1996 (6) TMI 99 - AT - Income Tax

Appropriate Authority, Assessing Officer, Assessment Year, Claim For Depreciation, Financial Year, Previous Year, Purchase Price, Sale Proceeds, Short-term Capital Gains

Issues Involved:
1. Eligibility for deduction under Section 50 of the Income-tax Act, 1961.
2. Entitlement to depreciation on newly acquired premises.
3. Validity of the return filed.

Detailed Analysis:

1. Eligibility for Deduction under Section 50 of the Income-tax Act, 1961:

The primary issue in this case is whether the assessee is eligible for a deduction of Rs. 57,01,001 for computing short-term capital gains under Section 50 of the Income-tax Act, 1961, despite not receiving the No Objection Certificate (NOC) from the appropriate authority under Chapter XXC before 31-3-1992.

- Facts: The assessee sold certain premises for Rs. 52,21,000 and sought to purchase two new premises for Rs. 57,01,001 through agreements dated 24-2-1992 and 30-3-1992. The payments were made by cheque on the date of the agreements, but the NOC was received only on 13-5-1992.

- Assessing Officer's View: The Assessing Officer denied the deduction, arguing that without the NOC, there was no transfer of the premises within the financial year 1991-92, making the assessee ineligible for the deduction.

- Assessee's Argument: The assessee contended that the term "acquired" in Section 50 is broader than "purchased" or "transferred" and that the acquisition should be considered effective from the date of the agreement. They cited various judicial precedents to support their claim that possession and substantial investment are sufficient for acquisition.

- Tribunal's Decision: The Tribunal agreed with the assessee, stating that the term "acquired" is amorphous and does not require legal title. The Tribunal found support in the decision of the Bombay High Court in the case of Mrs. Hilla J.B. Wadia, which emphasized domain over the property and substantial investment. The Tribunal concluded that the assessee had "acquired" the premises within the meaning of Section 50 and allowed the deduction.

2. Entitlement to Depreciation on Newly Acquired Premises:

The second issue is whether the assessee is entitled to claim depreciation on the newly acquired premises under Section 32 of the Income-tax Act, 1961.

- Facts: The sale agreements were executed, and possession was obtained during the year of account, but the cheques were cleared, and the transfer of share certificates in the books of the society was completed only in the subsequent year.

- Assessee's Argument: The assessee cited the Supreme Court decision in R.B. Jodha Mal Kuthiala, arguing that ownership for tax purposes includes the ability to exercise rights over the property.

- Departmental Representative's Argument: The Department argued that ownership under Section 32 requires legal title, which includes registration of the sale deed.

- Tribunal's Decision: The Tribunal held that for depreciation under Section 32, the asset must be "owned," implying that the conveyance should be executed and registered. Since the transfer of share certificates was not completed within the accounting year and the NOC was received later, the assessee did not "own" the premises within the meaning of Section 32. Therefore, the claim for depreciation was denied.

3. Validity of the Return Filed:

The third issue concerns the validity of the return filed by the assessee.

- Outcome: The assessee did not press this ground, and it was dismissed as not pressed.

Conclusion:

The appeal is partly allowed. The assessee is entitled to a deduction under Section 50 for the cost of the new premises but is not entitled to claim depreciation on these premises under Section 32. The ground regarding the validity of the return filed was dismissed as not pressed.

← Previous Next →