Law:

Section:

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance of - Assessee-company's capital subscribed by Government of India and State Government - State government transferred land and building to assessee but no sale deed executed - Whether assessee was owner of impugned property under section 32 - Held, on facts, yes - Whether assessee entitled to depreciation under section 32 qua impugned property - Held, on facts, yes Facts The assessee-company's capital was subscribed equally by the Government of India and the Government of Uttar Pradesh. The Government of Uttar Pradesh vide its order dated 27-4-1968, transferred certain lands and buildings to the assessee in consideration of Rs. 44,07,589 (Rs, 40,00,000 worth of equity shares and Rs. 4,07,589 in cash). During the assessment year 1972-73, the assessee claimed depreciation under section 32 in respect of the said lands and buildings. The ITO declined the same on the ground that the impugned properties were immovable and since no sale deed had been executed by the State Government, the assessee did not become its owner. On appeal, the assessee contended that even though no sale deed had been executed, the said lands, for all practical purposes, belonged to it and it was the only beneficial and equitable owner of the impugned properties. However, the AAC sustained the ITO's order. On further appeal, the Tribunal upheld the assessee's claim holding, inter alia, that in view of the State Government's order, it had ceased to be owner of the impugned properties as it could not exercise any rights in respect thereof and the assessee was in the possession and ownership of the impugned properties. However, it held that depreciation would be available only in respect of the buildings and since the figures of the lands and the buildings were not separately available, it sent the case back to the ITO. On reference : Held To qualify for depreciation under section 32, the property should not only be used by the assessee in connection with his business or profession but it should also be owned by the assessee. The scope of the expression "property of which the assessee is owner" used in section 9 of the 1922 Act,…

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