TMI Blog1980 (11) TMI 41X X X X Extracts X X X X X X X X Extracts X X X X ..... 1968, transferred possession over the Agricultural Workshop, Lucknow, and Pilot Project, Karimganj to the Agro Corporation in consideration of Rs. 44,07,589 (Rs. 40,00,000 worth of equity shares and Rs. 4,07,589 paid in cash). During the assessment proceedings, the Agro Corporation, inter alia, claimed allowance by way of depreciation under s. 32 of the I.T. Act, in respect of the buildings taken over by it from the State Govt. The ITO disallowed the aforesaid claim for depreciation on the ground that the properties in respect of which the claim had been made were immovable properties. Since no sale deed had been executed by the State Govt. till then, the Agro Corporation did not become its owner. It was accordingly not entitled to claim any depreciation allowance in respect of such property. In appeal before the AAC, it was contended on behalf of the Agro Corporation that even though the U.P. Govt. had not transferred the immovable property by a registered deed, the properties for all practical purposes belonged to it. The Agro Corporation was the beneficial and equitable owner of the property and was in connection with its assessment entitled to claim depreciation on it. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal which has stated the case and has referred the aforementioned question for the opinion of this court. Section 32(1) of the I.T. Act, runs thus: " In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed . ...... .." As pointed out by the Tribunal, in order to qualify for a claim of depreciation under s. 32 of the Act, the property should not only be used by the assessee in connection with his business or profession but it should also be owned by the assessee. As mentioned above, the only controversy before us is whether in the circumstances of this case it can be said that the properties which the Agro Corporation obtained from the State Govt. in consideration of the equity shares of the Corporation worth Rs. 40,00,000 and payment of Rs. 4,07,589 in cash, but without execution of a formal registered sale deed were, within the meaning of s. 32 of the I.T. Act, properties owned by the Agro Corporation. Section 9(1) of the Indian I.T. Act, 1922, which corresponds to s. 22 of the I.T. Act, 1961, lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 'owner' referred in this section ? Is it the person in whom the property vests or is it he who is entitled to some beneficial interest in the property ? It must be remembered that section 9 brings to tax the income from property and not the interest of a person in the property. A property cannot be owned by two persons, each one having independent and exclusive right over it. Hence, for the purpose of section 9, the owner must be that person who can exercise the rights of the owner, not on behalf of the owner but in his own right. " It, therefore, follows that the expression " building owned by the assessee " in s. 32 of the I.T. Act, 1961, has not been used in the sense of the property, complete title in which vests in the assessee. The assessee will be considered to be an owner of the building under s. 32 if he is in position to exercise the rights of the owner not on behalf of the person in whom the title vests but in his own rights. We will now proceed to examine the question referred to us in the light of what has been stated by us above. The Transfer of Property Act, 1882, concerns itself with the question as to how title is conveyed in an immovable property by way of sal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ossession of the property or any part thereof, or the transferee, being already in possession, continues in possession in part performance of the contract and has done some act in furtherance of the contract, and the transferee has, performed or is willing to perform his part of the contract, then, notwithstanding that the contract, though required to be registered, has not been registered, or, where there is an instrument of transfer, that the transfer has not been completed in the manner prescribed therefor by the law for the time being in force, the transferor or any person claiming under him shall be debarred from enforcing against the transferee and persons claiming under him any right in respect of the property of which the transferee has taken or continued in possession, other than a right expressly provided by the terms of the contract: Provided that nothing in this section shall affect the rights of a transferee for consideration who has no notice of the contract or of the part performance thereof. " In this case, it is not controverted that there was correspondence, on record, entered into between the State of Uttar Pradesh and the Agro Corporation according to wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that nothing contained in the section shall affect the rights of a transferee for consideration who has no notice of the contract of the part performance thereof. Accordingly, if the State Govt., after entering into the contract with the Agro Corporation and putting it into possession of the properties, should transfer the same to a person who has no notice either of the contract or of the part performance, the title in the property would pass to such a person and he would be in a position to enforce his rights against the Agro Corporation. This proviso has been added with view to protect a bona fide transferee of the property who has no notice either of the earlier contract or part performance thereof. It may be that after a transfer of the nature mentioned in the proviso to s. 53A of the Transfer of Property Act takes place, the Agro Corporation may cease to be the owner of the property within the meaning of s. 32 of the I.T. Act, 1961, but then so long as such a transfer has not taken place, the Agro Corporation will continue to be the owner of the property within the meaning of the expression as used in s. 32 of the Act. As stated above, after putting the Agro Corporation in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is not to be equated with title in the property. The following observations made by the learned judges at page 467 (of 103 ITR): "From the above discussion, we hold that the words 'being the property of the assessee' appearing in section 10(2)(vi) of the Act have the same meaning as the words 'owned by the assessee' appearing in section 32(1) of the new Act and that these words merely clarify the position that already existed under section 10(2)(vi) of the Act. The interest which a person has in a property by virtue of section 53A of the Transfer of Property Act does not amount to ownership of the property. In the present case, the Crown Flour Mills constituted immovable property of the value of more than Rs. 100 and the title in the said property would not pass to the assessee in the absence of a registered sale deed. As admittedly no sale deed was executed by M/s. Meatles Ltd. in favour of the assesseecompany during the assessment year under reference, the title in the Crown Flour Mills did not pass to the assessee company. The Crown Flour Mills, therefore, was not the property of the assessee-company during the assessment year under reference and, as such, one of the conditio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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