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Issues involved: Interpretation of the term "owner" for the purpose of claiming depreciation allowance under section 32 of the Income-tax Act, 1961.
Summary: The High Court of Calcutta addressed a reference application u/s 256(2) of the Income-tax Act, 1961, raised by the Revenue regarding the entitlement of the assessee to depreciation allowance on a building not transferred by registered deed of conveyance. The court considered the interpretation of the term "owner" under section 32 of the Act, which allows deductions for depreciation on assets owned and used for business purposes. The court examined previous decisions, including one by the Allahabad High Court, which held that for claiming benefits under section 32, it is not necessary for the assessee to be a complete owner in terms of lawful title transfer. The Calcutta High Court, in a similar case, agreed with this interpretation and referenced the Supreme Court decision in R. B. Jodha Mal Kuthiala v. CIT [1971] 82 ITR 570. It was established that possession of the property, even without complete legal ownership, suffices for claiming depreciation under section 32. In light of these precedents, the High Court ruled in favor of the assessee, stating that the ownership requirement under section 32 does not mandate full legal title transfer, but rather focuses on possession and use for business purposes. The court rejected the Revenue's argument that ownership necessitates legal competence to dispose of the property, emphasizing that physical possession suffices for depreciation allowance eligibility. Therefore, the court concluded that the assessee was entitled to depreciation allowance on the buildings in question, as held by the Income-tax Officer. The judgment was unanimous, with both judges concurring on the decision. The court also mentioned the possibility of considering a request for leave to appeal to the Supreme Court, if properly submitted.
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