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TMI Blog1984 (4) TMI 6X X X X Extracts X X X X X X X X Extracts X X X X ..... ssesseecompany decided to purchase "Lignite House" with the buildings and appurtenant works, furniture, fittings, etc., on payment of its book value to the Neyveli Lignite Corporation. The Neyveli Lignite Corporation thereupon addressed the Government of Tamil Nadu for permission to sell the "Lignite House" to the assessee and by G.O. Ms. No. 2345, Industries Department, dated November I 1, 1970, permission was granted to the Neyveli Lignite Corporation to sell "Lignite House" to the assessee, subject to certain conditions. The assessee-company as well as the Neyveli Lignite Corporation passed the necessary resolution at the meetings of their respective board of directors held on November 13, 1970, and January 28, 1971, agreeing to abide by the conditions imposed by the Government. It appeared that though the Neyveli lignite Corporation was permitted by the Government of Tamil Nadu to dispose of the property allotted to it by the Government, the assignment deed from the Government of Tamil Nadu in favour of the Neyveli Lignite Corporation with reference to the plot allotted to them had not been issued or obtained. The assessee paid the full consideration of Rs. 7,58,940.45 on Octob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Appellate Tribunal was right in holding that as per the provisions of section 47 of the Indian Registration Act, the title over the property passed to the assessee on November 1, 1970, and not on the date of registration in 1975 and accordingly the assessee was entitled to depreciation ?" Section 32 of the Act grants an allowance in respect of depreciation on the value of certain capital assets with a view to mitigate, the rigour of the general scheme of the Act subjecting income to charge, regardless of the exhaustion of or diminution in the value of the capital asset. In order to enable the assessee to claim the benefit of depreciation, the following conditions should be fulfilled : (i) the assets in respect of which the depreciation is claimed should be buildings, machinery, plant or furniture, (ii) the assets must have been used for purposes of the assessee's business the profits of which are being charged ; (iii) the assessee must be the owner of the buildings, machinery, plant or furniture, as the case may be ; (iv) the prescribed particulars relating to the buildings, machinery, plant or furniture must be duly made available by the assessee ; and (v) the aggregate of su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest in the purchaser with reference to immovable property of the value of Rs. 100 and upwards, is compulsorily registrable, as in this case. It remains only to notice section 47 of the Registration Act, which states that a registered document shall operate from the time from which it would have commenced to operate if no registration thereof had been required or made and not from the time of its registration. One thing is clear from section 47 of the Registration Act, 1908, i.e., that the registered document does not become operative only from the time of its registration. No doubt, title does not pass until registration of the document is effected. Also, section 47 does not purport to create a new title, but merely affirms the title created under the deed and completes the same rendering it unquestionable and absolute. The creation of title in favour of the purchaser is on the date when the document is executed and not only when it is registered. It is this that finds expression in section 47 of the Registration Act. In other words, if no registration of the document is required, the document would ordinarily take effect from the date of its execution. Also, if no registrati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m Saran Lall v. Mst. Domini Kuer, AIR 1961 SC 1747, on January 31, 1946, a sale was executed and the completion of the process of registration of document was done on February 9, 1946. The suit for pre-emption filed on September 9, 1946, was decreed by the courts below, but the High Court was persuaded to take a different view resulting in the dismissal of the suit. Reliance before the Supreme Court was placed on section 47 of the Registration Act to contend that once a document is registered, it begins to operate from the time it would have otherwise operated and, therefore, the sale became operative and completed on January 31, 1946. In pointing out the scope of section 47 of the Registration Act, the Supreme Court, by a majority, stated that section 47 of the Registration Act permits a document, when registered, to operate from a certain date which may be earlier than the date when it was registered, but that had nothing to do with the completion of sale when the instrument is one of sale. It was also further pointed out that a sale which is admittedly not complete until the registration of the instrument of sale is completed, cannot be said to have been completed earlier becaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 21, 1977, and in view of the provisions of section 47 of the Registration Act, 1908, the transfer would operate from the date of the execution of the document viz., November 7, 1972, and the competent authority had, therefore, no jurisdiction to initiate proceedings under section 269C of the Act. In dealing with this question, the Bombay High Court pointed out that the mere fact that the transfer operates from the date of execution is not sufficient to conclude that the title itself passes on the date of execution and that there is no distinction between the transfer of title and the completion of the sale and title passes only when the document is registered under the provisions of the Registration Act. The right of the competent authority, it was pointed out, to initiate the proceedings under section 269C of the Act accrued on the registration of the document and, therefore, the proceedings initiated by the competent authority were not barred by limitation or lack of jurisdiction. This view was also affirmed on appeal in Amarchand Jainarain Agarwal v. Union of India [1983] 142 ITR 410 (Bom). We have already noticed how the sale in this case became effective and operative only f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile the second included movables like machinery, etc. Possession was given on March 30, 1946, with reference to movable as well as immovable properties, but on May 17, 1946, the sale was executed in respect of the immovable properties. The Supreme Court held, on the construction of the agreement as well as the sale deed, that what was intended to be sold and actually sold under the deed dated May 17, 1946, were only the properties mentioned in the first schedule to the agreement and not the items included in the second schedule and that the intention was to sell the fixtures on the immovable properties as movable and, therefore, only the profits arising out of the sale of the properties described in the first schedule to the agreement were liable to capital gains under section 12 B of the Indian Income -tax Act, 1922. In Dr. Rajah Sir MA. Muthiah Chettiar v. CIT [1984] 148 ITR 532 (Mad), the ownership in a property was not transferred from the founder of the trust to the trust but the trust was in enjoyment of the income from that property as per the directions given by the founder and the question arose whether the income should be assessed in the hands of the founder or in the h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Agro Industrial Corporation [1981] 127 ITR 97 (All) and Addl. CIT v. Sahay Properties and Investment Co. (P.) Ltd. [1983] 144 ITR 357 (Pat). In the first of these cases, the Allahabad High Court took the view that a person can be considered to be an owner of the building for purposes of section 32 of the Act if he is in a position to exercise rights of ownership not on behalf of the person in whom the title vests, but, in his own right and that the transfer of possession in favour of UP State Agro Industrial Corporation Ltd. by the State Government would enable the Corporation to claim depreciation, though no sale deed had been executed and registered. This decision proceeded on the footing that after UP State Agro Industrial Corporation Ltd. was put in possession of the property, it was open to it to deal with it in any manner it liked without objection from the State Government and it could realise the income from the property and appropriate the same for itself and that the corporation became the owner of the property in the sense used in section 32 of the Act and could claim depreciation under section 32 of the Act We are unable to agree with the view expressed in the above dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee while being such owner in the course of the business of the assessee. Otherwise, as pointed out earlier, any person inclusive of a person who is not, in any manner, entitled to be in possession of the property, can get into possession and then claim that he is in possession of the property in his own right to the exclusion of others and, therefore, he should be deemed to be the " owner" for all purposes, inclusive of section 32 of the Act. We are unable to subscribe to such an interpretation of section 32 of the Act, as in our view, that would strike at the root of and negate the very notion of and the basis for the allowance of depreciation claimed by an assessee in respect of the assets used by him in his business. This also accords with the scheme of the Act in providing for the allowance of depreciation. Under the provisions of the Act, income is subject to tax without any reference to the exhaustion, or diminution or even the destruction of the value of capital which includes building, machinery, etc. If the income is so subjected to tax without reference to the exhaustion or erosion of the value of the capital, it would no doubt work a great hardship to, assess ..... X X X X Extracts X X X X X X X X Extracts X X X X
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