be constructed for the benefit of employees and eventually to be transferred. Thereafter, an order under s. 263 dt. 21st March, 1991 was passed and the AO was directed to re-examine the allowability of depreciation on said residential building. In compliance an order under s. 143(3) r/w s. 263 for asst. yr. 1986-87 was passed on 23rd March, 1993 and the AO has recorded a finding vide para 5 that on verification it was found that the claim of depreciation was proper. In the said para it was observed by the AO that he has arrived at the said conclusion on examination of the terms of agreement and the amount received from the employees. Naturally, these two undisputed facts have a direct bearing on the issue in hand. The first contention of the Revenue that in view of the provisions of part performance of Transfer of Property Act, the flats were tra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT (1993) 112 CTR (Bom) 68 : (1994) 205 ITR 339 (Bom) wherein the Hon'ble Court has opined that phrase "extinguishment of rights" takes colour from the associated words and expressions and will have to be restricted to the sense analogous to them. The expression "extinguishment of rights therein" will have to be confined to the extinguishment of rights on account of transfer. On the basis of the facts of that case, the Hon'ble Court has held that for the purposes of determination of actual cost, the amount paid by the bank in settlement of breach of contract entered into by the assessee in connection with purchase of dollars in repayment of loan taken to purchase the machinery not to be deducted in computing the actual cost. 6.3 An another case of Rajshree Roadways vs. Union of India & Ors. (2003) 181 CTR (Raj) 467 : (2003) 263 ITR 206 (Raj) has also been referred wherein the facts were not directly connected with the issue in hand. However, the ratio laid down in the said decision was stated to be applied in the instant appeal. In that appeal the Hon'ble Rajasthan High Court was of the view that considering the lease agreement though the sale was to be executed to the lessee aft ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... position was that the buildings/flats were agreed to be constructed by the company by raising loan as well as by utilizing the company's own funds, the asset was disclosed in the balance sheet. Both the situations i.e. investment in acquisition of asset by the company and mere handing over of possession for which legal transfer yet to take place; has duly been considered by the Hon'ble Court as we have discussed supra. Respectfully following the view already taken by the Hon'ble Court as well as considering the totality of the facts and circumstances of the case, we are of the considered view that the assessee is entitled for the depreciation for the years under consideration. The findings of the authorities below are hereby reversed and the ground is allowed. 8. The ground No.2 for asst. yr. 1997-98 and ground No. 5 for asst. yr. 1998-99 is in respect of deduction claimed by the assessee on account of leave encashment. This issue stands covered in favour of the assessee by the decision of the Supreme Court in the case of Bharat Earth Movers Ltd. (2000) 162 CTR (SC) 325 : (2000) 245 ITR 428 (SC). So it can be held that the provision made by the company for meeting the incremental ..... X X X X Extracts X X X X X X X X Extracts X X X X
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