1977 (7) TMI 11 - HC - Income Tax

Capital Gains Tax, Cinema Theatre, Claim For Depreciation, Depreciation On Building, Question Of Law, Supreme Court

Summary

Issues:
Dispute over entitlement to claim depreciation on assets due to lack of registered deed of conveyance. Interpretation of s. 32 of the I.T. Act in relation to ownership rights. Application of s. 53-A of the Transfer of Property Act on equitable ownership. Consideration of conflicting judgments and absence of direct Supreme Court or High Court decision on the matter.

Analysis:
The judgment by the High Court of Rajasthan addressed the issue of the assessee's entitlement to claim depreciation on assets without a registered deed of conveyance. The assessee had entered into an agreement for the purchase of a cinema property, paying a substantial amount towards the sale consideration and taking possession of the property. However, the assessing authority disallowed depreciation, arguing that the assessee did not become the "owner" due to the absence of a registered deed. This decision was upheld by the AAC and the Tribunal.

The assessee contended that under s. 53-A of the Transfer of Property Act, they had acquired equitable ownership, allowing them to claim depreciation. The counsel for the assessee argued that previous judgments cited by the Tribunal, relating to capital gains tax, were not directly applicable to the present case. The absence of a direct decision by the Supreme Court or the High Court on this specific issue was highlighted as a reason to refer the matter to the High Court for clarification.

On the other hand, the revenue's representative argued against the application of the doctrine of equitable ownership in India, citing s. 54 of the Transfer of Property Act, which states that a contract of sale does not create any interest in the immovable property. Reference was made to a Privy Council case to support this argument.

The High Court refrained from expressing an opinion on the legal points raised by both parties, emphasizing that these would be addressed during the reference process. It was acknowledged that the issue at hand involved a substantial question of law, especially considering the lack of a direct precedent from higher courts. Consequently, the court directed the Income-tax Appellate Tribunal to refer the question of the assessee's entitlement to depreciation for consideration by the High Court.