A.P. SMALL SCALE INDUSTRIES DEVELOPMENT CORPORATION VS COMMISSIONER OF INCOMETAX, 2000 PTD-ANDHRA-PRADESH-HIGH-COURT-INDIA 1076 (1998)

Income-tax--

----Depreciation---Condition precedent--Ownership of asset-=-Meaning of "owner"---Building purchased by assessee---Full consideration paid and building occupied but document of sale not registered ---Assessee was owner for purposes of Income Tax Act---Entitled to depreciation---Indian Income Tax Act, 1961, S.32.

The liability to pay income-tax as owner is on the person who received or is entitled to receive the income from the property in his own right. The requirement of registration of the sale-deed in the context of section 22 of the Income Tax Act. 1961, is not warranted. Although under the common law "owner" means a person who has got a valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act. the Registration Act, etc., in the context of section 22 of the Income-tax Act having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, "to tax the income", owner is a person who is entitled to receive income from the property in his own right.

The Andhra Pradesh Industrial Development Corporation constructed a building known as "Parisrama Bhavan". The assessee purchased two floors in the said building. Full consideration was paid to the Government. However, the conveyance deed transferring title to the property was not registered Though the premises were taken possession of in the month of July, 1978, by the assessee, the document was registered on March 31, 1984. The Income-tax Officer held that the assessee was not the owner of the property and, therefore, not entitled for depreciation. This view was upheld by the-Tribunal. On a reference:

Held, that the assessee was entitled to depreciation notwithstanding that the property was subsequently registered.

CIT v. Podar Cement (Pvt.) Ltd. (1997) 226 ITR 625 (SC) applied.

Nawab Mir Barkath Ali Khan v. CIT (1988) 171 ITR 541 (AP) ref.

Y. Ratnakar for the Assessee.

S. R. Ashok for the Commissioner.

JUDGMENT

MS. S. V. MARUTHI, J.---This is a reference at the instance of the assessee.

The assessee is a public sector undertaking wholly owned by the Government of Andhra Pradesh. The Andhra Pradesh Industrial Development Corporation constructed a building known as "Parisrama Bhavan". The assessee purchased two floors in the said building. Full consideration was paid to the Government. However, the conveyance deed transferring title to the property was not registered. Though the premises were taken possession of in the month of July, 1978, by the assessee, the document was registered on March 31, 1984. The Income-tax Officer held that the assessee was not the owner of the property and, therefore, not entitled for depreciation. On appeal, the Commissioner (Appeals) held in favour of the assessee. On a further appeal to the Tribunal, the Tribunal held, following the judgment of this Court in Nawab Mir Barkath Ali Khan's case (1988) 171 ITR 541, that since the assessee was not a legal owner, he is not entitled for the depreciation. Aggrieved by the order of the Tribunal, the assessee sought for a reference on the following question:

"Whether, on the facts and circumstances of the case, the assessee was entitled to depreciation on building purchased by it from Andhra Pradesh Industrial Development Corporation?"

The issue involved in this case is now covered by a judgment of the Supreme Court in CIT v. Podar Cement (Pvt.) Ltd. (1997) 226 ITR 625, wherein it was held:

"The liability to pay income-tax as owner is on the person who receives or is entitled to receive the income from the property in his own right. The requirement of registration of the sale-deed in the context of section 22 is not warranted.

Although under the common law 'owner' means person who has got a valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act, etc. but in the context of section 22 of the Income tax Act, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, 'to tax the income', owner is a person who is entitled to receive income from the property in his own right."

The Supreme Court, while holding as above, held that the judgment in Nawab Mir Barkath Ali Khan's case (1988) 171 ITR 541 (AP), is no longer a good law.

Following the judgment of the Supreme Court, we hold that the assessee is entitled for depreciation notwithstanding that the property was subsequently registered for the relevant assessment year.

The question raised at the instance of the assessee is answered in the affirmative and against the Revenue.

The reference is answered accordingly.

M.B.A./3357/FC ??????????????????????????????????????????????????????????????????????????????? Reference answered.