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TMI Blog1997 (12) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... nder section 132 of the Income-tax Act. Certain incriminating documents, found in the search were seized by the department. The scrutiny of the seized material showed that certain vehicles bearing numbers MXL 7461, MXL 7761, MXL 7861 and MVK 363 were registered in the name of Shri S.D. Patil, employees of Shri M.R. Mahadik. In the letter dated 30-8-1991 before the Assessing Officer it was admitted by Shri M.R. Mahadik that the Motor Vehicles registered in the name of Shri S.D. Patil really belonged to him. Shri S.D. Patil in his statement under section 131 dated 27-9-1991 also admitted that vehicles registered in his name really belonged to Shri M.R. Mahadik. The assessee therefore, offered income relating to these trucks/ tankers for taxation in his hands and claimed depreciation in respect of such vehicles. The Assessing Officer included the income in the hands of Shri M.R. Mahadik in respect of the aforesaid vehicles but disallowed the claim of the assessee regarding depreciation on the ground that he was not the legal owner of such vehicles. In support of his stand, he relied on the decisions of the various High Courts in the cases of Parthas Trust v. CIT [1988] 169 ITR 334/38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed counsel for the assessee that the issue before the Tribunal was covered by the decision of the Hon'ble Bombay High Court in the case of CIT v. Dilip Singh Sardarsingh Bagga [1993] 201 ITR 995 wherein it has been held that registration under the Motor Vehicles Act is not relevant for deciding the question of ownership of a vehicle. However, the learned Sr. D.R. Shri Hari Krishan submitted before us that the present appeals are not covered by the said decision inasmuch as the Hon'ble Bombay High Court, did not deal with the question of ownership in a case where the vehicles arc owned by benamidar. According to him, the decision of the Bombay High Court can be applied only where the vehicles are purchased by the assessee but the registration continues in the name of Vendors for want of formalities. Proceeding further, it was submitted by him that in order to claim depreciation under section 32, the assessee must be the legal owner of the asset. In support of his contention, he relied on the decisions of the High Courts considered by the Assessing Officer. It was submitted by him that the vehicles stood in the name of the employee of the assessee from the very beginning and it was t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e into force in May 1988 and therefore, the provisions of such Act cannot be applied in the present case as the vehicles were purchased prior to the aforesaid date. It was further submitted by him that provisions of Benami Act do not determine the ownership of the property but merely prohibit the benami transactions after May 1988. It has further submitted by him that it provides defence to the person in whose name property stands against the recovery of such property by real owner. As far as question of ownership is concerned, the same is not determined by Benami Act. He referred to the latest decision of the Supreme Court in the case of R. Rajagopal Reddy v. Padmini Chandrasekharan [1995] 213 ITR 340/79 Taxman 92 wherein Their Lordships have considered the effect of provisions of the Benami Act. According to him, the benamidar holds the property in fiduciary capacity and therefore, in law, the assessee can effect the transfer of the property held in the names of Benami persons. He therefore, concluded that CIT(A) had rightly allowed the claim of the assessee. 9. Rival submissions of the parties as well as the case law relied upon by them have been considered carefully. The ques ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ty by way of sale. It provides that where the value of immovable property is more than Rs. 100 it cannot be transferred unless the sale deed is registered under the provisions of Indian Registration Act. However, it is pertinent to note that immovable property having value less than Rs. 100 can be transferred by mere delivery of the property. It does not lay down any condition regarding the transfer of movable property. Therefore, it appears that the law has made a distinction between the transfer of immovable property having value more than Rs. 100 on one hand and the transfer of movable property as well as transfer of immovable property having value less than Rs. 100 on the other. In the former case, legal ownership is not transferred unless sale deed is registered while in the later case no formality is required except the delivery of the property. 12. The benami transactions, i.e., purchase of the property in the name of some of the persons were governed by the provisions of section 82 of Indian Trust Act, 1882 which are being reproduced below: "Section 82-Transfer of one for consideration paid by another.-Where property is transferred to one person for a consideration paid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as owner of the truck for the purpose of section 32 of the Act. The Tribunal rejected this stand of the revenue by observing as under: "The expression 'owned by the assessee' has not been defined, but, all the same, that expression must be understood not simply as de jure ownership, but also as de facto ownership. The Income-tax Act takes into consideration not only the ostensible owner, but also the beneficial owner, for the purposes of charging tax and necessarily, therefore, it cannot exclude a beneficial owner when it comes to the granting of a certain deduction." 14. In the case of Sardar Jogender Singh Saluja the Indore Bench of the Tribunal considered a case where the truck was purchased in the name of assessee lady who was also not the wife of assessee. The Tribunal allowed the claim of assessee under section 32 by making following observations: "Since the lady was not the wife of the assessee, and as nothing was paid by her towards the cost of the truck, she can, at the worse, be treated as benamidar for the assessee, but even in respect of benami transaction, it is the de facto ownership which has to be taken into account. Now, in the present case, the facts and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of property prior to the commencement of Benami Act. 16. Now the question to be considered is whether any legal change has taken place after commencement of Benami Act. The relevant provisions of sections of Benami Act are being reproduced as under: 1. Short title, extent and commencement- (1) This Act may be called the Benami Transactions (Prohibition) Act, 1988. (2).... (3) The provisions of sections 3, 5 and 8 shall come into force at once, and the remaining provisions of this Act shall be deemed to have come into force on the 19th day of May, 1988. 2. Definitions---- (a) 'benami transaction' means any transaction in which property is transferred to one person for a consideration paid or provided by another person; (b)... (C)... 3. Prohibition of benami transactions- (1) No person shall enter into any benami transaction. (2)... (3) Whoever enters into any benami transaction shall be punishable with imprisonment for a term which may extend to three years or with fine or with both. (4)... 4. Prohibition of the right to recover property held benami- (1) No suit, claim or action to enforce any right in respect of any property held benami against the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the benamidar. To this extent, the provision was only retrospective. Relevant portion of judgment at page 352 is extracted below: "Even when we come to section 4, it is easy to visualise that subsection (1) of section 4 states that no suit, claim or action to enforce any right in respect of any property held benami against the person in whose name the property is held or against any other person shall lie by or on behalf of a person claiming to be the real owner of such property. As per section 4(1) no such suit shall thenceforth lie to recover possession of property held benami by the defendant. Plaintiff's right to that effect is sought to be taken away and any suit to enforce such a right after the coming into operation of section 4(1) that is May 19, 1988, shall not lie. The Legislature in its wisdom has nowhere provided in section 4(1) that no such suit, claim or action pending on the date when section 4 came into force shall be proceeded with and shall stand abated. On the contrary, the clear legislative intention thereby that no such suit, claim or action shall be permitted to be filed or entertained or admitted to the portals of any court for seeking such a relief after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to transactions effected prior to 19th of May, 1988. (4) After the commencement of Benami Act the real owner is prohibited to recover the possession of the property from the ostensible owner. (5) The provisions of Benami Act do not determine the ownership of property purchased prior to the commencement of the Act. 19. In the present appeals all the benami transactions were in fact, effected prior to commencement of the Benami Act and therefore, the transactions of purchase of vehicles by the assessee would be governed by the legal position prevailing prior to the commencement of the Benami Act. There is no dispute about the fact that assessees were enjoying the properties and fruits of the property. The benamidars were merely name lenders. According to the provisions of section 82 of the Indian Trust Act, the assessees were the real owners of the vehicles and therefore, they were entitled to the claim of depreciation under section 32 of the Act. The contention of the learned Sr. D.R. to the effect that it was benamidar who could transfer the owner-ship of the vehicles cannot be accepted in view of the provisions of section 82 of the Indian Trust Act. For all legal purposes, t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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