1999 (10) TMI 30 - HC - Income Tax

Summary

Issues:
Claim of depreciation on house property acquired through acquisition of shares in a co-operative society without registration under the Registration Act.

Analysis:
The case involved a question of law regarding the entitlement to claim depreciation on a house property acquired through acquiring shares in a co-operative society without registration under the Registration Act. The Assessing Officer rejected the claim of depreciation under section 32, stating that depreciation could only be claimed by the owner, and since the sale deed was not registered, the claim was rejected. The first appeal and the appeal before the Tribunal were also dismissed.

The assessee argued that the property was purchased as a flat in Bombay from a co-operative society by acquiring shares, and ownership had vested by acquiring shares in the co-operative society, making registration of a sale deed unnecessary. The Income-tax Act, 1961, defined "transfer" to include acquiring shares in a co-operative society, which effectively transferred or enabled the enjoyment of immovable property. The Tribunal, however, held that the co-operative society held the property, and members holding shares were entitled to possession and enjoyment, not ownership. The assessee contended that since they could enjoy the property, it constituted a transfer under section 2(47)(vi) of the Act, entitling them to claim depreciation.

The court referred to the decision in Mysore Minerals Ltd. v. CIT, where it was held that anyone in possession of property in their own title, exercising dominion over it and having the right to use and occupy it, would be considered the owner for the purpose of claiming depreciation under section 32(1), even without a formal deed of title. Applying this precedent, the court concluded that the Tribunal was not justified in denying the assessee's claim for depreciation on the house acquired through acquiring shares in a co-operative society without the need for registration under the Registration Act. Consequently, the reference was answered in favor of the assessee and against the Revenue.

In light of the legal principles established by the apex court and the interpretation of relevant provisions of the Income-tax Act, the court upheld the assessee's right to claim depreciation on the property acquired through acquiring shares in a co-operative society without the requirement of registration under the Registration Act.