9911796707
TMI Blog1996 (7) TMI 136X X X X Extracts X X X X X X X X Extracts X X X X ..... ged its mind and has decided the question against the Revenue for the subsequent assessment years for which reference petitions at the instance of the Revenue are in the pipeline. The relevant facts which are common to all the reference applications are taken from Income-tax Reference No. 22 of 1981 for the assessment year 1977-78. The business of Hotel Skylark and Restaurant was being run under the sole proprietorship of Shri Naranjan Singh. Hotel Skylark Private Limited (hereinafter referred to as "the assessee") was incorporated in the year 1973 to take over the business of the sole proprietorship. The assessee took over the running business of the firm through an agreement dated June 29, 1973 (annexure "A"). No registered transfer deed was executed in favour of the assessee. The total consideration was Rs. 12,28,923. All assets and liabilities of the firm were taken over by the limited company. Part of the consideration of Rs. 2,28,923.68 was given as cash and shown as unsecured loan in the name of Naranjan Singh. It was to carry interest at the rate of 12 per cent. per annum. 10,000 shares worth Rs. 10 each amounting to Rs. 10,00,000 were given to Naranjan Singh and associat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in its favour of the immovable property which was more than Rs. 100 ; that the assessee could not be deemed to be the owner of the property and, therefore, not entitled to the depreciation claimed for. The assessee filed an appeal before the Appellate Assistant Commissioner which was accepted. It was held that under section 32 of the Act two conditions, i.e. : (a) the depreciable asset is owned by the assessee ; and (b) it is used for the purposes of the assessee's business or profession ; are required to be satisfied for allowing depreciation. Relying upon the agreement entered between the parties (annexure "A"), the civil court decree dated October 17, 1977 (annexure "B"), and the entries made in the record of the Municipal Committee, Jalandhar, it was held that the assessee was the owner and, therefore, entitled to the depreciation as claimed for. The Revenue being aggrieved against the order of the appellate authority filed a second appeal before the Tribunal. The Tribunal accepted the appeal filed by the Revenue, set aside the order of the appellate authority and restored that of the Income-tax Officer holding that the assessee is not entitled to claim depreciation on the b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or award purports or operates to create, declare, assign, limit or extinguish, whether in present or in future, any right, title or interest, whether vested or contingent, of the value of one hundred rupees and upwards, to or in immovable property : Provided that the State Government may, by order published in the Official Gazette, exempt from the operation of this sub-section any leases executed in any district, or part of a district, the terms granted by which do not exceed five years and the annual rents reserved by which do not exceed fifty rupees. (2) Nothing in clauses (b) and (c) of sub-section (1) applies to--- (vi) any decree or order of a court except a decree or order expressed to be made on a compromise and comprising immovable property other than that which is the subject-matter of the suit or proceeding ; or . . . . . ." Clause (a) of section 17(1) talks of instruments of gift of immovable property ; clause (d) speaks of leases of immovable property from year to year and clause (e) provides for registration of non-testamentary instruments transferring or assigning any order or decree of the court. We are not concerned with either of these clauses. In this case, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 100 was purportedly transferred on the basis of an admission which would be covered by Order 12, rule 6 of the Civil Procedure Code, and not by Order 23, rule 3, which deals with compromise of a suit and comprised property which was the subject-matter of the suit and, therefore, such a decree would not require registration. For the sake of clarity, we may add here that section 17(2) of the Registration Act exempts those decrees and awards which fall under clauses (b) and (c) of sub-section (1) of section 17. If the decree or award falls under any other clause such as (a) and (d) then such a decree or award would require registration. It is not the case of either of the parties that the assessee's case falls under clause (a) or (d) of section 17. The consistent case of the parties is that the assessee's case falls under clauses (b) and (c) of section 17(1). Such a decree shall not require registration in view of the exception created by clause (vi) of section 17(2) of the Registration Act. For the foregoing reasons it is held that decree dated October 17, 1977, passed by the Sub-Judge, Jalandhar, did not require registration. The question whether a compromise or a consent decree ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laint on the basis of an admission made by the opposite party. After some time "B" filed a suit claiming a one-third share in the suit land contending that the decree passed in the earlier suit did not survive and "B" was alone entitled to be in possession of the suit land. The trial court held that the aforesaid decree was against law and facts. The appeal filed by "A" (defendants in that suit) was dismissed by the District Judge and so was the appeal by the learned single judge of the High Court whose judgment had been impugned in the Supreme Court. One of the grounds on which the earlier decree was set aside was that the aforesaid decree required registration and the same having not been registered could not have conferred any right on "A". It was held by the learned single judge that the decree has to be treated "to create a gift" which would take the case out of the purview of clause (vi) of section 17(2) of the Registration Act because that is to apply only to clauses (b) and (c) of section 17(1) whereas clause (a) of section 17(1) was attracted in that case. This view of the learned single judge was assailed before the Supreme Court. Their Lordships upheld the view taken by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation is misplaced. Bhoop Singh's case, AIR 1996 SC 196, is clearly distinguishable as it falls under clause (a) of section 17(1) whereas the present case falls under clauses (b) and (c) of section 17(1) for which an exception has been created in clause (vi) of section 17(2) of the Registration Act. The relevant portion of section 32 of the Income-tax Act, 1961 (hereinafter referred to as "the Act"), reads as under : " 32. Depreciation.---(1) In respect of depreciation of buildings, machinery, plant or furniture owned by the assessee and used for the purposes of the business or profession, the following deductions shall, subject to the provisions of section 34, be allowed----. . . ." Under this section for claiming depreciation allowance, two conditions are to be satisfied, i.e., (1) that the depreciable asset is owned by the assessee ; and (2) asset must have been used for the purpose of the assessee's business. There is no dispute on the facts that the asset was used by the assessee for its business. The only dispute is with regard to the ownership. The case of the assessee is that he had become the owner of the property by the declaration granted by the court whereas the case ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n one way. The modes provided in the Transfer of Property Act are not exhaustive. There are modes other than those mentioned in the Transfer of Property Act by which ownership can be transferred from one person to another. Section 54 of the Transfer of Property Act provides one of the modes of transfer of ownership of the immovable property of value of Rs. 100 and upwards by a registered deed whereas the ownership of immovable property can also be transferred by inheritance, succession, adverse possession, court decree, partition, throwing of coparcenary property by a coparcener in the hotchpotch and contribution by a partner of his separate immovable property by throwing the same into the stock of partnership firm. Except in the case of sale deed and gift deed of immovable property exceeding Rs. 100, the instrument of transfer does not require registration. In the present case, the assessee had become the owner of the property by a decree of the court which became final, the same having not been set aside by filing appeal or by filing a separate suit. The assessee thus became the legal owner who used the asset for the purpose of its business thus entitling it to claim depreciation ..... X X X X Extracts X X X X X X X X Extracts X X X X
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