1991 (2) TMI 56 - HC - Income Tax

Summary

Issues Involved:
1. Whether the assessee owned the building from 1-4-1972 within the meaning of section 32 of the Income-tax Act, 1961, and was entitled to depreciation on the buildings.
2. Whether the assessee was entitled to depreciation on buildings u/s 32 of the Income-tax Act, 1961, for the assessment year 1973-74.

Summary:

Issue 1: Ownership of the Building from 1-4-1972
The respondent-assessee, a public sector undertaking, took over the Kolar Gold Field mining operations from the Government of India effective from April 1, 1972. The approval for the transfer was subject to the vote of Parliament, and the consideration was the allotment of 50% of shares to the Government of India. The assessee claimed depreciation on the buildings u/s 32 of the Income-tax Act, 1961. The Revenue objected, arguing that without a registered sale deed, ownership did not vest in the assessee-company. The court noted that the Government of India had transferred full rights and the assessee had used the assets for industrial purposes. Despite the lack of a registered sale deed, the court considered the equitable and factual realities, recognizing the assessee's claim to ownership.

Issue 2: Entitlement to Depreciation for Assessment Year 1973-74
The court examined whether the assessee was entitled to depreciation on buildings for the assessment year 1973-74. The Appellate Tribunal had allowed the depreciation, overruling the Revenue's objection. The court acknowledged the Supreme Court's stance that equitable considerations are generally irrelevant in tax law but emphasized that tax laws should be interpreted reasonably and in consonance with equity and justice. The court cited the Supreme Court's observation that the Legislature's use of "belonging to" rather than "owned by" should be considered. The court concluded that the Central Government was estopped from denying the ownership of the assessee, given the factual circumstances and the conduct of both parties.

Conclusion:
Despite recognizing the equitable considerations and factual realities favoring the assessee, the court ultimately adhered to judicial discipline and the precedent set by the Supreme Court and previous High Court decisions. The court answered both questions in the negative and against the assessee, emphasizing the need for legislative amendment to address such inequities.