TMI Blog1997 (2) TMI 73X X X X Extracts X X X X X X X X Extracts X X X X ..... ose shares are wholly held by the State Government of Tamil Nadu. The business of the assessee, as its name indicates, is to ensure supply of essential goods. One of the issues that arose for consideration related to the claim for depreciation and development rebate in respect of machinery in thirteen modern rice mills taken over by the assessee-corporation in pursuance of various Government orders. These rice mills were transferred to the assessee-corporation, by an order, dated October 26, 1972, issued by the Secretary to the Government, Co-operative Department, to the Registrar of Co-operative Societies. There was a further order in G.O. No. 632, dated December 7, 1974, detailing the conditions of transfer. A clarification was issued in G.O. No. 168, dated March 29, 1976, to the effect that the thirteen modern rice mills were set up from loans advanced by the National Co-operative Development Corporation and that the Government undertook to repay the unpaid loan. Ad hoc payments were sanctioned in G.O. No. 174, dated July 2, 1976, and it was argued that such ad hoc payments should be treated as share capital. G.O. No. 405, dated July 7, 1978, confirmed that the value of the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d senior counsel appearing for the assessee submitted as under : A combined reading of the earlier Government orders and the sale deeds executed in the year 1978 by the Government in favour of the Tamil Nadu Civil Supplies Corporation Ltd., would go to show that the thirteen modern rice mills were vested with the assessee-corporation in the year 1972. Therefore, the assessee is the owner of the thirteen rice mills, entitled to claim depreciation and development rebate in the assessment years 1973-74 and 1974-75. The conveyance deed executed by the Government in the year 1978 is only by way of clarification in the matter of vesting the ownership of the mills with the assessee-corporation. Section 53A of the Transfer of Property Act would apply and the doctrine of part performance is applicable to the facts of this case. Since the Government transferred the 13 mills to the assessee-corporation, the transfer deeds need not be registered under section 17 of the Registration Act, since the assignment was made under the Government Grants Act, 1895. " Transfer " is defined in section 2(47) of the Income-tax Act, 1961, wherein relinquishment is also considered as transfer. In the pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gh the sale deed was executed by the Government in the year 1978, registration of the same is not necessary under the Government Grants Act, yet the Government cannot vest the ownership of the property with the assessee-corporation beyond the day for the execution of the sale deed. The provisions of section 53A of the Transfer of Property Act would not be applicable to the facts of this case. The definition of "transfer" as stated in section 2(47) of the Income-tax Act, 1961, would be applicable only for assessment made for levying capital gains tax. It is only in that context relinquishment is stated to be "transfer" therein. For these reasons, it was submitted that the Tribunal was correct in not granting the depreciation and development rebate to the assessee. We have heard the rival submissions. We have already set out the facts in detail in the foregoing paragraphs on this issue. The assessee claimed depreciation and development rebate in respect of thirteen rice mills transferred by the Government in favour of the assessee-corporation. The sale deeds were executed in the year 1978. It is no doubt true that when the Government transfers its properties, it need not be by a re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... merely in possession, without any title to the property cannot claim depreciation. It was further held that the Tribunal's interpretation of section 47 of the Registration Act was erroneous. In the instant case, the terms of the sale deed indicated that the parties intended the sale to be operative and effective only from March, 1975, and not from any anterior point of time. This was also the effect of section 47 of the Registration Act. The assessee was not the legal owner of the building in the assessment year 1973-74 and was not entitled to depreciation in respect of the building in that year. In the above said decision, this court pointed out that the terms of the sale deed also indicate that the parties intended the sale to be operative and effective only from March, 1975, and not from any anterior point of time. Taking advantage of this finding, an argument was advanced by learned counsel for the assessee that the sale could be operative and effective in the present case from the year 1972 onwards, since the possession was given to the assessee-corporation of the thirteen rice mills. Inasmuch as in the year 1972, the Government is not the owner of the thirteen rice mills ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, according to the profit and loss account amounted to Rs. 1,52,163, while the expenditure amounted to Rs. 98,587, Rs. 55,000 was shown as a contribution by the assessee. Thus, the Tribunal took the view that it is not an expenditure for scientific research and that this amount represented only a transfer entry made on March 31, 1974, in pursuance of a journal voucher. Only the actual expenditure could be allowed under section 35 of the Act. Since the actual expenditure amounted to Rs. 1,00,873, what was allowable was one-third of the same and it was this amount of Rs. 33,628 that was allowable and was allowed by the first appellate authority. It was the assessee's case that the entire amount of Rs. 55,000 as contribution should have been allowed. Before us, learned counsel appearing for the assessee submitted that the research centre was transferred to the assessee-corporation. Thereafter, the assessee was looking after the research centre. The assessee incurred expenditure amounting to Rs. 98,587. According to the profit and loss account of the research centre, the contribution amounted to Rs. 1,52,163. The assessee claimed Rs. 55,000 as contribution by the assessee. According t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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