Law:

Section:

Section 32 of the Income-tax Act, 1961 - Depreciation - Allowance/rate of - Assessment year 1973-74 - An undertaking originally belonged to Government of India - This undertaking was sold to assessee-company as per approval of President, with effect from 1-4-1972 - Assessee took over undertaking and had been carrying on operations as absolute owner of assets - All terms of sale were satisfied - However, sale deed was executed only on 28-3-1977 in respect of immovable properties of undertaking -Whether assessee was owner of assets of undertaking from 1-4-1972 within meaning of section 32 and was, therefore, entitled to depreciation Held, no FACTS An undertaking originally belonged to the Government of India. This entire undertaking was agreed to be sold to the assessee-company which was a public sector undertaking. By a communication the approval of the President for the transfer of the ownership and management with effect from 1-4-1972 was conveyed and it was stated that this approval was subject to the vote of Parliament. The consideration was the allotment of 50 per cent of shares to the Government of India by the assessee. Accordingly, with effect from 1-4-1972 the assessee took over the undertaking and had been carrying on the operations as absolute owner of the assets. However, the sale deed was executed on 28-3-1977 in respect of the immovable properties comprised in the assets of the undertaking. For the assessment year 1973-74 the assessee claimed depreciation under section 32 in respect of the aforesaid assets. The department disallowed the assessee's claim. However, on second appeal, the Tribunal allowed the assessee's claim. On reference: HELD There are two sets of views - one view is that when the vendee under the agreement of sale takes possession and enjoys the same as absolute owner the benefit of the ownership should be recognised with such a vendee even though sale deed is not registered The second view is that under the Indian law ownership does not vest until a sale deed is registered. Different High Courts have expressed differently. The Government of India had clearly and categorically sold all the assets in question and transferred full…

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