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TMI Blog2002 (8) TMI 93X X X X Extracts X X X X X X X X Extracts X X X X ..... ALVEER BHANDARI., VIKRAMAJIT SEN. JUDGMENT The judgment of the court was delivered by DALVEER BHANDARI J.-This appeal is directed against the order passed by the Income-tax Appellate Tribunal (for short "the Tribunal"), dated April 30, 2001. This court admitted the appeal on December 19, 2001, and framed the following substantial questions of law: "1. Whether the Income-tax Appellate Tribunal was justified in law in holding that depreciation allowance under section 32 of the Income-tax Act, 1961, was not allowable to the appellant-company in respect of the property purchased from Punjab Financial Corporation? 2. Whether the Income-tax Appellate Tribunal was justified in law in disallowing Rs. 75,000 out of sales promotion expenses in the absence of any material to support it?" The relevant facts for deciding the controversy involved in the case are briefly stated as under. The appellant-assessee was engaged in the business of bottling and marketing of Indian made foreign liquor. The appellant also started the business of manufacturing liquor by taking over the factory at Dera Basti from the Punjab Financial Corporation. By the agreement dated March 26, 1996, an a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee, therefore, he is not entitled to depreciation. This finding of the Tribunal is based on the fact that the assessee did not make full payment to the Punjab Financial Corporation, therefore, did not acquire the ownership in the property in question. Mr. B. Gupta, learned counsel for the assessee, placed reliance on the judgment of the Supreme Court in CIT v. Podar Cement Private Ltd. [1997] 226 ITR 625. In this case their Lordships examined a large number of cases decided by the Supreme Court and the High Courts. Their Lordships also had occasion to decide the expression "owner" in the light of the Income-tax Act. The Supreme Court in this case held that though under the common law "owner" means a person who has got valid title legally conveyed to him after complying with the requirements of law such as the Transfer of Property Act, the Registration Act, etc., in the context of section 22 of the Income-tax Act, 1961, having regard to the ground realities and further having regard to the object of the Income-tax Act, namely, to tax the income, 'owner" is a person who is entitled to receive income from the property in his own right. The requirement of registration of th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e domain of ownership for the purpose of this statutory provision. The reason is obvious. After all, who is to be taxed or assessed to be taxed more accurately-a person in receipt of money having actual control over the property with no person having better right to defeat his claim of possession or a person in legal parlance who may remain a remainderman. Mr. B. Gupta, learned counsel appearing for the assessee, placed heavy reliance on the judgment of the Supreme Court in Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775. In this judgment their Lordships of the Supreme Court had an occasion to examine the expressions "owner" and "depreciation". The court also relied on the judgment of the Supreme Court in CIT v. Podar Cement Pvt. Ltd. [1997] 226 ITR 625 and agreed with the definition and the meaning given to the expression "owner" in that case. In Black's Law Dictionary (sixth edition) "owner" has been defined as the person in whom is vested the ownership, dominion or title of property. Parks in Principles and Practice of Valuation states that as for building, depreciation is the measurement of wearing out through consumption, or use, or effluxion of time. Paton has in h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee had made part payments to the Housing Board in the case of Mysore Minerals Ltd. v. CIT [1999] 239 ITR 775 (SC). In this case also the appellant-assessee paid part of the consideration. The court in the case of Mysore Minerals Ltd. [1999] 239 ITR 775 (SC) held that the assessee was entitled to depreciation of seven houses in respect of which the assessee had not obtained the conveyance deeds from the vendor though it had taken possession and made part payment of the consideration. Mr. B. Gupta, learned counsel for the appellant, submitted that this case squarely applies to the present case. In this case also the appellant had taken possession and made part payment of the consideration on March 26, 1996, but subsequently paid the entire amount and the assessee is entitled to get the depreciation. Learned counsel for the appellant also placed reliance on a Full Bench judgment of this court in Gowersons Publishers (Pvt.) Ltd. v. CIT [1999] 240 ITR 191. In this case Goverdhan Kapoor and Sons, a partnership firm, owned certain assets including immovable property. The firm entered into an agreement of sale with the assessee-company on October 1, 1972, whereby the running busines ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee-company it spent Rs. 23,75,170 on giving major gift items. The Assessing Officer held that keeping in view the nature of the business of the assessee-company and the reasonableness of such expenditure he deemed it fit to disallow 50 percent of the expenditure on gift items as detailed in the table being of a non-business nature and thus disallowable as per the provisions of section 37(1) of the Income-tax Act and initiated penalty proceedings under section 271(1)(c) of the Act separately on this issue. The Commissioner of income-tax (Appeals) mentioned about the disallowance of sales promotion expenses of Rs. 11,83,585 and allowed Rs. 10 lakhs, which according to her was related to the business and a part of Rs. 1,83,585 was confirmed as used in personal gifts and personal expenditure. The Tribunal has observed that the Commissioner of Income-tax (Appeals) has allowed bulk of the relief by observing that the expenditure was related to the business expenditure. The Commissioner of Income-tax (Appeals) has sustained the disallowance which accounts for about five percent of the total claim. The Tribunal observed that "in our opinion, the disallowance of Rs. 75,000 un ..... X X X X Extracts X X X X X X X X Extracts X X X X
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