Delhi High Court
Addl. Commissioner Of Income Tax vs Hindustan Cold Storage & ... on 3 August, 1983
Author: P Narain
Bench: P Narain, S Chadha
JUDGMENT
Prakash Narain, C.J.
1. The ITAT, Delhi Bench (C) has referred to this court the following question of law for its opinion :
"Whether, on the facts and circumstances of the case, the assessed company is entitled to claim depreciation u/s 32(1) of the IT Act, 1961 in respect of building, machinery and plant of the Crown Flour Mills, Delhi ?"
2. The assessed is a private limited company running a cold storage and flour mills. The relevant year for which the question arises is the asst. yr. 1962-63., the accounting year being the calendar year 1961. The assessed is a subsidiary of another private limited company known as Meattles Pvt. Ltd. The latter company carried on the business of speculation in shares and other commodities and also the business of running the flour mills known as Crown Flour Mills. Meattles Pvt. Ltd. decided to transfer the Crown Flour Mills to the assessed. The assessed also considered the proposal to start this business. On 1-2-1957 the Board of Directors of Meattles Pvt. Ltd. passed a resolution approving the draft agreement for sale of the Crown Flour Mills to the assessed for a consideration of Rs. 8,75,000 by accepting equity shares of an equal amount of the assessed company and to sell the stock-in-trade and other assets and liabilities of Crown Flour Mills for a sum of Rs. 3,75,063 to the assessed, which price was to be shown as paid in the from of a loan advanced to the assessed on an interest of 5% per annum. The Board of Directors of the assessed by its resolution dt. 1-2-1957 approved the decision to purchase the Crown Flour Mills on the above terms and conditions. The resolution also approved of the taking over of the possession of the Crown Flour Mills with immediate effect and for giving necessary information of the change of proprietorship thereof to the parties concerned as well as to the government departments. In pursuance of the aforesaid two resolutions, two separate agreements were executed between the two companies on 1-2-1957, one relating to the sale of the Crown Flour Mills for Rs. 8,75,000 and the second relating to the sale of stock-in-trade and other movables. Actual possession of the Crown Flour Mills was taken over by the assessed on 1-2-1957. It is a finding of fact given by the Tribunal and mentioned in the statement of case to this court that the sale deed was not executed even till the end of the accounting year relevant to the asst. yr. 1962-63, i.e., there was no sale deed executed till 31-12-1961.
3. In its return for the asst. yr. 1962-63 the assessed claimed depreciation on the assets of the Crown Flour Mills. The ITO rejected this claim. The AAC allowed the claim on appeal. The Tribunal on further appeal upheld the decision of the AAC. The Commissioner sought a reference on the question of law contending that the assessed could not claim depreciation for an asset of which it was not the owner in the relevant accounting year. The Tribunal accepting the application of the Commissioner has made the present reference.
4. No one has put in appearance on behalf of the assessed despite actual date notice. We have, therefore, proceeded to hear counsel for the revenue exparte.
5. In our opinion, the question raised is no longer res integra. The identical question in respect of an identical claim of the same party for the asst. yr. 1958-59 was considered by a Bench of this court, which decision is reported as CIT v. The Hindustan Cold Storage and Refrigeration P. Ltd. (1976) 103 ITR 455 (Del). It was held that the words "being the property of the assessed" had the same meaning as the words "owned by the assessed" appearing in s. 32(1) of the IT Act, 1961 and these words merely clarified the position that already existed u/s 10(2)(vi) of the 1922 Act. The interest which a person had in the property by virtue of s. 53A of the Transfer of Property Act did not amount to ownership of the property. The Crown Flour Mills constituted immovable property of more than Rs. 100 in value and title thereto could not pass to the assessed in the absence of a registered sale deed. As admittedly no sale deed was executed in favor of the assessed during the previous year relevant to the assessment year, the title to the Crown Flour Mills did not pass to the assessed. Thus the Crown Flour Mill was not the property of the assessed during the assessment year and, therefore, one of the conditions prescribed under the relevant provision of law was not satisfied and the assessed was not entitled to depreciation in respect thereof. On facts, the situation has not changed even for the asst. yr. 1962-63. Agreeing with the bench decision referred to above, we answer the question referred to us in the negative, against the assessed and in favor of the revenue.
