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TMI Blog1981 (9) TMI 10X X X X Extracts X X X X X X X X Extracts X X X X ..... th June, 1961, addressed to the assessee by the Superintending Engineer, Vizag Port. The assessee, accordingly, agreed to import the aforesaid items from the USA as could be seen from its letter dated 1st July, 1961, addressed to the Chief Engineer, Vizag Port. Thereafter, in the letter dated 14th December, 1961, the Chief Engineer, Vizag Port, informed the assessee that the Govt. of India would recover the rupee equivalent of the total cost of the aforesaid items from the monthly bills submitted by the assessee and till the completion of the project the Government will have permanent lien on the said items. We shall refer to the actual terms used in the correspondence, as a great deal of argument has been advanced before us on the expression used in those letters. On the basis of the aforesaid correspondence, the machinery including the spare parts worth Rs. 5265 lakhs were actually imported by the Govt. of India from the USA. The payment for the machinery was also made by the Govt. of India as per TCM procedure. The assessee was allowed to use the machinery with the stipulation that it would be transferred to the assessee on the completion of the job. The assessee showed such mac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of CIT v. Ganga Properties Ltd. [1970] 77 ITR 637 and it was submitted that the concept of beneficial ownership was unknown under the Indian law and the only ownership which was recognised under the Indian law was the legal ownership. In this view of the matter, it was submitted that the AAC was not justified , in holding that the assessee was entitled to depreciation and development rebate in respect of the aforesaid items. On behalf of the assessee, on the other band, support was drawn to the order of the AAC on this point and it was submitted that on reading the entire correspondence, which took place between the assessee and the Vizag Port authority, it is clear and beyond doubt that the assessee was the owner of the aforesaid imported items as it was the assessee who had purchased the said items with the financial help of the Government. In this view of the matter it was submitted that the Commissioner was not justified in referring in his order that even on the date of passing of the order the machinery had not been transferred by the Port authority to the assessee, Reliance was placed on several decisions, viz., the decision of the Lahore High Court in the case of CIT v. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he owner of the items imported from the U.S.A. and the Government of India was merely the financier of the assessee for the importation of the said items as per T.C.M. procedure. In para. 2 of the letter dated 27-6-64 it is pertinent to note that the Ministry of Commerce and Industry have agreed to the import of the items mentioned ....... The article " the " before the word 'import' clearly indicates that the Govt. of India has agreed to import the items mentioned by the assessee in its tender. If the Government of India, were to import the said items, on its own account, there was no need for using the word 'agreed' in the aforesaid sentence. Again in para. 3 of the said letter the: words 'it has been decided to release' also suggest, that the Govt. of India have agreed for the import of the items by the assessee and further agree to release foreign exchange for that purpose.. If the Govt. of India were to import the items on their own account, there was no need to use these words in para. 3. Para. 5 of the said letter also indicates that the items to be imported from the USA was on account of the assessee only. In para. 6 of the aforesaid letter the word 'transferred' is very si ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... USA and not the Government of India. Letters dated 7-7-62 and 27-762 also lead to the conclusion that it was the assessee who was the legal owner of the items imported from the USA. In this view of the matter, we uphold the order of the AAC on this point. As we have decided that the assessee was the legal owner of the items imported from the USA, we do not want to discuss the arguments advanced on the assumption that there was a hire purchase agreement between the assessee, the Government of India and the USA parties. As regards the assessee's claim for deduction of interest in respect of the amount due to the Vizag Port authority, the learned representative for the department submitted that the AAC was not justified in allowing the assessee's claim without properly appreciating the reasons given by the ITO for the amount disallowed by him. It was further submitted that since the interest was paid to the Vizag Port authority for the importation of items from the U.S.A , which was of capital nature, it enhanced the purchase price of the items imported from the U.S.A. and cannot be treated as interest paid on borrowed capital. In this view of the matter, it was finally submitted t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rities, wrote to the assessee on the subject of tender for the construction of Wharves and Berths, Additional Berths Scheme, Vizagapatnam Port. By that letter the said Superintending Engineer conveyed that it was intended to award the contract on the aforesaid matter on the terms and conditions mentioned in the said letter. It was mentioned that the assessee intended to import certain items of equipment and machinery as per statements given by the assessee and copies were attached with the letter and the Ministry of Commerce and Industry have agreed to the import of the items mentioned in the lists except certain specific items mentioned in the lists which were indicated in the letter. It was further stated that it had been decided to release foreign exchange amounting to Rs. 24.63 lakhs. Clauses (5) and (6) of the, said letter are as follows: " (5) The purchase of the plant and equipment shall be made from the U.S.A. and the T.C.M. procedure will be followed. You are requested to furnish immediately detailed specifications, duties, etc., of the plant you proposed to import. (6) It may be understood that under the T.C.M. procedure the title of the equipment so purchased from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he equipment may be effected in practice and that when the amount of the bills is found inadequate, the excess over the bill should be recovered immediately from the contractor in cash. (d) The equipment shall remain the property of the Government of India or be mortgaged to the Government of India until all work under the wharf construction contract is completed and such lien shall be paramount to any other liens on the equipment. (e) Upon completion of the work under the wharf construction contract and full payment of the rupee equivalent of the total cost of the equipment, the equipment shall become the property of the contractor free of any lien of the Government of India. The letter further stated that the Government have allowed the procurement of plant and machinery direct from the U.S.A. and the requisite authorities have been issued. It was highlighted on behalf of the assessee that the Government had agreed to the importation and the Government had also agreed to release foreign exchange but the assessee was to import. It was further submitted that the purchase orders were issued by the assessee to the contractor. Then, it was mentioned, it was significant fact that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eliance was placed on Halsbury's Laws of England, 3rd Edn., Vol. 24, p. 145, art. 265. On behalf of the assessee , however, reliance was placed an the observations made by the judicial Committee in the case of Nippon Yusen Kaisha v. Ramjiban Serowgee, AIR 1938 PC 152 and our attention was drawn to the observations appearing at p. 155, where Lord Wright had observed as follows: " A person cannot have a lien on his own goods." The real question that we have to decide taking into consideration the surrounding circumstances, the expression used and the correspondence that passed between the Parties is who was the owner of the assets in question. In other words, to whom did the title of the goods, belong and when had such title passed ? Section 19 of the Sale of Goods Act provides that where there is a contract for the sale of specific or ascertained goods the property in them is transferred to the buyer at such time as the parties to the contract intend it to be so transferred. Therefore, we have to find out from the surrounding circumstances and the background of this case, when did the parties intend that the property in question in this case should be transferred to the assessee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cise the rights of the owner not on behalf of the owner but in his own right. There also the Supreme Court, at p. 578 of the report, discussed the different meanings of the expression " ownership ". As was observed by the Calcutta decision, reliance was placed on Salmond's jurisprudence and Stroud's Judicial Dictionary and it was stressed that various meanings of the word " owner " could be given. The Andhra Pradesh High Court in the case of S. P. B. P. Srirangacharyulu v. CIT [1965] 58 ITR 95, had also to consider the expression " owner " in the context of s. 10(2)(vi)(b) of the Indian I.T. Act, 1922. Reliance was also placed on the decision of the Allahabad High Court in the case of Addl. CIT v. U. P. State Agro Industrial Corporation Ltd. [1981] 127 ITR 97, where the Allahabad High Court had to construe the meaning of the expression " property owned " by the assessee for the purpose of allowing depreciation. The Allahabad High Court was of the view that for the purpose of allowing depreciation the assessee need not have complete title over the asset and our attention was also drawn to the observations at pp. 102 to 105 of the report. Reliance was also placed on the decision of t ..... X X X X Extracts X X X X X X X X Extracts X X X X
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