1984 (4) TMI 6 - HC - Income Tax

Summary

Issues Involved:
1. Claim for Depreciation Allowance
2. Ownership and Legal Title
3. Application of Section 47 of the Registration Act

Summary:

Claim for Depreciation Allowance:
The assessee-company claimed depreciation on buildings acquired from Neyveli Lignite Corporation for the assessment year 1973-74. The Income-tax Officer rejected the claim, stating there was no legal transfer of property during the accounting period. The Appellate Assistant Commissioner and the Tribunal had differing views, with the Tribunal allowing the claim based on section 47 of the Registration Act.

Ownership and Legal Title:
The court emphasized that for claiming depreciation u/s 32 of the Act, the assessee must be the legal owner of the asset. The sale deed was executed on March 22, 1975, and registered later, thus the legal ownership did not vest in the assessee during the relevant accounting period. Mere possession or use of the property without legal title does not entitle the assessee to claim depreciation.

Application of Section 47 of the Registration Act:
Section 47 of the Registration Act states that a registered document operates from the time it would have commenced if no registration was required. However, this does not imply that title passes before registration. The Tribunal's interpretation that the sale deed took effect from the date of possession (November 1, 1970) was incorrect. The court clarified that the sale became effective only from the date of registration (March 22, 1975).

Conclusion:
The court held that the assessee was not entitled to claim depreciation for the assessment year 1973-74 as it did not have legal ownership of the building during the relevant period. The Tribunal's decision was overturned, and the question was answered in favor of the Revenue.