Case: M/s Mysore Minerals Limited, M.G. Road, Bangalore Vs. The Commissioners of Income Tax, Karnataka, Bangalore

e is a private limited company. During the assessment year(accounting year ending on 31.3.1981) the assessee had purchased for the use of its staff seven low income group houses from the Housing Board. The assessee had made part payments and was in turn made allotment of the houses followed by delivery of possession by the Housing Board. The actual deed of conveyance was not yet executed by the Housing Board in favor of the assessee. The assessee made a claim under Section 32 of theAct in respect of depreciation of buildings used for the purpose of the business of the assessee. The claim was rejected by the assessing officer forming an opinion that the assessee had not become owner for want of deed of conveyance in its favour. The Commissioner ofallowed the appeal preferred by the assessee and directed the assessing officer to allow the assesees claim for depreciation inasmuch as the company was acting as the owner and could exercise the rights of the owner qua the houses. The Tribunal in an appeal preferred by the Revenue set aside the decision of the CIT. On an application under Section 256(1) of the Act filed by the appellant, the following question was referred by the Tribunal for the opinion of the High Courton the facts and in the circumstances of the case, the Tribunal was right in rejecting the claim of the assesee for depreciation in respect of the seven houses in respect of which the assessee has not obtained a deed for conveyance from the vendor although it had taken possession and made part payment of theHigh Court relying on its own decision in Ramkumar Mills (P.) Ltd. v. Commissioner of180 ITR 464 answered the question in the affirmative, that is, against the assessee. The aggrieved assessee has preferred this appeal pursuant to a certificate under Section 261 of the Act granted by the High Court.

Reasoning: In our opinion, the term owned as occurring in Sec. 32(1) of theAct, 1961 must be assigned a wider meaning. Any one in possession of property in his own title exercising such dominion over the property as would enable others being excluded therefrom and having right to use and occupy the property and/or to enjoy its usufruct in his own right would be the own of the buildings though a formal deed of title may not have been executed and registered as contemplated by Transfer of Property Act, Registration Act etc. `Building owned by the assesseethe expression as occurring in Section 32(1) of theAct means the person who having acquired possession over the building in his own rights uses the same for the purposes of the business or profession though a legal title has not been conveyed to him consistently with the requirement of laws such as Transfer of Property Act and Registration Act etc. but nevertheless is entitled to hold the property to the exclusion of allspeaking depreciation is an allowance for the diminution in the value due to wear and tear of capital asset employed by an assessee in his business. Blacks Law Dictionary (Fifth Edn.) defines depreciation to mean, inter aliafall in value; reduction of worth. The deterioration, or the loss or lessening in value, arising from age, use, and improvements, due to better methods. A decline in value of property caused by wear or obsolescence and is usually measured by a set formula which reflects of useful life of property.......... Consistent, gradual process of estimating and allocating cost of capital investments over estimated useful life of asset in order to match cost againstParks in Principles & Practice of Valuation (Fifth Edn., at page 323) states: As for building, depreciation is the measurement of wearing out through consumption, or use, or effluxion of time. Paton has in his Accounts Handbook (3rd Edn.) observed that depreciation is ancost as any other costs. he has furtherdepreciation charge is merely the periodic operating aspect of fixed assetoverall view of the above said authorities show that the very concept of depreciation suggests that the tax benefit on account of depreciation legitimately belongs to one who has invested in the capital asset, is utilizing the capital asset and thereby losing gradually investment caused by wear and tear, and would need to replace the same by having lost its value fully over a period ofed that there cannot be two owners of the property simultaneously and in the same sense of the term. The intention of the Legislature in enacting Section 32 of the Act would be best fulfilled by allowing deduction in respect of depreciation to the person in whom for thevests the dominion over the building and who is entitled to use it in his own right and is using the same for the purposes of his business or profession. Assigning any different meaning would not subserve the legislative intent. To take the case at hand it is thewho having paid part of the price, has been placed in possession of the houses as an owner and is using the buildings for the purpose of its business in its own right. Still the assessee has been denied the benefit of Section 32. On the other hand, the Housing Board would be denied the benefit of Section 32 because inspire of its being the legal owner it was not using the building for its business or profession. We do not think such a benefitnone situation could have been intended by the legislature. The finding of fact arrived at in the case at hand is that though a document of title was not executed by Housing Board in favour of the assessee, but the houses were allotted to the assessee by the Housing Board, part payment received and possession delivered so as to confer dominion over the property on the assessee whereafter the assessee had in its own right allotted the quarters to the staff and they were being actually used by the staff of the assessee. It is common knowledge, under the various schemes floated by bodies like housing boards, houses are constructed on large scale and allotted on part payment to those who have booked. Possession is also delivered to the allottee so as to enable enjoyment of the property. Execution of document transferring title necessarily follows if the schedule of payment is observed by allottee. If only the allotee may default the property may revert back to the Board. That is a matter only between the Housing Board and the allottee. No third person intervenes. The part payments made by allottee are with the intention of acquiring title. The delivery of possession by Housing Board to allottee is also a step towards conferring ownership. Documentation is delayed only with the idea of compelling the allottee to observe the schedule of payment.