1983 (8) TMI 311 - HC - Income Tax

Summary

Issues:
Claim for depreciation under section 32(1) of the Income-tax Act, 1961 for assets of Crown Flour Mills.

Analysis:
The case involved the question of whether an assessee-company is entitled to claim depreciation under section 32(1) of the Income-tax Act, 1961, for the building, machinery, and plant of Crown Flour Mills, Delhi. The assessee, a private limited company, was running a cold storage and flour mill. The relevant assessment year was 1962-63, with the accounting year being 1961. The company was a subsidiary of another private limited company, which decided to transfer Crown Flour Mills to the assessee. However, no sale deed was executed until the end of the relevant accounting year. The Income Tax Officer (ITO) rejected the claim for depreciation, but the Appellate Assistant Commissioner (AAC) allowed it on appeal. The Tribunal upheld the AAC's decision, leading the Commissioner to seek a reference on the issue. The Tribunal referred the question of law to the High Court for its opinion.

The High Court, in its judgment, referred to a previous decision regarding a similar claim by the same party for the assessment year 1958-59. It was held that ownership, as required by the Income-tax Act, did not pass to the assessee without a registered sale deed. The interest under section 53A of the Transfer of Property Act did not constitute ownership. Since no sale deed was executed during the relevant accounting year, the title to Crown Flour Mills did not pass to the assessee. Therefore, the assessee did not satisfy the conditions for claiming depreciation under the law. The Court relied on the previous decision and answered the question in the negative, against the assessee and in favor of the revenue.

In conclusion, the High Court ruled that the assessee was not entitled to claim depreciation for the assets of Crown Flour Mills as ownership did not pass to the assessee without a registered sale deed. The Court's decision was based on the interpretation of ownership under the Income-tax Act and the absence of a sale deed during the relevant accounting year.