TMI Blog1993 (3) TMI 139X X X X Extracts X X X X X X X X Extracts X X X X ..... 32 of the IT Act, the assessee, in order to become entitled to depreciation in respect of the assets used in its business, should be the 'owner' of the assets. The ITO was of the view that though the assessee had paid the entire purchase price and had also used the building for the purpose of the business and had also earned income therefrom which was charged to income-tax, was not eligible for depreciation in respect thereof in the absence of legal ownership. He also referred in this connection to the note made by the auditors in the printed accounts and balance-sheet which stated that the registration in respect of the buildings is yet to be executed. In coming to this conclusion the ITO relied on the decision of the Supreme Court in Nawab Sir Mir Osman Ali Khan v. CWT [1986] 162 ITR 888. 3. On appeal, the CIT(A) was of the view that the assessment orders passed under section 143(3) read with section 144B of the Act for the assessment years under appeal got merged with the appellate orders passed in appeal and, therefore, the ITO did not have jurisdiction to rectify the assessment orders. He further held, and this was the main ground, that the issue whether the assessee is enti ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... orted the orders of the CIT(A). He pointed out that the question to be determined was whether it was the requirement of section 32(1) of the Act that in order to be entitled to depreciation, the assessee should be the legal owner of the assets and such question was itself a debatable question. He pointed out that there was no direct decision of the Supreme Court on this point and the decisions cited by Mr. Lahiri were in connection with different statutory provisions. According to Mr. Bajoria. since the decisions relied upon by the ITO as well as Mr. Lahiri were with reference to different provisions of law, the question whether the ratio or principle of such decisions would be applicable to the provisions of section 32 of the IT Act would itself be a debatable question not amenable to the jurisdiction under section 154 of the Act. According to him, the word 'owner' must receive its meaning in accordance with the context in which it is used in the Income-tax Act and it is not as if the meaning ascribed to this word with reference to a particular provision in the statute can automatically be imported and applied to that expression appearing in a different context in the same or diff ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rect in view of the clear provisions of sub-section (1A) of section 154 of the Act which was introduced with effect from 6-10-1964. As far as rectification proceedings are concerned, an issue which has not been taken up in appeal by the assessee and which has, therefore, not been dealt with by the first appellate authority can be the subject-matter of rectification by the ITO. That exactly is the purport of sub-section (1A). In view of this provision it is no longer open to apply the theory of merger in respect of orders passed under section 154 of the Act. We are fortified in this view by the decision of the Madras High Court in CIT v. Indian Auto Stores [1981] 129 ITR 554 at page 558. Therefore, the CIT(A) was wrong in relying on the theory of merger for cancelling the orders passed by the ITO under section 154 of the Act. However, as for the other ground on which the orders were cancelled, we have to accept the view taken by the CIT(A) and canvassed before us for acceptance by Mr. Bajoria. The question relates to the interpretation of the word 'owner' appearing in section 32(1) of the Act. The question is whether it is the requirement of that section that in order to be entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat remained with him was only the husk of title in the properties. The Supreme Court, relying on its earlier decision in CWT v. Bishwanath Chatterjee [1976] 103 ITR 536, ruled that so long as the assessee was the legal owner of a property, the property must be taken to 'belong' to him and the fact that he was not in possession of the property but had parted with the the same cannot stand in the way of treating the property as belonging to him. In so holding, the Supreme Court had considered the various decisions of different High Courts wherein it had been held that it was not always necessary in order that a person may be treated as the owner of an immovable property that a registered conveyance deed should be executed in his favour. The Supreme Court in fact accepted the position that such a view is plausible and that there can be circumstances where a person, even without a registered conveyance deed in his favour, can be treated as owner of an immovable property. Far from being in support of the rectification proceedings initiated in the present case the decision of the Supreme Court actually goes in favour of the assessee, as will be clear from the observations appearing at p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nce-sheet is not a correct balance-sheet. It will be clear from this decision of the jurisdictional High Court which was rendered in the context of section 32 of the Act that the word 'owner' appearing in section 32 can be so interpreted as to include a person who has paid the purchase price and who is in possession of the property and has also made appropriate entries in its accounts to show that he is the owner of it. 8. The above discussion would show that the question whether for the purpose of depreciation on an immovable property under section 32 of the Act the assessee should be the legal owner of the property is a debatable question. We have seen that the decisions relied on by the department are not directly applicable or helpful in solving the debate. On the contrary there is at least one direct decision, that of the Andhra Pradesh High Court in Sahney Steel Press Works (P.) Ltd.'s case, which directly supports the assessee's claim. The Madras High Court has taken the view that it is the requirement of section 32 that the assessee should be the legal owner of the property and that a formal deed of conveyance duly registered should have been executed in his favour (see ..... X X X X Extracts X X X X X X X X Extracts X X X X
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